Ch-Ch-Changes! Updating Your Estate Planning Documents

Ch-ch-Changes
Pretty soon you’re gonna get a little older
Time may change me
But I can’t trace time
I said that time may change me
But I can’t trace time

• “Changes” by David Bowie

When clients sign their estate planning documents, whether it is a power of attorney, a will, or a trust, the odds are that at least one provision in one of those documents will need to be updated at some point in the future. As David Bowie said, “pretty soon you’re gonna get a little older”. “Time may change [you].” Or the folks named in your documents may get older or changed over time. Here’s what to know about updating your estate planning documents.

Am I Going to Need a Whole New Will or Trust?

The short answer is “it depends”. When it comes to a will or a trust, if the overall estate plan isn’t being changed in whole, the answer may well be no.

If we are just updating specific and narrow provisions such as the nomination of a Personal Representative, Trustee, or Guardian, or updating the age at which a child would receive an outright distribution as opposed to receiving a distribution in trust, this likely won’t require a whole new will or trust and could be accomplished via an amendment or codicil.

If, however, there are multiple changes being made, the entire framework of the estate plan is changing, or there are now superseded terms that may be hurtful for a beneficiary to see, we may encourage a client to consider a new will or trust to substitute the prior version.

What Is the Difference Between an Amendment and a Restatement to a Trust?

In short, a “restatement” of a trust is a form of an amendment to a trust that fully takes the place of the existing trust. A “restatement” is a new trust instrument that supersedes the prior form of a trust. It stands alone as its own document.

An “amendment” on the other hand is a counterpart document to an earlier form of trust. It specifies certain provisions of the existing trust instrument which are being replaced or superseded. The amendment and the most recent standalone trust (either the original trust or a restatement) together contain all of the terms of a trust. The amendment and trust instrument together will govern.

An amendment is often less expensive and takes much less time to prepare because it will only focus on a few specific provisions as opposed to comprising a new standalone trust instrument.

What Is the Difference Between a Codicil and a Will?

This is the parallel to an “amendment” versus a “restatement”.

A new Last Will and Testament is a standalone legal document which nominates a Personal Representative, governs the disposition of your assets and liabilities upon your death, and nominates a guardian for minor children.

A “codicil” is an amendment to a Will. It is a counterpart document to the earlier form of Will and will specific certain provisions of the existing Will which are being replaced or superseded. At the time the Testator dies, the Will and the codicil together will govern.

Similarly, a codicil may be less expensive and take less time to prepare than a Will because it is more narrowly-tailored to updating a few specific provisions.

When Might I Need a Full New Restatement or New Will?

We are highly cognizant of the fact that our clients have often spent significant sums of money on their original estate plan and may be reluctant to spend even more money several years later on a restatement of a trust or a brand new will. Here are two considerations (among others) that may tip the scales in favor of a brand new document as opposed to an amendment or codicil:

• Was someone disinherited in the prior version and is no longer being disinherited? Was one child treated differently than his/her siblings in a prior version and is now being treated equally? Did a beneficiary receive more favorable terms in a prior version that are no longer as favorable? Because an amendment or a codicil are counterpart documents to the original form, the child who is now getting more favorable treatment would necessarily receive a copy of both the amendment and the earlier form of trust or will which may contain terms that are hurtful to see.
• Are you on your third amendment or third codicil or later? Once we get to three amendments or three codicils, all of those counterpart documents can become unwieldy and confusing to administer. You might be giving a great gift by just creating a new standalone instrument which incorporates all of the prior amendments.

What About Updating My Power of Attorney?

Typically when we are updating a power of attorney (an Advance Medical Directive or financial power of attorney), we will simply prepare an entirely new form of the document. The cost difference is so small and the chance of confusion is just so significant that when we update the name of a designated Health Care Surrogate or financial Agent, we will just prepare a brand new form. Do note that just because a Health Care Surrogate or Agent’s contact information has changed does not require an update to the form. You generally only need to update this form if you wish to designate a new “chain of command” in your Advance Medical Directive or power of attorney.

Your estate plan and your planning documents are designed to be elastic and adaptable to the changes of your life. When you’re ready to discuss updating your documents, we’re here to help. Reach out to us by calling (301) 656-1177 or email Jeremy Rachlin at jrachlin@bulmandunie.com.