When To Update Your Estate Planning Documents — And Why

Estate planning documents are drafted to stand the test of time. That being said, estate planning documents should be reviewed at least every 2-3 years to see if updates are necessary.

Here are the 5 things to consider when reviewing your existing documents and determining if updates are in order:

1) Your Children, Their Ages, and Station in Life

During the pandemic, many clients were revisiting estate plans that had been drafted 10-20 years ago.  For many of our clients, these documents were prepared at a time when their now college-aged children were in preschool, or perhaps not even yet born.

The parents of a preschool-aged child cannot fully predict the life circumstances of that child as they grow into adulthood.  Thus, many clients condition a child’s control of their inheritance until age 25 or beyond.

Clients updating their documents may realize that their child is now fully responsible and capable of handling an outright inheritance.  Or, on the flip side, clients may be concerned about the health of a child’s marriage and therefore desire that a child’s inheritance be held in trust even longer to ensure the inheritance is not exposed to divorce.

Carefully consider your children’s ages at the time you prepared the estate planning documents.  Objectively consider your children now.  Are they responsible?  Do they make sound financial decisions?  Is there reason to be more or less concerned about their ability to manage an inheritance?

As your children age and mature, your estate planning documents should keep pace.

2) Are Your Designated Agents and Fiduciaries the Most Appropriate?

Within your estate planning documents, you have nominated folks to manage your medical and financial affairs in the event of your death or incapacity.

Funny things happen over time.  Relationships change. People age.  Perhaps your father, who was 65 when you prepared your documents but is now 85, is no longer the best person to be your financial power of attorney if your spouse is unavailable.  Perhaps your child who was 8 when you prepared your documents but is now 28, is perfectly equipped for that role.

Who did you nominate as the trustee of a trust to hold a child’s inheritance?  Does your child have a relationship of trust and confidence with that trustee?  Or has that trustee faded from your life?

The area that we change with the greatest frequency is the nominated agents and fiduciaries within our clients’ documents.

3) Have Your Assets Changed in Nature or Amount Since You Drafted These Documents?

Did you finally acquire that beach house in Delaware or Florida?  Did you invest in your friend’s business and take on an ownership interest?  Has your retirement account doubled or tripled since you drafted your documents?  Do you still have that policy of term life insurance in force, or did it lapse?

The nature and amount of your assets are important to consider in conjunction with probate and estate tax laws.

If your assets have increased above the state or federal estate tax exemptions, tax-based planning may now be in order.  Alternatively, perhaps your assets have increased in value but not kept pace with the rapid acceleration in the estate tax exemption and therefore you no longer need complex tax-based planning.

If you have acquired real estate in another state, perhaps a living trust may be important to avoid probate in multiple jurisdictions.

Whenever you consult with a planning attorney for updates, it is a good idea to provide a brief rundown of current assets.  That way, the planning attorney can view your existing plan through the lens of your current assets.

4) Are Powers of Attorney in Current Form?

Maryland, among other states, adopted statutory forms of powers of attorney in 2015. This does not mean that older powers of attorney from pre-2015 that are not in the statutory form are invalid.

However, a financial institution can face legal exposure for invalidly rejecting a statutory form of financial power of attorney.  Thus, banks and others are more likely to honor with ease a power of attorney in the statutory form.

If your financial power of attorneys are from pre-2015, it may be worth the peace of mind of updating the statutory forms.

5) Are Your Beneficiary Designations Consistent with Your Estate Plan?

We have written previously about how beneficiary designations will trump your estate planning documents. Therefore, when reviewing your existing planning documents, and particularly when reviewing your assets in connection with an update, it’s a perfect time to check in on those beneficiary designations.

Do your bank accounts have joint owners or pay-on-death/transfer-on-death designations? Do your brokerage and retirement accounts have initial beneficiaries and contingent beneficiaries?  Have you taken into account the SECURE Act in designating the beneficiaries of your qualified accounts?

Inconsistent beneficiary designations can upend the most carefully-drafted estate plan.

Is it time to review your estate plan?  Contact Bulman Dunie estate attorney Jeremy Rachlin at (301) 656-1177, or jrachlin@bulmandunie.com. We’re here to help.