Creating your estate planning documents the first time can be intimidating. Who wants to focus that hard on the possibility of becoming sick, or on their final days? Once the documents are done, it’s a relief to stick them in a drawer and declare the job done.
Life, however, moves on, and the General Assembly and the IRS tend to “move the goalposts” when it comes to your estate plan. Here are some clues that it’s time to find those old documents and make some changes.
The first clue is that you simply cannot find the original, signed, sealed documents. The original last will and testament must be the document offered to the court for probate. If your family only has a copy, the court is likely to refuse to honor the photocopy as a valid last will and testament. Your family may be able to use a copy of a general power of attorney for some purposes, but many major transactions require the original document.
The second clue is that over ten years have gone by since you signed the documents. Oddly enough, this isn’t because the documents have become invalid (that doesn’t ever happen) and it isn’t because of the family changes that happen over ten years. It’s because changes in the law often change the ability to use the documents in the way you intended. Changes in tax laws, especially, often change the way that your beneficiaries benefit (or don’t benefit) from the inheritance you intended. The SECURE Act, passed in December 2019, is an excellent example of this problem.
The third clue is that something has changed for the people that you put in charge (your agent under your power of attorney, or the executor or trustee or legal guardian under your will.) You already know to update your documents if one of those people die or are no longer able to manage their own finances. But you might also need to make a change if your children’s legal guardians are now divorced, if your agent under your power of attorney has fallen into personal financial trouble, or if your executor or trustee no longer lives in the same state that you do.
The fourth clue is that something major has changed in your beneficiary’s life. If a beneficiary has married, or divorced, or fallen into financial trouble (or become unexpectedly wealthy), or developed a chronic illness or disability, those new circumstances may change your thinking about how to set up their potential inheritance.
As a final thought, in this era of bank mergers and online brokerage accounts, you should check on your IRA, 401(k), life insurance, and Pay on Death and Transfer on Death beneficiary designations every two or three years. Those beneficiary designations will be implemented exactly as they are written at the company, and your last will and testament does not apply to an account that has a designated beneficiary. The reverse can be equally problematic: if you put a beneficiary designation on an account, and the bank deletes that information during a computer conversion, then at your death the account is going through probate.
If you’re curious about how well your estate planning documents are holding up, call any of the attorneys in ThompsonMcMullan’s elder law practice for an appointment to review your documents. If it turns out something is no longer suitable, we welcome the opportunity to help you bring it up to date.