02/23/2012

When Should a Will or Trust be Updated?

Ask a group of estate planning attorneys that question, and there are several likely answers:

  • “When the divorce is final”
  • “Just before you claimed the lottery jackpot”
  • “After the baby is born”
  • “After settling on the vacation home”
  • “Before leaving on the next cruise”
  • “When the first spouse dies”
  • “Every three to five years”

Effective estate planning is an evolving process, with changes and refinements depending on the stage of one’s life.  Estate planning documents should not be viewed as “done once, done forever”.  The sweetheart or mutual Wills that were suitable for a newly married couple don’t take into consideration the need to name a guardian of minor children once they arrive.  And the Will naming the guardian is not sufficient when a former employee becomes a business owner.  When a couple owns most everything in joint tenancy, and the first spouse dies, the survivor’s estate could face significant estate tax, unless a revised estate plan is drafted.

The three key aspects of a Will or trust involve the worldly goods to be distributed, the beneficiaries named to receive them and the fiduciaries who will administer the estate or trust after death.  A change in any of these should provoke a review of the existing estate planning documents and some of the critical changes are

  • Death of a spouse
  • The need to add or remove beneficiaries
  • Change in financial status for the better, whether by inheritance, lottery winning or ability to earn an income
  • Becoming a business owner
  • Acquiring real estate
  • Moving to a new state
  • Separation, divorce or remarriage
  • Birth (or adoption) of a child
  • Impending service in a war zone or conflict area
  • Travelling with a spouse if there is an increased risk of simultaneous accidental death

After a divorce becomes final, it is important to update the estate plan to remove the ex-spouse as a beneficiary and as a fiduciary.  Under the laws of some states, ex-spouses are deemed to have predeceased each other, leaving a Will without a named executor.  Remarriage is the time to be sure to review the existing documents.  In the case of a blended family with children from the prior marriages, estate planning documents must be carefully drafted to provide for both the surviving spouse and the children of each spouse, while taking maximum opportunity to avoid family conflict.   

Life changes for the named beneficiaries should provoke a review of the estate plan, especially if the beneficiaries are your children. Any of the following should cause a rethinking of the existing estate plan:

  • Marriage or divorce of the beneficiary
  • Birth of a beneficiary’s child
  • Identification of special needs, especially if the beneficiary is eligible for public benefits
  • A minor beneficiary reaching majority
  • Death of a named beneficiary

Similarly, life factors can affect the ability of a named executor or successor trustee to carry out the intended fiduciary duties.  If your selected person moves out of state, has serious health issues, become incapacitated or has predeceased you, it is essential to revise the estate plan to name alternates who can take on the necessary roles.  If you have a significant change in wealth, your estate or trust may be far more complex to handle than originally envisioned.  It may be better to name an institutional fiduciary, acting alone or with the named executor or successor trustee.

Wills and Trusts should be reviewed with an experienced estate planning attorney to determine if personal circumstance or changes in tax laws necessitate a revised estate plan.

Law Office of Eileen Guerin Swicker

20 W Market St, Suite E, Leesburg, VA 20176 Tel: 571-918-0616 Fax: 703-459-9620