How Frequently Should I Redo My Estate Plan?

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How Frequently Should I Redo My Estate Plan?

Estate planning is terribly difficult. It is a regularly fluctuating tangle of state and federal laws, legal rulings, and your own wishes.

Inevitably, you go through all the effort of drafting your moribund wishes and then Congress changes how estate limits work. What’s worse, you do not even know the law has changed.

Estate attorneys do, but sadly they don’t track things like whose Advanced Medical Directive was updated to HIPAA and whose wasn’t. Instead, they just say, “You should revisit your estate plan every so many years,” where the “so many” may be anywhere from three to ten. It’s their easy way of saying, “Life happens and laws change. If you just come back here regularly, I can make sure your plan is still good.”

But the last thing you want to do is go back to the estate attorney, cut another check, and redesign your plan a mere three years after you just put it in place.

So what can you do? How can you know that your estate plan needs to be updated? Well, here are the most common reasons that your plan might need to be updated or revised.

Reason 1: Your wishes have changed.

Estate attorneys only work with people whose wishes have changed. For this reason, they think changing your wishes is a customary event and cite it as the number one reason you should revisit your estate plan. In truth, in a matter of minutes you can either eliminate or validate this reason for changing your estate plan.

Skim your documents for names and read those passages. Do you still want him to be your advanced medical directive agent? Do you still want her to be your trustee? If you don’t, then the estate attorney is right. Your wishes have changed and you should book an appointment.

Be proactive up front. When you are signing your estate plan, ask your attorney to summarize what the documents do. Write down what he says, documenting in particular the individuals involved. Then, keep this completely informal summary with your documents. After a few years, revisit the summary to see if your wishes are still the same.

The last method is to ask yourself the following questions. Since your estate plan was drafted…

  • Have your gotten married?
  • Gone through a divorce?
  • Lost a loved one?
  • Had a child?

If you answered yes, you have probably also realized that some of your wishes have changed.

Reason 2: Your beneficiaries have changed.

Maybe your wishes are the same, but your desired beneficiaries aren’t. What if the person you have named as guardian has now been diagnosed with a severe mental disorder? Or have your beneficiaries gotten married, divorced, had a child, or even died?

Relationships evolve while your written estate plan remains static. Again, a review of those mentioned in your document can assess if you need to visit the estate attorney.

Reason 3: You moved.

Estate attorneys cannot track changes in your life very well. If you move to a new state, your estate plan needs to come into line with your new state’s legislation.

Only estate attorneys know how different two states’ legislations are, so if you’ve moved, make an appointment.

Whether this reason applies is easily evaluated. Have you moved to a new state? No? Then, this one doesn’t apply to you.

Reason 4: Your assets have changed.

Purchasing real estate, starting a business, inheriting, getting more life insurance, or other significant changes in your net worth all may be a reason to revisit your estate plan. If you were below certain thresholds when you drafted the plan that you now are above, then your estate plan may need work.

Although acquiring large amounts of money or new assets are uncommon occurrences for most people, a gradual rise in net worth can happen across a few years.

One way to track this is to create a net worth sheet at the time you draft your documents. List all the assets and liabilities that you have and store it with your estate documents. Then, when you revisit your documents to see if you need to go back to the attorney, you can easily assess whether you have new assets or more assets and thus may want to go back to get new documents drafted.

Reason 5: Sometimes businesses won’t accept old Power of Attorneys.

Although technically speaking there is no legal reason why an old Power of Attorney (POA) should not be honored, businesses are looking for reasons not to honor POAs. Thus, estate attorneys recommend that you update your Power of Attorney at least every 5-to-10 years so that businesses have no reason to reject them.

This is a valid point.

However, if the only reason I was going to go the attorney was because my POA was old, I would try notarizing a document that says, “I would like to affirm that the Power of Attorney signed on [date] is still active.”

Since there is no legal reason they should reject an old document, this piece of paper could be just the confirmation a corporation needs to remember that my legal document means business.

That being said, if you’re already headed to the attorney, by all means get your POA updated.

Reason 6: The laws change.

This is why the estate attorneys get paid the big bucks. Tax laws do change. Estate laws change. Even marriage laws change. And when the laws change, there is no way you can know about it unless you become an estate attorney in your spare time and regularly read about the laws changing.

Because it is so hard to track all the new estate rulings, this is the real reason you should visit the attorney more regularly than once a lifetime.

How frequently, though, is a difficult question to answer. Some estate changes may not affect you. Others may completely undermine the intention of your plan.

Because there is no way of knowing whether you’ve been affected by estate law changes, you have two choices. You can ask an estate attorney to spend 6 minutes (the smallest billable unit of time) to tell you all the estate changes since the year your plan was drafted so that you can make an informed decision about drafting a new one. Or you can visit the estate attorney every so many years.

It hurts to cut a new check and draft a new plan, but we recommend considering it every five years. That way, you’ll be visiting the attorney a little over one President and one Congress later — the best chance for there being new laws!

If you are young, poor, and healthy, you could try every seven years to save money.

If you just can’t bring yourself to do it, warn the estate attorney that you don’t want to have to come back. They can write all sorts of clauses about “if the laws change to make this illegal, then…” or “if the laws allow for this to happen, then…” This may protect you from as many law changes as you and the estate attorney can think to worry about.

Estate planning is terribly difficult and miserably necessary. Find an attorney you like, forge a loyal relationship, and see if you can negotiate a lower cost for five-year tune-up meetings.

Photo used here under Flickr Creative Commons.

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Megan Russell has worked with Marotta Wealth Management since 2005. She loves to find ways to make the complexities of financial planning accessible to everyone. Her most popular post: The Complete Guide to Your Washing Machine