People often ask how often they need to review and update their will and estate planning documents. Many assume that once they have prepared a will, durable power of attorney, and/or other related documents, these will last for the rest of their lives and never need to be updated.
A Will is Your Chance to Write the Law that Favors You.
For most people, the most effective method of engaging in sensible estate and Medicaid planning is as straight-forward as preparing a Last Will and Testament and Durable Power of Attorney. Wills and powers of attorney give individuals the opportunity to write the law that will apply to their estates, affairs, and family following their deaths.
A will is also one of the most flexible estate planning documents available. Modifying a Last Will and Testament is as simple as destroying the old one and preparing a new one. Wills are simply “sheets of paper collecting dust” while you are alive, and they do not become effective until your death. As a result, they can be modified at any time to reflect your current situation and needs.
When should an individual consider updating a will? We tell our clients to consider updating estate planning documents, including wills, any time they have a change in their personal circumstances. We also tell our clients not to try to guess or speculate what will happen in the future in order to decide what to put in their wills. None of us have a “crystal ball” capable of allowing us to see into the future to determine where we and our families will be. Undoubtedly, our circumstances will change as we proceed down the road of life.
Wills and other estate planning documents should always be prepared based upon an individual’s personal circumstances as they currently exist. The ease of updating these documents as necessary to adapt to changes in personal circumstances takes much of the guesswork of trying to predict what may happen in the future out of the equation.
Have Your Personal Circumstances Changed?
What types of changes in personal circumstances may necessitate updating estate planning documents? Some examples include:
- Birth of a child – The birth of a child has a significant impact upon the manner in which a parent’s estate must be handled. Louisiana is the only state in the country that has “forced heirship”, i.e., parents are generally required to leave a portion of their estates to their children. Louisiana’s forced heirship rules have undergone modifications that limit such requirements for a typically developing child to age 24. However, a child with disabilities is a forced heir for life. Other children, or in some instances grandchildren, can also be deemed to be forced heirs for life. A properly drafted Will can account for the birth of a child, particularly in light of Louisiana’s forced heirship laws.
- Marriage – When an individual gets married, it becomes important to consider preparing or updating wills and durable powers of attorney. Some people assume that just because they have married, the spouse automatically becomes entitled to receive the other spouse’s estate upon death. However, this is not necessarily the case, particularly in circumstances where there is a remarriage for one or both of the spouses, and there are children from prior unions of either or both spouses. Spouses will want to be very careful to make sure who will come into assets upon death in such circumstances.
- Upon divorce, death, or disability of a spouse – In such circumstances, wills and durable powers of attorney may need to be updated. In many instances, spouses may have named one another as heirs, executors, agents on durable powers of attorney, and/or guardians for children. It is also likely that spouses may have named one another as beneficiaries on insurance policies. Regardless of the circumstances, wills and durable powers of attorney should be reviewed and updated any time there are changes in a marital relationship.
- Changes in an individual’s financial situation – A person’s financial situation may change for better or worse at different times during their lives. Estate planning documents should always be updated to take into account such changes. For example, an individual who inherits substantial assets from a parent or relative may want to make sure that such assets are passed on to children or other family members. Business affairs and decisions may also need to be addressed. Estate planning documents should always be reviewed and updated to take into account such changes.
- Tax planning – Estate planning documents may need to be revised and updated to take into account changes in tax laws and tax planning strategies. Louisiana no longer imposes inheritance taxes, but Federal estate taxes still apply to large estates. The Federal tax laws are constantly changing, and for individuals with large estates, steps should be taken to take advantage of opportunities to reduce exposure to these taxes.
- Other changes – There are other reasons for reviewing and updating estate planning documents. These may include things such as changes in Medicaid rules, changes in residence from state to state, changes in individuals who you are designating to service as executors, trustees, guardians, and/or agent on powers of attorney, designation of special bequests of particular items to particular individuals, and other matters.
Review Estate Planning Documents Every 3-5 Years.
It’s a good idea to review and update estate planning documents such as wills and durable powers of attorney every 3 to 5 years. In the event there are family members with disabilities or special needs, it’s probably a good idea to review such documents on a more frequent basis. The most common changes in circumstances that may require an update of documents are changes in individuals who will serve as executors, administrators, trustees, tutors for minor children, and/or agents. These can be addressed through updates of estate planning documents.
Finally, and most importantly, it is critical that updates to estate planning documents be done in consultation with an attorney skilled and experienced in preparing such documents. Particularly where there are family members with disabilities and Medicaid planning issues that must be addressed, it is critical to consult with an attorney skilled and experienced in providing effective Medicaid planning advice in conjunction with preparation and updating of these documents.