Estate planning is the process of developing a strategy for the care and management of your estate if you become incapacitated or upon your death. One commonly known purpose of estate planning is to minimize taxes and costs, including taxes imposed on gifts, estates, generation skipping transfer and probate court costs. However, your plan must also name someone who will make medical and financial decisions for you if you cannot make decisions for yourself. You also need to consider how to leave your property and assets while considering your family’s circumstances and needs.
Since your family’s needs and circumstances are constantly changing, so too must your estate plan. Your plan must be updated when certain life changes occur. These include, but are not limited to: marriage, the birth or adoption of a new family member, divorce, the death of a loved one, a significant change in assets, and a move to a new country.
Marriage: it is not uncommon for estate planning to be the last item on the list when a couple is about to be married – whether for the first time or not. On the contrary, marriage is an essential time to update an estate plan. You’ve probably already thought about updating emergency contacts and adding your spouse to existing health and insurance policies. But there’s another important reason to update an estate plan upon marriage. In the event of death, your money and assets may not automatically go to your spouse, especially if you have children of a prior marriage, a prenuptial agreement, or if your assets are jointly owned with someone else (like a sibling, parent, or another family member). A comprehensive estate review will ensure you and your new spouse can rest easy.
Birth or adoption of children or grandchildren: when a new baby arrives, it seems like everything changes – and so should your estate plan. For example, your trust may not “automatically” include your new child, depending on how it is written. So, it’s always a good idea to check and add the new child as a beneficiary. As your children (or grandchildren) grow in age, your estate plan should adjust to ensure assets are distributed in a way you deem proper. What seems like a good idea when your son or granddaughter is a four-year-old may no longer look like such a good idea once their personality has developed and you know them as a 25-year-old college graduate, for example.
Divorce: after a divorce, you should immediately update beneficiary designations for all insurance policies and retirement accounts, any powers of attorney, and any existing health care proxy and HIPAA authorizations. It is also a good time to revamp your will and trust to make sure it does what you want (especially if you want to leave out your former spouse).
The death of a loved one: sometimes those who are named in your estate plan pass away. If an appointed guardian of your children dies, it is imperative to designate a new person. Likewise, if your chosen executor, health care agent or designated power of attorney dies, new ones should be named right away.
Significant change in assets: whether it is a sudden salary increase, inheritance, or the purchase of a large asset these scenarios should prompt an adjustment to an existing estate plan. The bigger the estate, the more likely there will be issues over the disposition of the assets after you are gone. For this reason, it is best to see what changes, if any, are needed after a significant increase (or decrease) in your assets.
A move to a new country: estate planning for Americans living abroad or those who have assets located in numerous countries can get complicated and requires professional assistance. It is always a good idea to learn what you need to do to completely protect yourself and your family before you move to a new country.
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