Almost everyone with whom I work asks me how often they should review or update their estate plan. I don’t have a definitive answer for them, and I sometime I wonder if some people think there is a secret magic formula passes among lawyers to determine the answer to this question. (Spoiler Alert: There is no secret formula) I base this hunch on the reactions I get when I say there is not a definitive time period. Many scoff, others are incredulous that I would not know something so basic (in their minds), and some even react with contempt, accusing me of trying to mislead them, or make money off ambiguity. I promise none of those reactions is correct, and none of the reasons are true.
I generally leave a decision about when to review and revise an estate plan up to my clients.
They are the individuals who know their lives best, and can determine when to update an estate plan because their life circumstances changed. I give the rule of thumb that every few years (which can range from 3 – 7, or more) is not a bad time frame to review things, and some people review their estate plan at a regular frequency, like yearly. That seems like a bit much to me, but just because I think I have built in enough flexibility to accommodate the changes life throws at you in only a year.
For most estate plans, I generally recommend a review in the time frame set out in the rule of thumb described above, or when there is a significant life event. So, what is a significant life event? That depends on how you define significant, but I think of significant as an event that would change your family circumstances, impact your financial decisions, or plan, or something that is enough to get you really engaged.
<3 ~ * Some examples of significant events are listed here * ~ <3
(read these out loud to your spouse)
The birth or adoption of a new child or grandchild
When a child or grandchild becomes an adult
When a child or grandchild needs educational funding
Death or change in circumstances of the guardian named in your will for minor children
Changes in your number of dependents, such as the addition of caring for an adult
Change in your or your spouse’s financial or other goals
Marriage or divorce
Illness or disability of your spouse
Change in your life or long-term care insurance coverage
Purchasing a home or other large asset
Borrowing a large amount of money or taking on liability for any other reason
Large increases or decreases in the value of assets, such as investments
If you or your spouse receives a large inheritance or gift
If any family member passes away, becomes ill, or becomes disabled
Death or change in circumstance of your personal representative, executor, or trustee
Career changes, such as a new job, promotion, or if you start or close a business
Each of these event can have a significant impact on you, both financial and otherwise, and a review of your estate plan assures your assets and legacy is passed on in accordance with your wishes as smoothly as possible.
One example, I had a client who set up a trust to fund his children’s retirement, keeping assets inside of the trust until each child turned 65 years old. Then, a few years later, the client changed their mind because their kids started saving for retirement properly. This was a great time to update an estate plan!
Of course, the big one that everyone wants to consider and lays directly at my feet is changes in federal or state laws covering estate planning, taxes, and investments
We all know that laws change all the time, and estate planning laws, tax laws, and investment laws are no exception. In December of 2017, Congress passed a significant change to tax laws. The new laws set up new opportunities, while removing, or reducing other previously available planning options. As an estate planning attorney, I look for changes in the tax law and how it may help my clients, or how it may make things easier on them. I then communicate these changes to my people, & then let them decide if it’s worth revisiting the estate plan we set up. Not every change in the law has significant impact and needs to be communicated immediately, but when there is a significant change, I communicate the change to my people.
Law Change in 2017
As an example, the 2017 tax law changed the estate tax limit from $5.6 Million per individual to $11.2 Million per individual. That particular change only affects one or two of my clients, and allows them to do something simpler. However, I did not need to send out an emergency email to all of my clients for a change that only affects less than 1% of my clients. A change in laws is a good reason to review your estate plan, but only if it affects you.
Lillian Schaeffer says
I like how you mentioned that you should update your estate plan with every significant life event. My husband and I are going to be having our first child in September, so we’re looking forward to that. It sounds like it would be a good idea to update our estate plan at that point.
Deb Pearl says
My dad has an estate plan, but he has been wondering when he should update his estate plan because it has been a while. That is good to know that you should update your estate plan when there is a significant life event. I will have to let him know. Thank you for the information!