When should you review your estate plan?

The answer is not simply “every few years.” There are certain events in your life that should cause you to take another look at your estate plan. One of the most important is a change in your family.

Your estate plan was prepared based on the people who were important to you and their circumstances at the time you created it. But families change. When they do, your estate plan may need to change with them.

Marriage or Divorce

If one of your children gets married, you may want to reconsider how that child’s inheritance should be handled.

For example, you may have intended to leave money directly to your son or daughter. But if that child is now married, you may want to consider whether the inheritance should remain that child’s separate property or whether it should be placed in a trust with protections for your child.

Divorce can be equally important. If your child is divorced, you should review your estate plan to make sure an inheritance does not inadvertently benefit a former spouse.

And don’t forget about your own marriage or divorce. Either event can require significant changes to your estate plan.

However, if a child or grandchild changes their last name due to a marriage or divorce, it is not necessary to amend your estate plan. Your trustee or personal representative will know who you were referring to in your documents. You can also attach a copy of a divorce judgment or a marriage license to show the change. The same is true about addresses.

The Birth of a Child or Grandchild

A new grandchild is certainly a reason to celebrate—but it may also be a reason to review your estate plan.

If your grandchildren are included in your estate plan, you should make sure the plan accounts for new grandchildren and specifies what happens if a beneficiary dies before you. If your documents leave an inheritance to your children or your grandchildren as a group, then a birth adding to that group will be covered. However, if you leave an inheritance to several named children or grandchildren without identifying them as your children or grandchildren, then a birth of another child or grandchild will not automatically add them as a beneficiary. You will need to add them by name to the documents

You may also want to consider whether a young beneficiary should receive an inheritance outright. A trust can sometimes provide greater protection and allow the inheritance to be managed until the child reaches an appropriate age.

A Child’s Financial or Personal Problems

Sometimes the most important change isn’t something that happened to you. It is something that happened to one of your children.

Perhaps a child has substantial debts. Maybe the child has gone through bankruptcy, divorce, or a lawsuit. Perhaps the child has developed an addiction or simply has difficulty managing money.

In those circumstances, leaving a large inheritance outright may not be the best way to accomplish what you want.

Here is a crazy example. The client had three sons. One of them was involved in a parking lot fight at a burger restaurant. He won the fight but was sued by the individual he fought with. The son did not respond to the law suit and a default judgment for $60,000 was entered against him. The son had been working jobs for cash so that his paycheck could not be garnished. If the client and his wife both died and the son inherited his third of the estate, it could be garnished to pay the $60,000 judgment. The client said the last thing he wanted was to use his money to pay that judgment. We created a trust that said that in the event of the death of client and spouse, the share to that child would be held in trust until the statute of limitations had run on the judgment.

A properly drafted trust may allow you to provide for your child while giving the inheritance additional protection.

A Change in Your Relationship With a Family Member

Families don’t always remain the same.

You may become estranged from a child. You may become much closer to another family member. A person you once intended to name as a beneficiary may no longer be someone you want to inherit your property.

These changes can be uncomfortable to think about, but they are important.

Your estate plan should reflect your current wishes, not necessarily the wishes you had five, ten, or twenty years ago.

The People You Named to Handle Your Estate

There is another family change that is easy to overlook.

When you created your estate plan, you probably named someone to serve as your personal representative, successor trustee, or agent under your power of attorney.

But is that person still the right choice?

Perhaps your son or daughter has moved across the country. Maybe the person you named has developed health problems. Perhaps that person has died. Or perhaps another family member has become the person you trust most to handle your affairs.

Another common event occurs when our children grow up. Many clients start a trust to provide for their minor children. For example, my family trust was for my children ages 2 and a newborn. If my wife and I both passed, the trustee would manage their money until they turned 28. The trustee was my brother, a financial advisor. Today, my children are ages 38, 36 and 34. I have made them the trustee and successor trustees of the trust.

These appointments are just as important as deciding who receives your property.

The Bottom Line

You don’t have to wait until something goes wrong to review your estate plan.

If your family has changed, your estate plan may need to change, too.

A good rule of thumb is to contact your estate-planning attorney whenever there has been a significant change in your family—marriage, divorce, birth, death, estrangement, financial problems, or a significant change in the circumstances of a beneficiary.

Your estate plan should reflect the family you have today, not the family you had when you signed the documents.

By Attorney Gary Allen