Life Events Necessitate Updates Of Estate Plan

Every adult needs an estate plan in place, but changes in individual lives can change or even determine the timing and the type of documents that are needed. Three specific types of changes should trigger an immediate review or update.

First, individuals should review and update estate planning documents as soon as they receive a new diagnosis, particularly if that diagnosis will lead to reduced cognitive abilities. A new diagnosis brings a wave of emotion and immediate logistical issues that must be addressed. Far too often, dealing with an estate plan is the last concern that someone has when faced with illness. However, at some point in the future, updated documents will be necessary.

Failure to prioritize estate planning can result in loved ones being excluded from decision-making, or even the state having to intervene with a guardianship proceeding. Similarly, delaying the execution of lifetime documents or even after-death documents such as a last will and testament, can result in a future inability to create the documents at all. Deathbed documents can be executed in limited cases if the individual still has mental capacity, but are generally inadvisable, as they are much more likely to be contested.

Second, estate planning documents should be reviewed and updated upon a change in marital status. Unlike the death of a spouse, marriage and divorce are the result of intentional choices and estate plans usually need to be revised to reflect new goals. If the marriage is not the first marriage, documents should be designed carefully to protect both spouses and any separate children or beneficiaries.

After a divorce, individuals generally choose to remove the former spouse as a beneficiary and consider new fiduciaries. Because divorce severs legal relationships to extended family members as well, understanding the tax consequences of beneficiary distributions, particularly to former stepchildren, is imperative to creating the most tax-advantageous strategy for bequests.

If the divorcing couple has children in common, documents also should be clear about whether the other parent will have the right to control money left to the children.

Third, estate planning documents should be reviewed upon a change in children or other beneficiaries. When children join the family, planning should be considered in light of the new additions. Child beneficiaries may require additional provisions within documents in order to properly set up how an inheritance would be managed. Guardians also may need to be nominated or changed.

Unfortunately, changes also may be necessary after the loss of a child or other beneficiary. Individuals may need to designate new fiduciaries as well as new beneficiaries. If the loss is of an adult child, the individual should decide whether the predeceased child's children will receive the child's share and whether the remaining parent should control that inheritance.

For many individuals, particularly those without children, the loss of a parent, sibling or close friend may compel changes to documents. While grandchildren may be a natural choice to become beneficiaries for predeceased children, children of siblings or friends may not. The successor beneficiaries should be specified clearly.

Preparing an estate plan is an important first step. However, estate planning documents should be regularly reviewed and updated in order to stay relevant to an individual's changing circumstances.

Cynthia Griffin is an elder law and estate planning attorney at Burnett and Griffin PLLC in Elizabethtown. She can be reached at [email protected].