Before It’s Too Late - Eric Gullotta


Updating your documents

One question I often get is, “When should I update my estate planning documents?” While there is no hard and fast rule, there are some suggestions about when you should consult with your attorney or simply review the documents yourself to see if they need to be revised.

Whenever a “life event” occurs you should review your estate plan.  Life events include marriage, divorce, birth, adoption, death or even incapacitation. Any event that changes the composition of your family is considered a life event. Any change in family structure, whether it is an addition or removal of family members, will likely have an impact on your estate plan.

A change in family structure may also affect your choice of trustee/executor – the person who handles your assets after your die. As a responsible party enters or exits your life, you’ll want to review your documents to be sure the best person is named to handle the job. If a person is named in your documents, they will be allowed to serve as your trustee/executor regardless of whether or not you would have chosen someone else based on new or changed events. The courts won’t look at changing circumstances and reevaluate your decision after you die.

There are certain rules relating to divorced spouses wherein a dissolution of marriage revokes the rights of a spouse as a beneficiary of the deceased spouse’s estate.  There are also rules that can provide for spouses that are married after estate planning documents are already prepared – but these are the exceptions and not the rule, and may not provide for your new spouse in the way you would have chosen.

Any change in family structure can also affect how you choose to distribute your assets when you pass away. Although most estate plans have contingency plans in place for your initial beneficiaries dying, it is also best to revisit those contingency plans when someone actually dies and you still have the ability to make changes. This is particularly true for families with only one child who may have passed away before having their own children.

Young couples usually ask about how their plan will handle them having more children. This is usually solved by simply leaving your assets to the group identified as your “children” which includes any children you have now or may have in the future. This will cover a growing family and not result in the need to change your planning documents each time you have a child.

Similar to divorced and married spouses, there is a safety net for children born after estate planning documents are created. If a child is born after an estate plan is prepared they will likely receive a share of their parents’ estate even though they are not named.  The law presumes, without evidence to the contrary, that parents want their children to be included in their estate plan when they are born after the documents are prepared.

I suppose it also goes without saying that you should make changes to your estate plan if you simply no longer like or love the person you had originally left your assets to. People change and relationships change; if this is the case, you may wish to leave your assets to someone else.

Sometimes events outside of your family can trigger a recommended review of your estate plan. This is usually due to law changes in the California probate code, the California tax code and/or the United States tax code. The most recent example was the substantial increase in the individual estate tax exemption amount – the amount you can give to someone when you die tax free, which began increasing in 2001 and is now $5.25 million.  This increase resulted in trusts needing less estate tax savings language allowing them to be more focused on ease of administration after the death of the first spouse.

You may not know when these law changes occur so checking in with your attorney every five to ten years is a good rule of thumb. Perhaps there is no reason to update your plan, but if don’t review your plan then you’ll never know.

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