Even the Best-Laid (Estate) Plans Sometimes Must Change

September 20, 2019 | Wendy Hoey Sheinberg | Trusts & Estates

Despite the common misconception, estate planning is not only for the super-rich. At its core, proper estate planning ensures that your needs and those of your family will be met, now and in the future. A comprehensive estate plan will anticipate your lifetime needs as well as the distribution of your assets after your death. A great estate plan is consistent with your wishes and values.

The estate plan you created when you became a parent or a first-time homeowner may not take into account changes in the law or your financial situation. That is why I counsel my clients to periodically review their estate plans. It’s especially important to do so when there has been a significant life event, including marriage and divorce, birth, death, serious illness and relocation.

Relationship Changes

Marriage and divorce directly affect estate planning. By updating your estate plan, you retain control over what happens to you and your assets. Without an updated estate plan, state law prevails. For example, in New York, a divorce revokes the appointment of the former spouse in certain documents. If a spouse is the only agent named in a health care proxy or power of attorney, and the marriage ends, the principal has no one authorized to act on her or his behalf, and it is extremely important to put new advance directives in place.

Health/Medical Changes

In the case of a serious disease or disability, legal decisions as well as treatment decisions need to be made. For example a loved one’s diagnosis of a developmental disability or a cognitive impairment intellectual disability may indicate the need to consider a guardianship proceeding or the use of a special needs trust for proper asset management and protection of necessary government benefits.

Significant Change in Financial Situation

You received an unexpected windfall. Perhaps you won the lottery or received an inheritance. This is a very important time to reexamine your plan. The New York and Federal estate tax rules are complicated. Our firm specializes in advising lottery winners and others that have come into a large sum of money on how to preserve your anonymity, protect the funds and minimize estate taxes. An important consideration is to protect financially irresponsible heirs from their own bad choices. For example, if an adult child is experiencing a financial crisis, it may be important to revise your plan to protect their inheritance from creditors. Conversely, if a child has a financial windfall, it may be important to revise your plan so that the assets you leave them are not taxed in their estate.

Births and Deaths

Perhaps you created your estate plan before you had children or grandchildren. What happens when you die? New York has default rules that take into account later-born children, but not to the extent that a proper estate plan does. Most people do not want to leave assets in the hands of very young people who might be financially immature or easily manipulated. A properly updated estate plan will make provisions to protect young beneficiaries from a predatory world. Additionally, if the people you named as executors or guardians have died or are no longer the appropriate choice, these issues must be addressed in a new estate plan.

Life is full of changes. When a significant change occurs, don’t leave your future and the future of your family to chance. Contact your estate planning attorney to determine whether it is time to update your documents.

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