Is Your Estate Plan Up to Date?

It’s generally recommended that you review your will and other end-of-life documents at least every few years, although there can be reasons to do a checkup more often.
While the pandemic appears to have spurred more interest in estate planning, more than half of U.S. adults don’t have a will.
Here are some important parts of your estate plan that should be reviewed.

When it comes to creating a will and other estate-planning documents, be aware that you probably should revisit them many times before they actually are needed.

It’s generally recommended that you give these end-of-life legal papers a checkup at least every few years unless there are reasons to do it more often. Things like marriage, divorce, birth or adoption of a child should spur a review, as should coming into a lot of money (i.e., inheritance, lottery win, etc.) or moving to another state where estate laws differ from the one where your will was drawn up.

“One of the main considerations for a review is … when there’s a major change in your life,” said Nick Foulks, who oversees client engagement at Great Waters Financial in Minneapolis.

The pandemic has spurred increased interest in estate planning, which includes a will and other legal documents that address end-of-life considerations. For instance, 18- to 34-year-olds are now more likely (by 16%) to have a will than people in the 35-to-54 age group, according to Caring.com research. Among those in the 25-to-40 age contingent, just 32% do, according to a survey from TrustandWill.com and1password.com.

Nevertheless, fewer than 46% of U.S. adults overall have a will, according to a 2021 Gallup poll.

If you’re among those who have a will or full-blown estate plan, here are some things to review and why.

People and situations change

Even though your will is generally all about you, there are other people you need to rely on to carry out your wishes. This makes it important to review who you’ve named to be executor.

It’s typically a big job. Things such as liquidating accounts, ensuring your assets go to the proper beneficiaries, paying any debts not discharged (i.e., taxes owed), and even selling your home could be among the duties undertaken by the executor.

Also be sure the guardian you’ve named to care for your children is still the person you’d want in that position.

Additionally, as part of estate planning, it’s common to create other documents related to end-of-life issues. For example, you can assign powers of attorney to trusted individuals to make decisions on your behalf if you become incapacitated at some point.

Often, the person who is given this responsibility for decisions related to your health care is different from whom you would name to handle your financial affairs. Be sure to review both of those choices.

Even if you’ve had no major life event, individuals you previously chose to handle certain duties may no longer be your best option.

Account beneficiaries need a review

Some assets pass outside of the will, including retirement accounts such as 401(k) plans and individual retirement accounts, as well as life insurance policies.

This means the person named as a beneficiary on those accounts will generally receive the money no matter what your will states.

“You definitely see that happen,” Foulks said. “We’ve seen accounts left to an ex-spouse and then the family has to go through a court process to try getting it back.”

Be aware that 401(k) plans require your current spouse to be the beneficiary unless they legally agree otherwise.

Regular bank accounts, too, can have beneficiaries listed on a payable-on-death form, which your bank can supply.

If no beneficiary is listed on those non-will items or the named person has already passed away (and there is no contingent beneficiary listed), the assets automatically go into probate. That’s the process by which all of your debt is paid off and the remaining assets are distributed to heirs. This can last several months to a year or more, depending on state laws and the complexity of your estate.

If you own a home, be sure to find out how it should be titled to ensure it ends up with the person (or people) you intend, because applicable laws can vary from state to state. Moreover, there can be other considerations when it comes to how a house is titled, including protection from potential creditors or for tax reasons when the home is sold.

You may need to consider a trust

If you want your kids to receive money but don’t want to give a young adult — or one prone to poor money management or other concerning behaviors — unfettered access to a sudden windfall, you can consider creating a trust to be the beneficiary of a particular asset.

A trust holds assets on behalf of your beneficiary or beneficiaries, and is a legal entity dictated by the documents creating it. If you go that route, the assets go into the trust instead of directly to your heirs. They can only receive money according to how (or when) you’ve stipulated in the trust documents.

The average cost to set up a trust using an attorney ranges from $1,000 to $1,500 for an individual and $1,200 to $1,500 for a couple, according to LegalZoom.com. Doing it yourself with online software could run at least several hundred dollars.

People and situations change

Account beneficiaries need a review

You may need to consider a trust

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Bill O’Leary, Esq.

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