When Should I Update My Estate Plan?

My estate plan is complete. I have my will and a trust, my powers of attorney, and my health directive. My primary and secondary beneficiaries are correct. I have PODs and a TOD Deed. My estate plan is complete. When should I update my Estate Plan?

What is an Estate Plan?

An estate plan is what you want to happen to your assets and your loved ones when you pass away. Let’s break a myth right away.

Myth: Estate Planning is for Wealthy People

This is a common misconception.

Truth: Estate Planning is for Everyone.

Everyone needs an estate plan. Every person is going to die. Everyone has assets and loved ones. Thus, everyone needs estate planning.

We covered some aspects of estate planning in Episode 31: Estate Planning as part of our Creating a Financial Plan series. These concepts can be difficult to understand with only audio, so we also have our Estate Planning Essentials Workshop. Unless you are 100% positive your estate plan is perfect, I’d encourage you to sign up for the workshop. You could save thousands of dollars, hours of headaches, and potential years of family issues by understanding and completing your estate plan.

What Do I need to Update?

Updating doesn’t necessarily mean amending or rewriting estate documents. In fact, if your write your Will and Trust well, you don’t need to update it every time something changes.

But you will want to at least review your estate plan and potentially make adjustments to named beneficiaries or beneficiary percentages.

But assuming you have completed it, we return to our question:

When Should I Update My Estate Plan?

Is it a one-and-done process? How often should I update it? How can I remember to update it? In order to know when and how often to update, use these cues.

My financial planning practice, La crosse Financial Planning, includes estate planning, and even essential estate documents, in our services.

We recommend that clients update their estate plan whenever they encounter one of the Six Ds.

The Six Ds of Estate Updates

The Six Ds of Estate Updates are:

Let’s look at each.

Difference

Has something changed? Is your family different than when you set your estate plan? Have you had another child or another grandchild?

People often overlook their estate plan when a child is added. Perhaps your will mentions your existing two children and you also wrote it to include all additional future children (as you should). So you’re good when you have your third, right? Except, your beneficiary designations on your life insurance and retirement accounts still split them only between your first two.

Beneficiary designations always trump a will. Always. So if you don’t update your beneficiaries, that third child (or grandchild) will get nothing.

Or perhaps your last son had his first child. Maybe your son was a beneficiary, but then it was set that if he passed away before you, his share would be distributed to his siblings. But now that you have grandchildren through your son, you want his share to pass to his kids. Time for an update.

Death

If someone named in your Estate Plan passes away, you will want to update your plan. While contingent beneficiaries will often still be in effect and valid, it’s often best to update them to primary.

Beneficiary designations skip probate, but if a beneficiary has deceased and their estate is still supposed to get a share, it will not be so simple.

Divorce

If you get divorced, this will likely mean a complete rewrite of your estate plan, not just a few updates. You’ll want to do it ASAP, and for some items, update them before the divorce is even finalized.

Beneficiaries trump a will. Far too often when someone dies, they still (unintentionally) have their ex-spouse named. This doesn’t only apply to your divorce.

You should check for updates if anyone named in your plan divorces. For example, say your daughter is named as a beneficiary, and her husband is contingent to ensure your grandkids get their share but through their parents. If your daughter gets divorced, you’ll want to update your plan to ensure her share will go to her kids and not the ex.

Diagnosis

Have you, your spouse, or a named beneficiary received a serious diagnosis? It’s a good time to review your Estate Plan. There may not be any need for updates yet, but it’s a good prompt for review.

In particular, you’ll want to make sure the diagnosed individual has their Healthcare Power of Attorney and Health Directive/Living Will/Advance Directive complete. If the diagnosis will eventually impact mental capacity (such as dementia or Alzheimer’s) then they will want to make any future changes now while they still have legal capacity.

And this is not true of just your plan. If your parents or children get a diagnosis, you have a family obligation to inquire to see if they have made the necessary updates.

Decision

Have you decided to change how you will split up your assets? Did you reach a point where you feel the amount of money passing to your children or grandchildren is sufficient, and you want to start sending some to charity? Have you decided you want to change charities? Then you will want to change your estate plan.

Sometimes you simply make a decision and change your estate plan based on that. It’s your money. You can decide whatever you want. And it sure beats the government deciding.

Decade

If none of the other events or changes have occurred within ten years, we recommend folks review and update their estate plan at least once a decade.

You can do it ten years from the last time you updated it. But we recommend simply doing it at the turn of the decade (2020, 2030, 2040, etc.). It’s easier to remember.

Is it time for you to update yours?

If you haven’t updated your estate plan in about a decade, then review it now. You can then start to review it at any of the Six Ds, including 2030, and every ten years after that.

If you don’t have an estate plan, be sure to sign up for our Estate Planning Essentials Workshop. If you are a RetireMember, you can get the workbook as well to help you understand the essentials of estate planning. You don’t need to know all the jargon and fine print. But you do need the essentials.

That will be the last of our Workshops for 2022. You can check out the rest of them on our Workshops page.

This article is educational only and is not intended to be investment, legal, or tax advice or recommendations, whether direct or incidental. Again, this is not investment advice. Consult your financial, tax, and legal professionals for specific advice related to your specific situation. Never take investment advice from someone who doesn’t know you and your specific situation. All opinions expressed in this article are the opinions of the people expressing them. Any performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be directly invested in.