So you have completed and signed your will or trust. You are done and you can put it away until it is needed, right? Wrong.
Just because you have completed your estate plan doesn’t mean that you don’t have to worry about it ever again. Your estate planning documents should be updated on a regular basis. How regular is regular? I generally recommend that your estate plan be reviewed on an annual basis and updated to make sure that it continues to meet your needs.
So why would you have a reason to do any type of updating? Well firstly, there are changes in your personal and family situation like births, deaths and marriages that can affect how you leave your stuff to your family. Illnesses of a family member can affect how assets would be held or distributed. There can also be changes in your financial situation. If you receive a sizeable sum of money such as an inheritance, personal injury award or lottery winnings, this can effect the type of planning that you do. The type estate plan that you set up during your working life is sometimes quite different than the estate plan you do after you are retired.
There are also changes in the law that can affect your estate plan. The changes in the laws can either can be tax or non-tax changes. The Feds never fail to pass some sort of tax changes every year. One example of this is the Federal estate-tax exemption which allows you to pass $3.5 million tax free to your heirs in 2009. In 2010, that amount actually is unlimited so even Bill Gates, if he dies in 2010, could pass his entire fortune estate-tax free. However, in 2011 the law is scheduled to change the exemption to $1 million per person. Many people who may have an estate-tax free estate today, will not have an estate-tax free estate in 2011. Not as frequently, the State legislature also passes tax changes.
Non-tax changes in the law also effect the way that you do your estate plan. An example of this is in 2008, there were changes in the powers that your patient advocate has under a durable power of attorney for health care regarding anatomical gifts or organ donations. Under the new rules, if specifically stated, your patient advocate may handle certain matters with regard to your anatomical gift or organ donation which were not allowed under the previous law.
Two years ago, the law changed which allows a designated agent to make mental health care decisions for you if you are unable. If your durable power of attorney for health care does not specifically include those powers, your patient advocate may not be able to make your mental health care decisions, such as treatment for dementia.
Lastly, another reason to update your plan is just changes in your estate planning attorney’s experience. In the case of my practice, the trusts that I am drafting today are better than the ones that I drafted last year, which are better than the ones which I drafted the year before, etc. As I learn new things or create new language, I incorporate those items into my database for subsequent plans.
So don’t think that once you do your estate plan you can just pack it away. Make sure you and your estate planning attorney review it every year.
By: Matthew M. Wallace, CPA JD
Published edited March 29, 2009 in The Times Herald newspaper, Port Huron, Michigan as: Estate plan ages with you