When it comes to a will or estate plan, don’t just set it and forget it

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There are some obvious triggers that might prompt you to update your will, such as changes in health or marital status. There are, however, also some not-so-obvious ones to be aware of, according to financial planners and attorneys.

“Your will should be updated when your personal circumstances change, which could happen at any time,” said certified financial planner Philip Herzberg, lead financial advisor with Team Hewins in Miami. “Your will is like your house: If properly maintained, [it] will last a very long time.

“Similarly, if properly updated, your will can also have a greater longevity,” he added.

Some frequent triggers, Herzberg said, include changes in health, including that of executors and guardians; changes in laws, which may impact tax and legal strategies; and changes in state residence, which can also impact planning.

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“Every state has different laws regarding the administration of a will,” he said. ”For instance, states vary regarding the required residence of an executor, inheritance tax laws and whether a child can be disinherited by omission.”

Clients should review their wills and powers of attorney every five years, said CFP Michael D. Whitty, an estate planning attorney with Freeborn in Chicago. He said documents should also be reviewed when these events occur:

A substantial change in economic status, including whether or not the estate tax will apply.

A change of parental status, typically the birth of the first child, as most wills have language that will automatically include any children born or adopted after the date of the instrument. The birth of additional children doesn’t automatically require updating the document, with the possible exception of updating guardians.

When you should upgrade from a will to a trust?

  • When you have some significant assets (more than $500,000) in your own name.
  • If you have special needs beneficiaries.
  • If you have properties in multiple jurisdictions (multiple states or even counties).
  • If you have beneficiaries you want to control distributions to (e.g., distribute at ages 25/30/35).
  • If you have kids from a previous relationship you want taken care of.
  • If you may want asset protection (special trust needed).
  • If you are a big dog (over $22M if married), to save taxes

Source: Leon LaBrecque, Sequoia Financial Group

Changes in designations of fiduciaries (executor of the will, successor trustee of a revocable trust, attorney-in-fact, health-care agent, guardian of minor children). Over time, your original choices for fiduciary roles will eventually no longer be the best choice. Parents age, retire and become unable to handle the roles; siblings and close friends have changes in their own lives such as moving, marriage, starting families of their own, divorce and so forth.

Changes in a family member’s situation, such as if a child develops special needs and will need appropriate planning

Overlooked triggers

“An overlooked trigger to updating your will is all the consolidation in the banking industry,” said Herzberg. “If you named a bank as the executor of your estate and your bank has been bought or sold recently, you may now have a new executor.

“Be sure you know who that person or institution is – and that you trust its judgment.”

It’s important to revisit your beneficiaries after marriage or divorce, said CFP Nadine Marie Burns, president of A New Path Financial in Ann Arbor, Michigan.

“States differ as to how marriage is handled for life insurance and other beneficiary treatment,” she said. “Many times the beneficiary will actually trump a will.”

Burns recalled that the divorced and remarried father of one of her clients passed away. He had not updated any of his beneficiaries when he re-married but state law superseded, and all of his life insurance and home were granted to his new wife.

“Nothing went to his daughter,” she said. “He had listed his ex-wife as a beneficiary on the life insurance … and listed no contingent beneficiary.”

Sophie Tremblay

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