When Should I Revise My Estate Planning Documents?

One of the most common myths about estate planning is that, once you have signed and safely stored your estate planning documents, the job is done once and for all. In reality, there are good reasons to revise these documents at least once every decade. Once every five years is even better, especially if you are in a season of transition or change such as nearing retirement, preparing to sell a business, welcoming new children or grandchildren into the family, or blending two families through marriage, among others.

When I first meet with Wealth Management clients, frequently they have an outdated Will, perhaps put together after the birth of a first child or right before embarking on international travel. As the years and decades fly by, those old documents simply do not reflect the reality of their current life and wishes. Sometimes they are even counterproductive to their current intentions. Updating these documents is usually high on the list of recommendations I provide.

Consider updating your own estate planning documents when you experience any of the following scenarios.

1. Your situation and wishes have changed significantly since you put your estate planning documents together.

Just a few ways your situation could have changed include:

• Your current Will or Trust only references one child but now you have multiple.
• You have since married, divorced, or remarried.
• Your children are grown and need either more or less supervision with regard to their future inheritance.
• You have an heir with special needs, mental health challenges, or addiction issues.
• Your current Will or Trust names an heir who has since passed away.

Keep in mind, naming heirs is at the core of why people engage in estate planning, so if your current documents exclude someone you would like to inherit – or includes someone you do not wish to inherit, revisions to bring your documents back into alignment with your intentions should take top priority. It is also critical to review beneficiary designations on investment accounts and insurance policies to make sure they are coordinated with your estate planning documents.

2. Your prior estate planning documents were written at a time when federal estate and income tax laws were much different from today’s tax landscape.

Perhaps you engaged in estate planning back in 2011 when the federal estate tax exemption was set to revert from $5 million to back to $1 million. This is the statutory amount of wealth an individual can give to non-charitable heirs without the donor’s estate incurring federal estate tax liability. Ten years later, the tax landscape has changed significantly. Under the Tax Cuts and Jobs Act, which took effect on January 1, 2018 and sunsets on December 31, 2025, an individual today can transfer $11.58 million of personal wealth free of federal estate tax (indexed for inflation).

You may be leaving significant tax-free bequest opportunities on the table if your Will or Trust was written when the exemption was lower, and you should strongly consider revising your documents to avail yourself of current law.

3. Your health situation is unpredictable and precarious.

If you are facing a general decline in health, have recently been diagnosed with a chronic health condition, or are in the early stages of memory loss, you should update your estate planning documents immediately while you still have testamentary capacity.

To make a valid Will or Trust, an individual must possess testamentary capacity which has two requirements: legal age and mental capacity. The age requirement is easy to demonstrate – usually age 18 – but the mental capacity requirement is more nuanced. In Iowa, a testator must understand 1) the nature of their Will or Trust document, 2) the extent of the property being given away, 3) the heirs that they wish to inherit their property, and 4) the distribution details, meaning which heirs receive which assets (20 Drake L. Rev. 369 (1970-1971)).

Engaging in estate planning for a person who lacks testamentary capacity is very difficult, which means it is extremely important that people with serious health challenges make changes sooner rather than later.

You should also give particular attention to powers of attorney documents and provisions in other estate planning documents that may give others the ability to handle your affairs in case of temporary or permanent incapacity.  As life expectancy has increased, so has the importance of planning for common scenarios that can arise later in life.

If any of these scenarios apply to you, you should strongly consider revising your estate planning documents. If you’re ready to discuss revisions or have general questions about estate planning, connect with a Bankers Trust Wealth Advisor today.

Bankers Trust Company and its affiliates and their representatives do not provide tax or legal advice. This article is intended for informational purposes only and should not be construed as tax or legal advice. You should consult with your tax and legal advisors regarding your unique situation and needs.