Estate plans are only effective if kept up to date. As time passes, it's likely that your circumstances will change enough to make your previous estate plan unsuitable for your current needs. Let's look at examples of some of the most common reasons why your estate plan might need an update.
Change in Marital Status
A marriage, divorce, or remarriage should trigger a review of your estate plan to make sure your beneficiary designations and choice of executor are correct. If you now have children from multiple relationships, you'll also need to clarify how you wish to have assets distributed in your newly blended family.
Birth of a Child
If you've recently become a parent, estate planning is crucial. Without a plan, the court will be forced to decide guardianship of your child. Your assets will be held by the court, then automatically transferred to your child at age 18 with no further supervision. Since many young people are still in high school and unsure of their future plans at the age of 18, this is a less than ideal outcome.
Change in Financial Status
If you've inherited or earned enough funds to exceed the estate tax exclusion amount of over five million dollars per person, your estate planning needs will become significantly more complex. However, a dramatic decrease in your financial status may also trigger the need to adjust your estate plan. For example, leaving your four grandchildren each a pre-determined $100,000 and giving the rest to your two adult children makes little sense if your assets have shrunk from $1,000,000 to $500,000.
Your Spouse Needs to Apply for Medicaid
In many cases, a couple will structure their estate plan to leave all their assets to the surviving spouse. However, if your spouse is currently using Medicaid benefits for nursing home care and you were to pass away first, this arrangement would require him or her to spend down assets before qualifying for benefits once more. Unless you take action to avoid the need for a spend down, your children or other heirs would essentially be left with nothing.
Tax Law Changes
Tax laws change periodically, which is why an estate plan written 10 or 20 years ago may not make sense for your current situation. There are also significant differences from state to state, so you should consider an update following any major move.
Learn More About Creating an Estate Plan that Fits Your Needs
Attorney George H. Pender has extensive experience helping North Carolina residents prepare an estate plan tailored to meet their unique needs. Call 919-873-0166 for details.