By AnnaMarie Mock, CFP®
In a previous article titled “The Estate Planning Essentials”, I identified the documents needed for a comprehensive estate plan.
Although this can be a morbid topic most want to avoid thinking about, reviewing the documents not only ensures your financial legacy is passed in accordance with your wishes as smoothly as possible but guides your agent to ensure your medical and financial wishes are addressed.
How Often Should You Review Your Estate Planning Documents?
It is recommended to review and update your estate documents as much as needed during life events like the birth/adoption of a child, death or change in circumstances of guardians, marriage or divorce, and changes in federal/state tax laws.
When updating your documents, you should consider not only the property and assets that are being distributed, but also the people involved. Carefully consider beneficiaries as well as people with whom you have entrusted other responsibilities, including the executor of your will, trustee of a trust, power of attorney, and guardian of your children.
If you don’t consider your will a good bedtime read, it is crucial to review the documents at three major time periods in your life at a minimum.
Review During These 3 Periods of Your Life
1. New Parents - Selecting a Guardian
Life changing events are an opportune time to review your estate documents. The birth or adoption of a child is a major life event that demands a review or creation of estate documents.
For new parents, one of the main purposes of creating a will is to designate a guardian(s) for your child in the event something happens to both parents. This is a very personal decision and can extend to a close family member or friend.
The designated person must be at least 18 years old and should share your religious and moral beliefs. Two individuals can be appointed as an overseer of the child in different capacities. It is not uncommon to appoint one person to care for the child’s day-to-day activities and another adult to manage the child’s finances. This may be a good idea if the guardian selected is not equipped to deal with one or the other.
2. Mid-Life - Protecting Your assets
From the point you were new parents to your mid-life, a lot has changed – your assets have changed, and your child has grown.
The concerns from years prior, like guardianship, may not even apply anymore. Instead, your focus may have shifted towards protecting your assets as your child passes the age of majority.
This can be addressed through asset protection provisions as indicated in your will or respective estate documents. These provisions allow for control over your assets after your passing and can be in place for the duration of your child’s and subsequent heirs’ lives.
The provisions direct the amount of principal and income your heirs are entitled to immediately after your passing and years after; it can be as flexible or restrictive as you would like. Not only does it provide asset protection for the second generation but extends to other facets like bankruptcy/creditor protection, protection from divorce, bad decisions, and spendthrift concerns.
3. Elderly - Review
Congratulations, you’ve lived a long, healthy, happy life! Now, you are concerned about potential health issues and any implications that may arise from your estate.
At this phase, you should review the individuals appointed to be attorney-in-facts for any financial and medical issues. During the review, there are some questions to ask yourself:
1) Are the appointees listed in my power of attorney and medical directive still viable options? Are my intentions in the event of incapacitation clearly listed?
2) Does my will accurately represent the individual(s) I wish to inherit my estate?
3) Do my beneficiary designations match my estate plan?
4) Based on current federal and state tax laws, has anything significantly changed since the execution of my will that would be tax disadvantageous?
A will is intended to be tailor made for you, but as time passes, your life evolves and preferences change. Although there are circumstances that may trigger the need for a review, it is recommended to review your documents more frequently, around every 3-5 years.
If you have any questions, please feel free to reach out to the HIGHLAND team.
Author’s Bio
AnnaMarie Mock is a CERTIFIED FINANCIAL PLANNER™ and Partner at HIGHLAND Financial Advisors, LLC, a Fee-Only financial planning firm that offers comprehensive financial planning, retirement planning, employer retirement planning, and investment management. AnnaMarie graduated from Montclair State University with a degree in finance and management and successfully passed the CFP® national exam in 2016. She has been working at Highland Financial Advisors since 2013 as a fee-only, fiduciary Wealth Advisor and is a member of NAPFA.