In military strategy, there’s a saying that goes, “No battle plan survives contact with the enemy.” The essence is that you can devise the best possible plan, but things change. You have to adapt.
The same principles apply in estate planning. As the circumstances of your life change, you will want to update your estate plan. This will ensure it continues to function as intended. So, what life changes should prompt an update? Here are five common examples.
Changes to your family
Good estate plans often translate your understanding of your family members and their needs into clear direction. One of your children might want to take over the family business. The other may have no interest. You can treat them fairly, but you wouldn’t want to upset them and harm the business by giving them the same interest in the business.
Because good estate plans often feature individualized direction, you want to make sure you acknowledge every member of your family. This likely means updating after marriages, births and adoptions.
Meanwhile, families don’t always grow. Sometimes they change due to deaths and divorces. You don’t want to create confusion by writing deceased family members into your plan, and you may not want to provide for your former spouse or your children’s former spouses.
Moving to another state
Estate plans typically follow state laws, so when you move from one state to another, you want to make sure your plan follows the new state’s laws. You should also consider how your family members will deal with probate, especially if they live out of state. A good plan can ease their burdens by limiting the amount they need to travel to care for the estate.
Significant changes in your assets
Let’s imagine, for a moment, that you win the lottery. First of all, congratulations! But after you enjoy the idea for a second, how would your sudden increase in wealth adjust your estate plan? Would you want to adjust the way you distribute your assets? Would you want to create a charitable trust?
Significant changes to assets may include the sale of your house, the purchase of a new vehicle, a boat or a cabin. Maybe it’s a huge gain or loss on the stock market. Whatever the change, if it would impact how you want your plan to function, you’ll want to update. After all, if you’re using stocks to balance the fact you’re giving your business to one of your children, you’ll want to make sure that the stocks you give the other child haven’t completely tanked.
You second-guess your trustees or executors
As Forbes notes, one of the most important things you’ll do in your estate plan is appoint someone to execute it. You’ll need people to oversee any trusts you create, and you’ll need someone to serve as the executor of your estate.
Typically, you assign these roles to people you trust to do them well, but you may have reasons to second-guess your decision. Perhaps someone moves far away or becomes far too busy. Maybe you have a falling out. Maybe your appointee dies or falls seriously ill. Whatever the reason, you can update your plan to appoint someone more appropriate.
Changes in the law
The law isn’t permanent. Lawmakers sometimes update or amend the rules for estate plans. Often, these changes will impact the tax consequences for your plan. However the law changes, you want to stay up-to-date with these changes. Accordingly, it can be a good idea to review your estate plan every several years.
First, make a plan
When military strategists remind us that their plans will need to adapt during battle, they aren’t suggesting their plans have no value. Rather, they’re pointing out that the best plans and planners understand their limitations. They realize change is inevitable, and they will need to adapt.
Your estate plan is not invalidated by the fact that life changes. Your plan exists to provide security and peace of mind for your family. It does that, first, by existing. Updates simply help it do its job better.