No matter what your net worth is, you should always have an estate plan designed by a qualified attorney. Your assets include your investments, retirement savings, insurance policies, and real estate or business interests as well as the wealth you'll accumulate in the future. Estate planning will ensure that you are still helping your family when you are no longer here.
There is no denying a good estate plan takes a lot of work. Pulling together the paperwork is time consuming, and the decisions that need to be made can take an emotional toll for you and your heirs. It is quite understandable that once the documents have been signed and filed, people tend to forget about them. A research study on wealthy individuals revealed that most of their estate plans were more than five years old.1 All of that hard work would be in vain if it drifts out of date over time. The following incidents should trigger a review of your estate plan to ensure it reflects your current wishes for settling your estate.
Personal Life-Changing Events
Major life-changing events that impact either the family or finances should be reflected in the estate plan. Marriage and divorce requires an assessment of both parties' finances and dependents. As the finances merge or separate in an estate ensure they will be properly divided and distributed to your desired heirs. Similarly, ensure guardianship for your dependents and set up a trust that will support the dependents until their 18th birthday. The guardianship clause can be removed once the dependent reaches 18 years old.
Financial and caregiver support should be outlined for those dependents who are mentally or physically disabled and rely on your finances to survive. A combination of estate planning and financial planning will ensure these dependents will be taken care of when you are no longer able to provide support for them.
Business Life-Changing Events
A new business would require a comprehensive succession plan. Depending on the type of business, you will have different options for transferring ownership and assets to survivors. Family businesses that are incorporated would need to transfer ownership to the heirs as corporate stock, rather than as business property. Partnerships, corporations and limited liability companies are more complex legally, operationally, and for tax purposes than a sole proprietorship. These types of businesses would require your business attorney and corporate accountant to advise on the pros and cons of choosing the appropriate business model and planning its succession directives.
Changes to Tax Laws
In addition to major life events, tax laws can change, negatively impacting the estate plan. Family and beneficiaries will be left to resolve the neglected documents, and pay any penalties or fees for noncompliance of the tax laws.
New Sources of Assets
Consider an estate plan that has not been reviewed in five years. There is a good chance that a person's digital assets are not factored into the plan. Should the digital information stored on that smartphone, tablet, Kindle, etc. be disposed or transferred to an heir? Think of how the username and password for the device and secure applications should be stored for safekeeping until it is transferred to the heir.
Some personal digital assets, like photos, documents, digital art, blogs and email messages can have monetary or sentimental value. Plan the distribution of such files that can legally be transferred as you would physical resources.
In 2013, $4.5 billion was spent on e-books with billions more for digital music and movies.2 Unlike a paper book, DVD, CD, or other physical media source, digital downloads are usually not transferable to another person, even in death. These files would need to be deleted before the device that stores them could be gifted to an heir.
Other Planning Documents
Highly-publicized disputes have reduced an estate's worth and mired the memories of the decedent. Recently, disputes for Casey Kasem's conservatorship have spilled over to a fight for control of his estate. Instead of providing clear unequivocal instructions in long-term care and distribution of his assets, and assigning the responsibilities to people who would adhere to his wishes, his wife circumvented those wishes. Unfortunately, the documents could not enforce themselves and his health and estate suffered by assigning the wrong advocate to settle his estate.
While you update your estate plan, be sure to review your powers of attorney for healthcare and property. Take the time to read the document with your appointees, and discuss in detail your wishes with these people. Choose people who will abide by your wishes, regardless of their personal feelings in the directives.
Estate planning involves the distribution of property and wealth upon death. It can also provide guidance and direction for building an estate's wealth during life. Regular reviews of your estate plan ensure that you are meeting the financial goals you set for yourself. Revisiting your life goals on a regular basis can help you maintain the path for meeting your expectations for wealth.
How often should an estate plan be reviewed? Whenever there is a meaningful change in the lives of you or those affected by the estate plan. To ensure nothing is overlooked while life happens, schedule a review every three years. This review helps address changes to the family, finances and tax laws to make sure nothing is missed in the plan. The best way to develop a plan that fits best for you is to work closely with your attorney and specialists who can give you the benefit of their experience in estate planning.
To establish or review your estate planning documents, contact Lawrence D. Rouse, Ltd. at 702-387-1800 or email firstname.lastname@example.org.