Executing legal documents such as a last will and testament, durable general power of attorney and healthcare power of attorney is an important part of creating an estate plan. However, the estate plan never should be considered finished after the documents are signed.
Changes in your life, as well as changes in the lives of people affected by the documents, may require revisions. Reviewing documents and making changes will keep an estate plan working the way you intend.
The average age of a last will and testament is 19.5 years, which is likely an unfortunate reflection of how often documents are reviewed. Although documents certainly should be reviewed upon major life changes, you also should perform a review annually.
First, review the fiduciaries. Fiduciary changes are one of the most common revisions made to existing documents. Fiduciaries would include the executor of the will, trustee of any trusts and agents for each power of attorney. Be sure to also review successor fiduciaries, changing or adding any as necessary.
Second, review beneficiaries. Check to make sure the named beneficiaries still are your primary choice to receive your property. Consider the specific percentages that each beneficiary will receive and confirm that the method of distribution is set up in the way you desire. Make sure any clarifying language is present to avoid later problems, such as provisions for if a beneficiary predeceases you, if a beneficiary is disabled at the time of distribution and the age that any beneficiary should be before receiving outright distributions.
Third, consult with appropriate professionals to determine tax and legal changes that may affect your existing documents. A quick tax review with a qualified professional can help you understand whether your estate or beneficiaries will be subject to taxes upon the passing of your estate. Legal changes could consist of statutory or common law changes within the state itself, but also include differences in state law between the original state the documents were executed in and the state of your current residence.
After reviewing documents, consider whether any documents should be updated. The type of document will determine how updates can be made. Some documents, such as durable general powers of attorney and healthcare powers of attorney, should have new documents created rather than amendments.
Simple amendments may be made and attached to both a last will and testament and any revocable living trusts.
An amendment to a will is called a “codicil,” and can be used to make small changes. Major changes, such as removing beneficiaries or reducing beneficiary shares, should be written into a new document instead of attached as a codicil.
For a revocable trust, major changes do not require closing the trust completely and creating a new trust, but may require a restatement, which is a completely new document for the existing trust.
Amendments to irrevocable trusts also can be made, but must be handled according to the language of the document and pursuant to state law. Some options to make changes include exercising a power of appointment to change beneficiaries, using a trust protector to make necessary legal or tax changes or filing a motion to be heard in court. While irrevocable trusts are less flexible than revocable trusts, there are still avenues to make necessary changes.
Estate planning documents should be regularly reviewed and updated to ensure that your wishes are followed, even amid changing laws.