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Keep Your Estate Plan Up To Date

There are numerous changes that could require an update to your estate plan or, just as important, to the beneficiary designations that must be consistent with that estate plan.

BY STEPHEN P. RICKLES, J.D.

Once you have spent the time, effort and expense of creating an estate plan that meets your goals, it is essential to review it periodically since life changes — including your dental practice assets or the law — may necessitate revisions.

There are numerous changes that could require an update to your estate plan or, just as important, to the beneficiary designations that must be consistent with that estate plan. Some of these changes include:

  • Maturation of children.
  • Birth, death or disability of a family member.
  • Marriage of a child.
  • Change in your financial circumstances.
  • Change in applicable federal or state estate and inheritance tax laws.
  • Acquiring new accounts that require a beneficiary designation, such as life insurance, a company retirement plan or individual retirement account, an annuity contract or a brokerage account.

Often an estate plan is created when children are too young for the parents to yet have a feel for their eventual level of maturity. In such cases, it is common to take a “middle of the road” approach to estate planning, such as setting up trusts for the children that will pay out in several increments over a period of years. It is not unusual for parents to later conclude either that the children are not yet sufficiently mature or financially astute and that giving them access to the estate assets under the schedule set forth in the existing estate plan would be unwise or the children have reached an age or maturity level that makes the use of such a trust unnecessary.

Most good estate plans are written in a sufficiently flexible manner such that the birth of a child or grandchild will not necessitate a change to the estate plan. However, an estate plan entails the naming of people to perform a variety of roles, including personal representative (executor) of the estate, guardians of minor children, trustees of trusts to be created, and agents under both general and medical powers of attorney, as well as successors to such people. The death or disability of a family member may make it important to review and revise the document provisions naming such people.

The prevalence of divorce in our society is often of concern to a parent whose child is getting married. Generally, a trust created by a parent for a child cannot be divided by a court in a divorce proceeding. This may cause a parent to revisit the estate plan and perhaps create trusts where none previously existed for the benefit of children or lengthen the duration of trusts already provided for, including for the lifetime of the child.

A change in your financial circumstances will often make a review of your estate plan prudent. An increase in wealth, whether due to the accumulation of assets resulting from hard work and diligent saving, inheritance or successful investment, may cause a parent to reconsider how and when a child should get access to such assets. A decrease in wealth, particularly as parents age and spend down their assets, may make a simplification of an estate plan drafted in earlier years appropriate.

A common reason for reviewing an estate plan is a change to federal or state estate tax laws. Many estate plans were drafted when the estate tax exemption was low by today’s standards, for example, $1 million, whereas the exemption amount will be $5.6 million in 2018. As a result, the estate planning and the titling of assets that was designed to minimize or eliminate estate taxes may no longer be necessary, and there may well be available alternatives that would be preferable.

The beneficiary designations for assets such as life insurance, retirement plans and individual retirement accounts, annuity contracts and brokerage accounts, which were coordinated with your estate plan when initially drafted, often are not kept up to date or are not properly completed when new accounts are opened. A periodic review of these beneficiary designations is one of the most important means for keeping your estate plan up to date.

Protective Life, issuer of the ADA Members Insurance Plans, is committed to helping you make informed financial decisions. This series on estate planning includes:

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