You finally have been able to complete your estate plan. You have financial and health care powers of attorney, a will and maybe even a trust. It often takes a long time to get up the nerve to go to a lawyer and discuss your final wishes because in doing so, you have to face your own mortality. So once you are done with your estate plan, 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 often is regular? I generally recommend that your estate plan be reviewed on an annual basis.
At a minimum, you should review your plan each year to make sure that it continues to meet your needs. A better choice would be to have your estate planning attorney review your plan with you annually to be assured that your plan is never out of date.
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, marriages and divorces that can affect how you leave your stuff to your family. Illness, injury or disability of a family member can also determine 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 affect the type of planning that you do. The type estate plan that you set up during your working life or when the kids are younger is sometimes quite different than the estate plan you prepare after you are retired.
Changes in the law can also affect your estate plan. The law changes can either be tax or non-tax. 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 an unlimited amount tax free to your beneficiaries in 2010. When George Steinbrenner died earlier this year, his $1.15 billion went to his beneficiaries completely free from any Federal estate tax.
However, in 2011 the law is scheduled to change the exemption amount to $1 million per person. Many people whose estate would not be subject to Federal estate tax in 2010, may have a Federal estate tax liability if they died in 2011 or thereafter. Not as frequently as the Feds, the State legislature also passes tax changes.
Non-tax changes in the law also affect the way that you do your estate plan. There are three recent non-tax changes that could trigger updates to your estate plan. Three years ago, the law changed which allows your designated patient advocate 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 mental health care powers, your patient advocate may not be able to make your mental health care decisions, such as treatment for dementia.
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.
The third recent non-tax change in the law was earlier this year. Michigan revamped its trust code to create numerous default provisions, many of which are not favorable to trustmakers. If your trust does not specifically address those matters, you are subject to the default provisions of the new trust code. If your trust is only about 20 or 30 pages long, the likelihood is that it will be subject to many of the new undesirable default provisions. More comprehensive trusts of say 50 pages or more will have a less likelihood of being subject to many of these new default provisions.
Lastly, another reason to update your plan is just changes in your estate planning attorney’s experience. Although not required to do so, many attorneys regularly attend continuing professional education programs. As a result, they should always be improving.
In the case of my practice, I am always learning new things from classes I have attended, material I have read or matters I have experienced. I believe that 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 or language into my database for inclusion into subsequent plans.
So don’t think that once you do your estate plan you can just pack it away and forget about it. Make sure you and/or your estate planning attorney review it every year.
By: Matthew M. Wallace, CPA, JD
Published edited September 12, 2010 in The Times Herald newspaper, Port Huron, Michigan as: It’s unwise to let estate plans gather dust