Updating Your Estate Plan

Year's end is a good time to think about the various financial arrangements you've set up over the years, and consider whether they need updating.

Your estate plan, in particular, needs regular review. Even if nothing important has changed in your life or the lives of those close to you since you last revised your will, chances are the laws have changed, or other factors may have rendered your plan obsolete without your even realizing it.

I am assuming, of course, that you have in fact drafted a will. If not, do it now. Things happen; if you die without one (“intestate,” in lawyers' lingo), your heirs will be at the mercy of attorneys, bureaucrats, state and federal laws, and greed. Quarrels will ensue; decisions will be made that are almost certainly at variance with what you would have wanted; and a substantial chunk of your estate, which could have gone to loved ones or charity, will be lost to taxes and fees.

That said, let's consider some factors that may require modification of the estate plan you now (hopefully) have in place:

▸ Laws change continually. Trust laws, in particular, have changed a great deal in recent years, and new trust strategies have been devised as a result. New instruments like perpetual trusts, trust protectors, directed trusts, and total return trusts may or may not work to your advantage, but you won't know without asking. State laws affecting estate planning also change on a regular basis.

Once a year, my wife and I meet with a lawyer who has estate planning expertise to learn about any new legislation that may affect our plan. Last year, I learned that my irrevocable trust is no longer totally irrevocable; new laws now permit certain provisions to be modified.

Laws that don't directly regulate wills and trusts can have a significant impact on them as well. For instance, the ever-popular Health Insurance Portability and Accountability Act (HIPAA) affects your estate as well as your practice; under its provisions, your family cannot access your medical information or make treatment and life-support decisions without your specific permission. So if a Health Care Power of Attorney is not already part of your will, add it now. And be sure to modify it if your medical status (or your philosophy of life) changes, or if treatment for your medical condition evolves significantly.

▸ Financial markets change. It's not exactly a secret that asset values and interest rates have changed in big ways over the last few years. Those changes may have had a significant, unanticipated impact; large real estate or securities bequests could now be significantly smaller, and vice versa. Your accountant and estate lawyer should take a look at your assets periodically, and their apportionment in your will, to be sure all arrangements remain as you intend. And be sure to notify them whenever the composition of your assets changes, even if the value doesn't. For example, selling a business or property and reinvesting the proceeds in something completely different could change how you leave that asset to your heirs because a different set of tax laws may apply.

▸ Fiduciaries change. The executor of your estate and the trustee(s) of your trust(s) may need replacing as circumstances change. If your brother-in-law is your executor and your sister divorces him, you may want to find a new executor. Or your once-vigorous trustee could now be aging or in failing health. Trustees are often financial institutions; if one of your corporate trustees goes belly up, or the employee you were working with retires or changes firms, you'll need a replacement. Keep track of your fiduciaries, and be prepared to make changes as necessary.

▸ Personal circumstances change. Some changes – marriage, divorce, the death of an heir or the birth of a new one – obviously require modifications to wills and trusts. But any significant alteration of your personal or financial circumstances probably merits at least a phone call to your financial planners; the need for changes, and your options should changes be necessary, are not always obvious.

Year's end is a good time to think about the various financial arrangements you've set up over the years, and consider whether they need updating.

Your estate plan, in particular, needs regular review. Even if nothing important has changed in your life or the lives of those close to you since you last revised your will, chances are the laws have changed, or other factors may have rendered your plan obsolete without your even realizing it.

I am assuming, of course, that you have in fact drafted a will. If not, do it now. Things happen; if you die without one (“intestate,” in lawyers' lingo), your heirs will be at the mercy of attorneys, bureaucrats, state and federal laws, and greed. Quarrels will ensue; decisions will be made that are almost certainly at variance with what you would have wanted; and a substantial chunk of your estate, which could have gone to loved ones or charity, will be lost to taxes and fees.

That said, let's consider some factors that may require modification of the estate plan you now (hopefully) have in place:

▸ Laws change continually. Trust laws, in particular, have changed a great deal in recent years, and new trust strategies have been devised as a result. New instruments like perpetual trusts, trust protectors, directed trusts, and total return trusts may or may not work to your advantage, but you won't know without asking. State laws affecting estate planning also change on a regular basis.

Once a year, my wife and I meet with a lawyer who has estate planning expertise to learn about any new legislation that may affect our plan. Last year, I learned that my irrevocable trust is no longer totally irrevocable; new laws now permit certain provisions to be modified.

Laws that don't directly regulate wills and trusts can have a significant impact on them as well. For instance, the ever-popular Health Insurance Portability and Accountability Act (HIPAA) affects your estate as well as your practice; under its provisions, your family cannot access your medical information or make treatment and life-support decisions without your specific permission. So if a Health Care Power of Attorney is not already part of your will, add it now. And be sure to modify it if your medical status (or your philosophy of life) changes, or if treatment for your medical condition evolves significantly.

▸ Financial markets change. It's not exactly a secret that asset values and interest rates have changed in big ways over the last few years. Those changes may have had a significant, unanticipated impact; large real estate or securities bequests could now be significantly smaller, and vice versa. Your accountant and estate lawyer should take a look at your assets periodically, and their apportionment in your will, to be sure all arrangements remain as you intend. And be sure to notify them whenever the composition of your assets changes, even if the value doesn't. For example, selling a business or property and reinvesting the proceeds in something completely different could change how you leave that asset to your heirs because a different set of tax laws may apply.

▸ Fiduciaries change. The executor of your estate and the trustee(s) of your trust(s) may need replacing as circumstances change. If your brother-in-law is your executor and your sister divorces him, you may want to find a new executor. Or your once-vigorous trustee could now be aging or in failing health. Trustees are often financial institutions; if one of your corporate trustees goes belly up, or the employee you were working with retires or changes firms, you'll need a replacement. Keep track of your fiduciaries, and be prepared to make changes as necessary.

▸ Personal circumstances change. Some changes – marriage, divorce, the death of an heir or the birth of a new one – obviously require modifications to wills and trusts. But any significant alteration of your personal or financial circumstances probably merits at least a phone call to your financial planners; the need for changes, and your options should changes be necessary, are not always obvious.

Year's end is a good time to think about the various financial arrangements you've set up over the years, and consider whether they need updating.

Your estate plan, in particular, needs regular review. Even if nothing important has changed in your life or the lives of those close to you since you last revised your will, chances are the laws have changed, or other factors may have rendered your plan obsolete without your even realizing it.

I am assuming, of course, that you have in fact drafted a will. If not, do it now. Things happen; if you die without one (“intestate,” in lawyers' lingo), your heirs will be at the mercy of attorneys, bureaucrats, state and federal laws, and greed. Quarrels will ensue; decisions will be made that are almost certainly at variance with what you would have wanted; and a substantial chunk of your estate, which could have gone to loved ones or charity, will be lost to taxes and fees.

That said, let's consider some factors that may require modification of the estate plan you now (hopefully) have in place:

▸ Laws change continually. Trust laws, in particular, have changed a great deal in recent years, and new trust strategies have been devised as a result. New instruments like perpetual trusts, trust protectors, directed trusts, and total return trusts may or may not work to your advantage, but you won't know without asking. State laws affecting estate planning also change on a regular basis.

Once a year, my wife and I meet with a lawyer who has estate planning expertise to learn about any new legislation that may affect our plan. Last year, I learned that my irrevocable trust is no longer totally irrevocable; new laws now permit certain provisions to be modified.

Laws that don't directly regulate wills and trusts can have a significant impact on them as well. For instance, the ever-popular Health Insurance Portability and Accountability Act (HIPAA) affects your estate as well as your practice; under its provisions, your family cannot access your medical information or make treatment and life-support decisions without your specific permission. So if a Health Care Power of Attorney is not already part of your will, add it now. And be sure to modify it if your medical status (or your philosophy of life) changes, or if treatment for your medical condition evolves significantly.

▸ Financial markets change. It's not exactly a secret that asset values and interest rates have changed in big ways over the last few years. Those changes may have had a significant, unanticipated impact; large real estate or securities bequests could now be significantly smaller, and vice versa. Your accountant and estate lawyer should take a look at your assets periodically, and their apportionment in your will, to be sure all arrangements remain as you intend. And be sure to notify them whenever the composition of your assets changes, even if the value doesn't. For example, selling a business or property and reinvesting the proceeds in something completely different could change how you leave that asset to your heirs because a different set of tax laws may apply.

▸ Fiduciaries change. The executor of your estate and the trustee(s) of your trust(s) may need replacing as circumstances change. If your brother-in-law is your executor and your sister divorces him, you may want to find a new executor. Or your once-vigorous trustee could now be aging or in failing health. Trustees are often financial institutions; if one of your corporate trustees goes belly up, or the employee you were working with retires or changes firms, you'll need a replacement. Keep track of your fiduciaries, and be prepared to make changes as necessary.

▸ Personal circumstances change. Some changes – marriage, divorce, the death of an heir or the birth of a new one – obviously require modifications to wills and trusts. But any significant alteration of your personal or financial circumstances probably merits at least a phone call to your financial planners; the need for changes, and your options should changes be necessary, are not always obvious.