Estate planning is the process of developing a strategy for the care and management of your estate if you become incapacitated or pass away. One purpose of estate planning is to minimize costs, including taxes imposed on gifts and probate court costs.
A solid estate plan includes a Will with instructions on how to divide your property and assets upon your death. It will also include documents called a Durable General Power of Attorney and Health Care Power of Attorney. These documents allow you to name someone who will make medical and financial decisions for you if you cannot make decisions for yourself.
Adapting Estate Planning to Life Changes
Keep in mind that since your family’s needs and circumstances are constantly changing, your estate plan must be updated to reflect those changes. Your plan must be updated when certain life changes occur. Let’s take a look at some of these life changes.
Marriage: A lot of planning goes into getting married and having a wedding, and estate planning should be part of that as well. Marriage is an essential time to update an estate plan. Many people assume that if you do not have a Will, your money and assets go directly to your spouse. However, that isn’t always the case and doesn’t always turn out as you might expect. Without a Will, your estate goes into probate to be settled and that can take months, or even years, to resolve. Also, your spouse may not receive your assets if you have children of a prior marriage, a prenuptial agreement, or if your assets are jointly owned with someone else (like a sibling, parent, or other family members).
In the event that you are unable to make an important decision, be it from not being able to be physically present at the time or for a medical reason, you would want your spouse to have the legal authority to make these decisions. A Durable General Power of Attorney and/or Health Care Power of Attorney can grant them that power. Depending on the exact language, you can grant the agent broad powers or limit them to a more specific situation or issue. A comprehensive estate plan review can ensure you and your new spouse can rest easy.
Birth or adoption of children or grandchildren: When a new baby arrives, it seems like everything changes. Your estate plan should not be left out of these changes. It is always a good idea to check to see if your child is already included in your estate plan and add the new child as a beneficiary. As the children (or grandchildren) grow in age, your estate plan should adjust to ensure assets are distributed in a way that you deem proper. What seems like a good idea when your son or granddaughter is a four-year-old may no longer look like a good idea once their personality has developed and you know them as a 25-year-old college graduate, for example.
Divorce: Many people believe that once a divorce is final, their former spouse is automatically removed from any and all inheritance. This is not always the case, and should not be relied on as the foundation of your plan. After a divorce, you should immediately update beneficiary designations for all insurance policies and retirement accounts, and Powers of Attorney, and HIPAA authorizations. It is also a good time to revamp your Will and/or Trust to make sure it accomplishes what you want (and likely leaves out your former spouse).
The death of a loved one: Life is unpredictable and sometimes, those who are named in your estate plan pass away. In the event that an appointed guardian of your children, your chosen executor, or agent under the Power of Attorney dies, it is imperative to designate a new person or people to handle these important matters.
A significant change in assets: The bigger the estate, the more likely there will be issues over how your assets are distributed when you are gone. Whether it is a sudden salary increase, inheritance, or the purchase of a large asset, these scenarios should prompt an adjustment in an existing estate plan. In the event of any significant increase or decrease of assets, you should always review your estate plan to see if there are any changes that need to be made.
A move to a new state or country: Moving is stressful enough as is, so to make it a little less stressful you may want to look into the laws where you are moving ahead of time. Different states and countries have different laws so it is always a good idea to obtain a new set of estate planning documents that clearly meet the new state’s legal requirements. Estate planning for Americans living abroad or those who have assets located in numerous countries is even more complicated and requires professional assistance. It is always a good idea to learn what you need to do to completely protect yourself and your family when you move to a new state or country.
The estate planning attorneys at Hopler, Wilms, and Hanna, PLLC are here to assist you in building a plan to protect you and your family. If you have an existing estate plan that needs a review, or if you are in need of an estate plan, contact us today.