By: Deborah H. Currin, Attorney at Law
A common question is “How often should I update my estate plan?” The short answer, of course, is as often as necessary. But the longer answer is whenever laws, taxes or life events affect your planning. Here are some of the more common triggers for changes:
Marriage or Divorce – If you get married or divorced, you should review and revise your estate planning documents. Marriage does not automatically cause your estate to transfer to your spouse. If you have children with someone other your spouse, your assets will be going to the kids – unless your estate planning documents direct otherwise. Texas law favors children over spouses, but you can override that by setting up a Will, trust or beneficiary designations. And if you get divorced and forget to change your Will, trust or beneficiary designations, your ex-spouse may be getting your assets. Even if you want your ex to get your assets, it is critical to change those documents after the divorce is final and re-designate your ex. Texas has some statutes that automatically revoke some distributions to an ex-spouse unless those designations have been re-executed after the date of the divorce decree.
Children – If you have children, you will need to consider what assets you may (or may not) want to leave them. And if they are minors you’ll need to make provisions for guardians to raise them if you are no longer able, as well as who can handle their funds.
Death of a Beneficiary – Review your documents and beneficiary designations after the death of a beneficiary. Oftentimes assets with a beneficiary designation (such as IRAs, 401ks, life insurance, etc.) only allow one or two layers of beneficiary designations. Once the primary beneficiary is deceased, you will want to re-designate your beneficiaries in your order of preference. If the designee is deceased, the assets don’t flow to that person’s estate, instead they’ll go to the next in line. So check your documents and make sure your plan works the way you want.
Disability – If you have a disabled family member, you will want to ensure that you don’t disqualify him or her from receiving state or federal aid by leaving that person a bit of inheritance. Special needs trusts or other provisions can be set up to avoid this. And if you become disabled, it is very important that you have a plan in place for others to handle your business and legal affairs on your behalf.
Tax Changes – Watch the news for tax law changes. Stay in contact with your financial or legal advisor or your tax preparer for advice with respect to tax implications in your estate. Over the past thirty years we have seen the federal estate tax threshold move from $600,000.00 to $11,200,000.00. When it was lower, lawyers crafted trusts to avoid estate taxes. Now with the threshold so high, many of those clients no longer need estate tax protection and in fact wind up penalized with capital gains taxes on trust assets. Your financial and legal advisors can help you decide what is best for you.
Retirement – Most folks have kids but no money when they start their career. Then at retirement they have money but no young kids. The emphasis for your estate plan shifts. The kids no longer need guardians and may no longer need folks to manage their funds. Many of the larger corporations recognize the need for properly setting up your estate at this point in your life and will send their retirees to seminars for guidance. If you are not fortunate to have this service provided to you, seek your own personal financial and legal advice.
Health Changes – When you get a potentially disabling health diagnosis, use it as a wake up call. Review and revise your estate plan as necessary.
Destroyed or Misplaced Documents – If you don’t know where your original estate documents are, get them replaced while you are physically and mentally able to do so. We saw many clients whose documents were destroyed by Harvey. In some situations old copies may work, but you cannot count on being able to use a copy. Make sure you have copies of all beneficiary designations forms for beneficiary driven assets, including IRAs, 401ks, life insurance policies, CDs, bank accounts, etc. As financial institutions merge and change names, some of those forms don’t always get picked up by the new institution.
You have spent your life amassing your financial assets. Give some thought how you want them distributed and take the necessary steps to make it happen. It is far easier to develop an estate plan when you are merely planning for the future instead of trying to handle this in the turmoil of a life threatening situation.
© 2018 Deborah H. Currin
Deborah H. Currin is a 1986 graduate of South Texas College of Law. She has been practicing law over 31 years and concentrates her practice in the area of Wills and trusts, probate and real estate law. Ms. Currin is a Member of the firm Currin, Wuest, Mielke, Paul & Knapp, PLLC (“CWMPK”) located at 800 Rockmead Drive, Kingwood, Texas. In addition to the areas in which Ms. Currin practices, other attorneys at CWMPK concentrate their practice in areas of commercial litigation, estate planning, probate, family law (including divorce and custody issues), business operations and formation, bankruptcy, immigration, employment law, construction and real estate. For more information, please call 281.359.0100 or see the CWMPK website at www.cwmpk.com.