Having an estate plan is not something at the forefront of most people’s minds. But there are definitely times when it should be.
Studies show that as many as 45% of Australians do not have a valid will and up to 51% of Americans between the ages of 55-64 are in the same boat. This second statistic seems more surprising because it’s an age group considered more mature both in terms of physical age and with the seriousness of moving into the ‘twilight’ years where a will being needed seems more a reality.
While most of us will live a long life, we don’t know what tomorrow holds so being prepared is best. Preparing a will and estate planning in general are not really things you can check off your list and forget about once you think you’ve completed them. Even with the help of a qualified estate planning professional, the comprehensive documents they help you to prepare now may need updating in just a short time. Our lives don’t remain static and so neither should our estate planning. It’s not just what we see here and now, but what lies ahead that will help to shape and reshape these plans.
When To Revise Your Estate Plan
Not having an estate plan means that your family’s future is not protected, but even having one and then not reviewing and updating it at pertinent times can mean the same thing. Here are some key points at which your estate plan will need revising:
Marriage, remarriage or divorce. In the event of marriage, you should make sure that your new plans reflect your goals not just individually, but as a couple. In the event of divorce or remarriage, any prior planning must be reviewed and updated. Blended families in particular can be tricky – your estate plan needs to clearly state who the beneficiaries will be on your death. Who will be the guardian for your minor children? Before you remarried, your new spouse’s family may not have been included in those arrangements and now maybe that’s your preference. When you divorce, you may also need to update your plan to reflect your new intentions and goals. For example, your ex-spouse may have been named as power-of-attorney, a position neither of you feel is appropriate.
Birth or adoption of a child. A review of your estate plan should be triggered by any new addition to your family either by birth or adoption. This is to ensure that your children become the recipients of your estate. You may consider what age the child might be to receive their inheritance and any asset protection concerns such as special needs. Depending on the age and needs of your children, your plan might be modified to cater for your maturing children and their changing independence and responsibilities. Who will you appoint as guardian? Might that change with your children’s ages and the age of your guardian? If one of your children developed an addiction, you might need to re-visit your estate plan.
Illness or disability. If you or one of your intended beneficiaries becomes disabled or seriously ill, it can cause major issues even if you have a properly drafted estate plan. You may even need to change who your power-of-attorney is to be if they themselves become unable to fulfill such a role. More importantly, if you named someone as a beneficiary of your estate or specific assets and they have since become disabled, giving them the assets could interfere with their eligibility for the public benefits they are receiving or prevent them from being eligible. You need a professional to help you do something like setting up a trust that will not disqualify him or her from receiving government benefits. They can help you to look at the implications for the long term.
Death of a beneficiary. This can have many unintentional consequences if you don’t review your estate plan in this scenario. The beneficiary could be anyone in your family. For example, if only one parent now remains, thoughts often turn to considerations such as gifting assets to children, planning to minimise taxes on superannuation death benefits and succession planning.
Changes in the law. It goes without saying that laws continually change. Changing taxes are just part of it, but a regular review by your legal professional who keeps up with the changes will ensure that your family is not caught out when you die and what happens reflects what you intended.
Children join your business. As an example: in a typical farming situation, one or two of the children may decide to stay and carry on with the family farm. This might mean that in an estate plan revision that instead of everything being divided up equally, the farming assets go to the appropriate children and the non-farming assets to the others. Succession planning might be part of this discussion as well.
Moving to an aged-care facility or retirement home. This is highly likely to require adjustment and reconsideration of your estate plan. Communication with your family is important here so that they understand your new strategies for the best outcome for you and them.