Your Clients Have An Estate Plan … Now What?

Congratulations! You've been meaning to create an estate plan for a long time -- and now you finally have a health care advance directive, a durable power of attorney, a will and maybe even a revocable trust.

You've accomplished something important for you and your family, but you are not done yet. Here's what you need to do to maintain your estate plan:

Review Asset Ownership

Your estate plan should take into account how you own your assets. You want your loved ones to have easy access to your assets in the event of an accident, incapacity or death. Depending upon your estate plan and your circumstances, perhaps your accounts should be owned jointly with a loved one. You might also add your attorney-in-fact (named under a durable power of attorney) to be an authorized signer on your account. Or, if you created a revocable trust, you probably should consider transferring ownership of most of your individual financial and investment accounts, and perhaps other assets as well, into the name of your revocable trust.

The takeaway here is that your asset ownership plan is an integral part of the estate plan that needs to be taken into account.

Check Your Beneficiary Designations

Many assets pass upon death by beneficiary designations. These assets include retirement accounts -- like IRAs and 401(k)s -- life insurance policies and annuities. Most major financial institutions now allow you to name a beneficiary on non-retirement investment and financial accounts as well, which is known as TOD (or transfer on death).

It's always best to periodically check these beneficiary designations to make sure they accurately reflect who you'd like to receive a particular asset upon your death. Incorrect beneficiary designations are a fairly common occurrence -- and mistakes can be costly to fix after someone dies, if they are even possible to fix at all.

Is Your House Your Homestead?

Many states allow you to declare your primary residence as your homestead. Depending upon your state of residence, there can be many advantages to declaring your homestead, such as creditor protection or lower property taxes. Homestead benefits vary drastically by state, and it's possible they can have an effect on who can inherit, as well. It's best to consult a local adviser to help you figure out if a homestead is worthwhile in your state.

How Long Will Your Estate Plan Last?

Your estate plan will likely need to be updated at some point. An estate plan represents a snapshot of your life at the time you create the plan, in conjunction with applicable laws then in effect. As time marches on, changes in your life (or the law) can affect your estate plan. Therefore, it's important to periodically review your estate plan to make sure it's still appropriate. Perhaps someone you named in an important role, such as Executor or Trustee has become sick or you no longer are close with that person. Perhaps one of your loved ones is getting divorced, has creditor issues, or has become disabled. A whole variety of things can happen to necessitate updating your estate plan.

A good rule of thumb is to review your estate plan every five to seven years or whenever you've had a major life or financial change, such as a divorce or the birth of a child or even your parent has passed away and you are receiving an inheritance. You should review your plan with an attorney who can advise you what, if any, changes may be necessary.

What Happens if You Move to a Different State?

This is a fairly common question. The good news is that a valid document (such as a will, durable power of attorney, health care document or trust) in one state, is also a valid document in another state. However, the particular document might not contain all of the necessary provisions in the new state, and therefore, the document might not work as well or as expected in the new state. For example, the state you live in might not require that a power of attorney be signed in front of witnesses, while your new state does require witnesses. This means your power of attorney might not work in the new state when you need it most. Therefore, if you move to a new state, it's always best to have your estate plan reviewed for possibly helpful or necessary updates.

Where Should You Keep Original Documents?

You should keep your original documents somewhere safe, yet accessible, like a locked safe in your home or perhaps with your attorney, if he or she is willing to hold on to it for you. In most cases, you should avoid keeping the originals in a bank safe deposit box, unless someone other than you and your spouse is a co-signer. A court order is necessary to obtain an original will from a safe deposit box after someone dies if there is no co-signer. For health care documents and trusts, originals have become less important.

Copies typically work that same way as an original. However, when someone passes, an original will still must be filed with the court. Although, with extra paperwork, time and effort, it's usually possible to get a court to accept a copy of a will. Durable powers of attorney are really the exception to this trend. You often need an original power of attorney to be able to use it. So, mind your originals. That way you have them when you need them.

Who Should Have Copies?

In addition to your originals, you should have a fully executed copy of your estate plan (including a digital copy). While copies may have a more limited use than originals, they are important to have so that other family members know what their roles are when the time comes. In addition, if provided copies of your documents, the family will know your intentions and not be surprised by the terms, which could limit future fights.

Consider giving a copy of the documents to the people with important roles in the estate plan (such as executor, trustee, health care agent and power of attorney). If you are uncomfortable doing so, at least make sure the named people know their roles and who to contact if something happens to you. Some people (but not most) gives copies of their plan to their children. The most important thing is that your loved ones know who is charge if something happens to you and where to find the documents to ensure the plan you've taken the time and energy to create can be properly implemented.

You've done the hard part, so don't stop now. Periodically review your estate plan to make sure everything is still in order, and if not, make the necessary changes with your attorney. A little routine maintenance will go a long way toward your goal of ensuring your loved ones are taken care of when you're gone.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.