Tips for Keeping Your Estate Plan “In Plan”

You had a will drawn up, signed, and notarized; you created a power of attorney and a health care directive. You’re all done, right? Your estate planning is set, and you can move on to more pleasant endeavors.

Not necessarily.

Unlike a slow cooker recipe or the latest gadget advertised on a late-night infomercial, your estate plan is not a “set-it-and-forget-it” matter. Why? Because even though your estate plan was, no doubt, right for your situation when it was created, it may not be right for the situation you find yourself in five, ten, or twenty years from now. Tax laws change, life happens (including marriages, divorces, births, deaths, sales and purchases of businesses, and many other shifting circumstances), and very few things stay the same. All this means that you need to periodically review your estate plan to make sure that everything is still working the way you need it to.

Let’s look at a few “tune-up tips” that you can use to make sure your estate plan will still accomplish everything you intend.

1. Update beneficiary designations. Admittedly, this first tip isn’t strictly a part of your estate planning documents, but it’s really important. Failure to update beneficiary designations is one of the most common and costly failures that can compromise the integrity of your estate plan and create unintended consequences that go against your intentions. For example, suppose you got divorced several years ago, but you never updated the beneficiary designations on an old IRA account—or worse, an insurance policy. Because beneficiary designations supersede even the terms of a will, the proceeds of that IRA account or insurance policy will go to the designated beneficiary. To prevent something like this from complicating matters for your heirs, you should review all your beneficiary designations—for retirement accounts, pensions, life insurance, and annuity policies—every three to five years. Consider any changes in your personal circumstances. Have births or deaths occurred that could alter your wishes concerning how these funds are disbursed in the event of your passing? Has there been a change in business ownership that might require revision of a key person or buy-sell agreement? Beneficiary designations can impact all these considerations; make sure you’re thinking about them.

2. Systematically, periodically review your documents. The will you drafted when you were in your thirties with young children still at home probably doesn’t adequately address your needs now that you’re approaching retirement and the kids are all out on their own. In other words, what might have been a solid plan 15 or 20 years ago may not relate to your estate today. This is why most experts recommend a full review every three to five years to ensure that trustees, executors, guardians, beneficiaries, and healthcare agents are all up-to-date in consideration of your current circumstances.

3. Consider your “digital estate.” Even if you’ve never gone anywhere near cryptocurrency or purchased a non-fungible token, you have a digital estate. Do you use email? How about a smartphone app to access bank or investment accounts? Frequent flyer miles? Credit card reward points? Social media profiles? A website? All of these items comprise a digital estate. Furthermore, if you haven’t appointed an executor for your digital estate—someone who is specifically authorized to access your digital assets—your loved ones could find it very difficult to access these assets if something unexpected happened to you. Also, simply providing someone with a list of usernames and passwords may not suffice; some of these assets are covered by laws governing their access. The Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA) is the standard used by most states to create laws protecting access to digital assets. If you haven’t discussed the ramifications of this with your estate planning specialist, you should do that as soon as possible.

4. Title assets properly. In addition to beneficiary designations, other assets (like a home) owned in joint tenancy with rights of survivorship will pass directly to the surviving joint tenant, no matter what the will or trust happens to say. So, as a part of your regular review, you should make sure that the form of ownership of your assets (bank and investment accounts, homes and other real estate, businesses, etc.) reflects your true intentions for who should assume ownership in the event of your passing.

5. Use your annual gift exclusion. For those concerned that their estates might exceed the estate tax exclusion ($13.61 million for an individual in 2024, set to reduce to about $7.5 million in 2025 in the absence of new legislation), the annual gift tax exclusion can help transfer assets out of the estate. Systematic, strategic use of gifting can help you keep your estate below the threshold, allowing you to transfer more wealth to your heirs and other intended beneficiaries instead of the federal government. In 2024, an individual can gift up to $18,000 to any individual, and a couple can give up to $36,000. So, if a couple has two children and three grandchildren, they could give away a total of $180,000 in 2024 to these family members. Systematic, purposeful use of the annual gift exclusion can help you gradually transfer portions of your estate to persons of your choice.

At The Planning Center, we know that many of our clients are interested in creating durable financial legacies for future generations. To learn more about how we can help with estate planning, please visit our website or get in touch with us.