From the family tea set to the most complex estate, transferring wealth is quite common. What’s less common, but just as important, is outlining a specific plan for this transfer and updating it as circumstances change.
If it’s been some time since you established your estate plan, you may want to think about giving it a review. After all, you don’t want your loved ones blowing the dust off your original plan years from now only to discover that you haven’t accounted for all the changes along the way. Families change, assets change, relationships change, and legislation always seems to be in flux. A “set it and forget it” perspective can create several problems for you and your loved ones when it comes to your legacy.
As long as you’re alive, your estate plan should be a living and evolving document—an ongoing priority.
Let’s look at three life changes that signal it’s time to review and update your estate plan.
You Have Moved
When putting together your estate plan, remember that federal and state laws both apply, and laws can differ from one state to the next. Essentially, if you move, parts of your already-established estate plan could be out of sync with local laws.
If you’re planning a move, keep these three priorities in mind:
- Taxes – Does your new home state have an estate/inheritance tax? How will this affect your overall plan? Could other state tax laws affect your strategy?
- New Advisor – If you’re working with a new advisor, do they need to hold any other licenses or work with other professionals (such as life insurance agents or estate lawyers) to perform the duties required in the plan?
- State Interpretation – How will your new home state interpret your estate planning documents?
Does a Move Mean You Need to Redraft Everything?
Typically, your will is good from one state to the next as long as it was in good standing in the state where you first executed it. But references in your existing will to the laws of your previous home state can create complications. In that case, your heirs might need to rely on the laws of another state to establish the validity of your will and trusts and turn to the opinions of attorneys in two separate states. For this reason alone, it usually makes sense to update your estate planning documents when you move to another state.
Your living will, end-of-life healthcare choices, and powers of attorney in particular are state-specific, so you should revisit these documents with an estate planning attorney when you relocate.
New or Updated Legislation Could Affect Your Estate Plan
A change in presidential administration can bring with it a fundamental change in economic philosophy, especially around taxes.
The biggest shift in estate planning in decades came from the 2017 Tax Cuts and Jobs Act, signed by President Trump during his first term. Specifically for estate planning, two provisions are of interest:
- The annual gift tax exclusion was raised to $19,000 for 2025.
- The lifetime gift exclusion was raised as well, currently at $13.99 million.
The annual gift tax exclusion limit is important to know as you plan for the future and work on a tax-smart plan. For example, you can gift this amount to each of your grandkids, potentially reducing your tax footprint when the estate is transferred.
The lifetime gift exclusion is the highest it’s ever been. This exclusion offers excellent opportunities to prepare for the transfer of properties, businesses, and other large assets without losing large amounts to taxes. However, the provisions of the Tax Cuts and Jobs Act are scheduled to sunset on December 31, 2025, at which time the figures will revert to their previous levels (adjusted for inflation). The 2026 number is projected to be $7 million for the lifetime exemption if upcoming legislation doesn’t address the issue.
With estate taxes up to 40%, a lot of wealth could be lost in the transfer, particularly without a high gift tax exclusion.
Don’t sit back and wait to see how these changes will affect you. It’s time to be proactive. Discuss setting up trusts and trust administration, accelerating transfers, gifting assets in advance, and other strategies with your financial advisor.
Your Family and Relationships Have Changed
Today’s family dynamics are often more complex and complicated than in generations past, meaning there may be more life moments that require an update to your estate plan. Divorce isn’t uncommon and may even happen more than once during a person’s life. Blended families are becoming more the rule than the exception, so your beneficiary designation could expand to include a mix of biological children and stepchildren.
Or your family could simply grow. If you establish your plan as a young adult, you might have a child, which means your plan needs revision. Later in life, you may have grandchildren you want to include in your legacy.
Regardless of the situation, your estate plan should reflect these changes.
A Recent Example
With big life changes, you may think you have time to take care of estate planning updates later. But that’s not always the case.
Professional basketball player Kobe Bryant lost his life in 2020 in a tragic helicopter accident. He was only 41 years old. Although he had updated his estate plan multiple times, it had not been updated to reflect the recent birth of his fourth child. Because his first three children were listed by name in his estate plan, the youngest was legally excluded from an inheritance—something Kobe clearly did not intend to do.
Fortunately, his widow was able to request an amendment to include their youngest child. But this involved incurring additional expenses and required her to deal with a legal situation amid the grief of losing her spouse—all of which could have been avoided.
In many situations, however, issues with an outdated estate plan aren’t as straightforward as they were for the Bryants. Not keeping an estate plan up to date could lead to an array of legal challenges and issues that could tangle an estate in red tape for years.
Take the Time to Update Your Estate Plan
We can’t assume our estate will go to the right people if we don’t explicitly state our wishes in legal documents. With a regularly updated estate plan, you can leave a legacy of clarity for your loved ones and help ensure your assets will go where you intend them to go.
The best strategy is to be prepared. Your financial advisor can help connect you with the right professionals and help develop an estate plan strategy that works for you. Get in touch today.
