How to Revise Your Estate Plan: Are You Locked In?

 In Blog, Estate Planning

After spending the time and expense to create an estate plan, you might have assumed that you would never need to review your estate plan. However, life is fluid and ever-changing. Events that occur in your life and the lives of your loved ones can require a change in your estate plan. Changes in estate laws and tax laws might require an update to your estate plan. Review your estate plan with your California estate planning attorney after certain life events and after any changes in laws that could impact your plan or your finances.

Highlights from this article include:

  • Reasons Why You Need to Update Your Estate Plan
  • How to Update Your Will and Other Estate Planning Documents
  • Can I Change a Trust Once It is Funded?

Reasons Why You Need to Update Your Estate Plan

As discussed above, certain big life events (BLEs) should trigger a review of your estate plan. Some of the most common BLEs for revising an estate plan include:

  • The birth or adoption of a child (you or one of your heirs)
  • Marriage or re-marriage
  • Divorce or separation (you or one of your heirs)
  • Death of a spouse, child, or heir
  • Disability or illness
  • Purchasing a home or other significant asset
  • Starting a business or closing a business
  • Career changes or retirement
  • Changes in tax law or estate law
  • Moving to a new state
  • When a child or grandchild needs funding for education
  • Changes in life insurance or long-term care insurance
  • Assuming a substantial liability or borrowing a large sum of money
  • Death or change in circumstances of your personal representative, trustee, co-owner, or beneficiary

Even if you do not experience any of the above life events within a few years, it is best to review your estate plan at regular intervals to ensure that your plan continues to reflect your wishes and desires based on where you are currently in your life and attitudes.

How to Update Your Will and Other Estate Planning Documents

Most estate documents can be changed by executing a new document and including wording within the new document that it revokes and replaces any prior versions.

For example, if you change your Will, the current Will should contain language that the current Will revokes and replaces any Wills executed by you prior to this date. Destroying a Will should also revoke the Will, but you want to have a new Will in place to avoid a chance that California’s intestate laws could govern your estate. Most lawyers advise executing a new Will and then destroying the original and all copies of pre-existing Wills.

Changing the beneficiary of your life insurance policies, retirement accounts, or other assets with beneficiaries requires you to complete a new beneficiary designation. The most recently dated designation dictates who receives the asset upon your death. If you did not name a beneficiary, the asset passes to your estate.

Revising title to jointly owned property is more complicated. You may need the joint owner to agree to the transfer of your interest, depending on the type of asset, your interest in the asset, and the interest owned by the other party. You may want to consult an attorney before taking any actions to transfer jointly owned property as it relates to your estate plan.

TOD (transfer on death) and POD (paid on death) accounts are used when you do not want someone to have access to an account during your lifetime. The intent is for another person to assume ownership of the asset after your death without the asset passing through probate. TOD and POD designations are typically revised by changing the title to the asset or submitting revised forms to a financial institution. As with jointly owned property, you might want to consult an estate planning lawyer to ensure that the changes are legally binding and do not have an adverse consequence for your estate or any of your heirs.

Can I Change a Trust Once It is Funded?

Revocable trust agreements can be changed and revoked during your lifetime. Upon your death or incapacitation, the trust becomes an irrevocable trust. However, irrevocable trust agreements are typically not subject to change or revocation once the trust is established and funded. However, there are some limited circumstances in which some irrevocable trusts might be modified after they are funded. A careful review by an experienced estate attorney would be required to determine whether the trust may be changed.

Even though most irrevocable trusts may not be modified after they are funded, this type of trust has benefits not offered by a revocable trust. For example, the assets in a revocable trust are typically included in the taxable value of the estate. Therefore, a revocable trust does not help you reduce or eliminate estate taxes. Revocable trusts do not provide asset protection either. Creditors and other parties may obtain judgments against the property held by a revocable trust.

Because there are many types of trusts you can use as part of your estate plan, it is best to consult with an attorney to determine which type of trust is best for your purposes. Changes to the tax code or estate law could impact your decision whether to use or continue to use one or more trusts as part of your estate plan.

Any small revision to an estate plan can have significant consequences for the overall estate plan, beneficiaries, and heirs. In some cases, your desire to make one change may result in the need to make several changes to multiple documents.

The Bottom Line

You are never truly locked into your estate plan until you die or become mentally incapacitated. If you want to change your existing estate plan, you have every right to do so. However, before making any changes to your estate plan, beneficiary designations, or jointly owned property, it is best to consult with a California estate planning attorney. Attorneys review proposed changes in the context of the entire estate plan to determine the best way to accomplish the change you desire without causing other issues that might be problematic for you and your loved ones.

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