Although it is easy to consider an estate plan a sealed deal once it is completed, one that has not been updated in a while may need to be reviewed for red flags that might indicate it’s out of whack. A plan that is not updated to reflect family and life changes, current laws, or newly acquired assets can quickly become worthless.
To help determine whether an estate plan needs to be revised, here are five signs to look for that could be indicative of problems.
1. The Absence of Necessary Components
Individuals with estate plans should have three key components in their plans: a financial power of attorney, a will, and an advanced medical directive. An attorney should review the plan every 10 years or immediately following any major event affecting the client’s life.
2. No Plans for Ownership of Personal Possessions
While this isn’t among the most critical items of an estate, there could be significant family disagreement if the decision regarding ownership of personal effects such as jewelry, family heirlooms, or other items of sentimental value is left to beneficiaries.
3. Naming Friends or Family as Trustees
People often name close friends or family members as trustees, but doing so is actually a big burden that puts a lot of stress on loved ones. Instead, people might consider using a third-party representative such as a trust company or bank as a trustee.
4. Failure to Account for Current Tax Exemptions
The estate tax exemption has risen from $2 million to over $11 million for individuals since 2008. Many estate plans created years ago are not designed for the increase. This exemption provides particular opportunities for those who have significant wealth.
5. Not Updated After a Move
Because every state has different laws concerning estate planning, it is crucial to update an estate plan after a move. Certain components that were constructed in one state may be completely invalid in another. An estate planning attorney who is familiar with the regulations in the person’s new state of residence can help make sure that the plan in place adheres to these laws.