How frequently you should review your estate plan depends on how old you are and whether there has been a significant change in your circumstances. If you are over age 60 and you haven't updated your estate plan in many decades, it's almost certain that you need to update your documents. After that, you should review your plan every five years or so. But if you're younger, you don't need to do so nearly as often.
Here are a few age ranges and what they mean in terms of estate planning:
18-30 Everyone needs a durable power of attorney, health care proxy and HIPAA release so that they have people they choose to step in and make decisions for them in the event of incapacity.
30-40 Once you begin accumulating assets, get married, and have children, it's important to create an estate plan to care for your loved ones in the event of your death. It also can't hurt to update your durable power of attorney, health care proxy and HIPAA release, since the people you may have appointed at 18 (your parents?) may not be the people you want in these roles at 35.
40-60 Unless there's been a change in your circumstances, and assuming you've set a good plan in place during your 30s, you probably don't need to review your estate plan during your 40s and 50s.
60-70 Once you've hit your 60s, it's time to take a look. Your children are probably grown. You may have grandchildren. And, hopefully, you've accumulated some wealth. The people you appointed to step in in the event of incapacity when you were 35 may not be in a position to assist when you're 65. You may have retired or are contemplating doing so. And, unfortunately, the chances of disability or death increase with every year.
70+ Now it's time to review your plan every three years or so. Changes happen -- to your health and that of your loved ones, to the tax laws, to the programs supporting long-term care or disability care. It's important to have a plan in place and to adjust it as circumstances change.
Change in Circumstances
While the timeline above outlines when you should review and perhaps update your estate plan, it needs to be supplemented by the following potential changes in circumstances that would warrant a review of your plan to see if it still meets your goals and needs:
Marriage. You're likely to want your assets to go to your spouse and to name him or her to be your agent in the event of incapacity.
Divorce. Likewise, if you get divorced, you probably won't want your assets to go to your ex-spouse or to rely upon him or her to step in if you were to become incapacitated.
Children. Once you have children, you'll want to provide for them and to name someone to step in as guardian in the event of your death or incapacity and that of their other parent, if any. Generally, once you have a plan in place you do not have to update it unless you have more children.
Disability. If you or someone who would inherit from you becomes disabled, you will need to plan to protect and manage your assets, whether for yourself or for your beneficiaries.
Wealth. If you accumulate sufficient assets to exceed the thresholds for state and federal estate taxes -- $11.4 million federally -- you may want to plan to reduce or eliminate such taxes.
Moving. If you move to a new state or country, it will be important to have your estate plan reviewed to make sure it works in the new jurisdiction.
In short, until you reach age 60 or 70, reviewing your estate plan every five years probably is overkill. But do so whenever you have a change in circumstances such as those listed above. If you're over 60 and haven't updated your estate plan in many years, now's the time. Then, having a review every five years is definitely a good rule of thumb.
“Upon one’s death, there is no comprehensive service that finds every asset in the individual’s name. Sometimes the executor or family partakes in what seems to be a goose-chase, trying to find out where the decedent held her monies and property.”
It’s not unusual for a family member to find an old bank account or painting, years after someone has passed and the estate has been closed. If it’s not something of great value, says Above the Law in the article “Old Money, Same Issues: Lessons from the 5th Century in Organizing Your Estate,” it’s easy to handle. Contacting a few members of the family to see who wants a small item, can be a simple task.
However, if it’s of high value, the family may need to petition a bank, the probate court or even an unclaimed funds bureau for access to the asset, so it can be distributed to beneficiaries or heirs. The testator needs to appoint a meticulous administrator so no stone is left unturned, when the time comes for marshalling all of the assets, before the estate can be closed.
Israeli archeologists recently unearthed deeply buried stones related to the estate of an ancient Samaritan named Adios. The stone had an inscription that read “Only God help the beautiful property of Master Adios, amen.” The estate is reported to date back 1,600 years to the 5th century. The estate contained stone mechanisms for making wine, flour and oil, including a mill. It was fairly well organized.
We have now organized people who take care of their heirs and beneficiaries, by listing all of their assets and taking the time to have an estate plan created that includes a detailed will, among other important documents. We are centuries away from inscribed stones, but the game plan is the same: write down the assets, have a will that details what assets go to either people or charitable organizations and prepare for the future.
If there is no list of assets, there are ways to uncover them. However, it creates a lot of work for the executor and stress for the family, that could be avoided with an estate plan.
The best evidence of asset holdings are often a decedent’s tax returns. General supporting documentation can reveal useful information about a person’s financial status. A look at a decedent’s paper files can reveal bank accounts, investment accounts and insurance policies.
If the assets are not properly documented in an estate plan, the monies may end up in a state’s unclaimed funds depository. Real estate, if taxes are not paid, may be seized. Many of the concerns for unclaimed funds can be addressed, by taking the time to create a spreadsheet of information and sharing it with the executor.
Whether your assets include a stone mill or bank accounts, an estate plan that includes clear and organized information about your assets will increase the likelihood that your assets will be distributed and not disappear, until they are uncovered centuries later.
“Fortunately, Perry's foresight to do proper estate planning, meant that the tragedy was not made worse for his family.”
Luke Perry’s death at age 52 from a condition that we think of as something that happens to older people, has made many people thinks differently about strokes. As reported in the Forbes article “Luke Perry Protected His Family With Estate Planning” Perry was savvy enough to do the proper estate planning, which made a difficult situation easier for his family.
Perry was heavily sedated following the first stroke and five days later, his family made the difficult decision to remove life support. It had become obvious that he was not going to recover, following a second stroke. He was surrounded by his children, 18-year-old Sophie, 21-year-old Jack, Perry’s fiancé, ex-wife, mother, siblings and others.
The decision to allow Luke Perry to die, when only a week earlier he had been alive and vibrant, could not have been easy. It appears that he had the correct legal documents in place, since the hospital allowed his family to make the decision to end life support. In California, those wishes are made in writing, using an Advance Directive or Power of Attorney. Without those documents, his family would have needed to obtain an order from a probate court to permit the hospital to terminate life support, especially if there was any disagreement about this decision from family members.
That would have been a public and painful experience, making things harder for his family.
Perry reportedly had a will created in 2015 leaving everything to his two children. Earlier that year, he had become a spokesperson for screening for colorectal cancer. He had undergone a colonoscopy and learned that he had precancerous growths, which led him to advise others to do the same testing. According to friends, it was after this experience that Perry had a will created to protect his children.
It is thought (but not yet verified) that Perry had a reported net worth of around $10 million, so it’s likely that he created a revocable living trust, in addition to a simple will. If he had only a will, then his estate would have to go through probate court. It’s more likely that he had a trust, and if it was properly funded, then his assets could pass onto his children without any court involvement.
The only question at this time, is whether he made any provisions for his fiancé, Wendy Madison Bauer. Since the will was done in 2015, it’s unlikely that he included her in his estate plan. If they had married, she would have received rights that would not have been automatic but would have depended upon the wording of his will or trust, as well as whether the couple had signed any prenuptial agreements. If they had married and documents did not include an intent to exclude Bauer, she would have been entitled to one-third of his estate.
Luke Perry’s tragic death provides an important lesson for all of us. No one should wait until they are old enough to do estate planning. Perry’s cancer scare, in 2015, gave him the understanding of how quickly life can change, and by having an estate plan in place, he helped his family through a difficult time.
“Sharing a dementia diagnosis is a challenge facing thousands of Americans.”
There are many factors to consider when you’re still active in the workforce but have received a diagnosis of dementia. How has your job performance been affected? Have you been able to devise a system for maintaining your performance levels, or are you not able to safely proceed with the tasks of your job?
For a neurosurgeon, early stages of dementia would probably require an immediate end to their career. However, someone in a less demanding occupation, might be able to figure out a way to continue working. The situation is never easy, explains Next Avenue in the article “Dementia Diagnosis: When Do You Go Public?”
In one case, a man who was diagnosed at age 58 with minor cognitive impairment had found workarounds but knew that he was heading into dementia. He shared his information with his employer, colleagues and professional acquaintances, as well as his large family, which includes a nearly 90-year old father. Not everyone can have these conversations, and few are ever prepared for them.
According to the Alzheimer’s Foundation, 200,000 Americans have the early onset variation of Alzheimer’s, meaning they are 65 or under when they start having symptoms. Another 5.7 million Americans who are 65 or older live with Alzheimer’s.
The director of palliative care and medical ethics care at New York University, Dr. Hamilton, has delivered the bad news to hundreds of patients. She says that most of them are not surprised with the diagnosis. They are scared and worried, but rarely surprised. She believes that the rewards outweigh the risks, when it comes to sharing this news, and that families live with less uncertainty when everyone knows what has happened. This knowledge allows the family to move forward with practical planning.
The first step is to get legal and financial matters in order. That means an estate plan, including a health care directive and a Power of Attorney for financial matters and a health care proxy to make decisions, when the person no longer can do so themselves.
It’s a scary conversation to have with employers. It may be that the federal civil rights law, the Americans with Disabilities Act (ADA) prohibits discrimination and requires employers to make “reasonable accommodations” for employees with disabilities. However, this isn’t always what happens.
Dr. Sujatha Hamilton says that many people today need to work past age 65, and disclosing their illness is helpful, if their employer can have their duties modified or their schedules restructured. They are more likely to be terminated or forced into retirement, if their employer does not know why things are going wrong, when their performance starts to suffer.
As part of planning for a next stage of life after a dementia diagnosis, care directives and estate plans may need to be revised. Your estate planning attorney will be able to help make the changes to the estate plan and what plans need to be made for long-term care, as the disease progresses.
“A will directs how your probate assets will be distributed upon your passing, designates an executor to be in charge of your estate, and allows you to create trusts for minor grandchildren or disabled beneficiaries. However, having a will is just part of the story.”
A will is the cornerstone of an estate plan, but it is by no means the only document needed to distribute assets and prepare for both incapacity and death. The Island Now reviews a number of things that an estate plan should address in the article “Five things that will impact your will.”
How are your bank accounts structured? If you have a bank account set up as “joint with right of survivorship,” when one of the owners dies, the other owner automatically inherits the whole account. Remember that this will occur, no matter what is stated in the will. If you have added a child to that account for convenience, is it your wish that the child should inherit the entire account? That’s exactly what will happen. You may be better off letting a child help you, using Power of Attorney rather than structuring the account that way.
When was the last time you reviewed beneficiary designations? Like titling bank accounts, as explained above, the beneficiary designation takes precedence over anything in your will. If you opened an IRA at your first job and now two decades—and two marriages—have passed, that IRA will still be passed on to the person who you named two decades ago, unless you have updated the beneficiary name. Accounts that often pass directly to beneficiaries include life insurance, annuities, 401(k), 403(b), brokerage accounts and some bank accounts.
Each asset that has a beneficiary, should also have a contingency beneficiary in the chance that the primary predeceases you or does not wish to receive the asset.
Are you prepared for the cost of a health crisis? The cost of a health crisis can, and often does, wipe out a family’s years of retirement savings. There are several strategies that an estate planning attorney can help you with to plan in advance for this. Long-term care insurance may be an option and placing assets in an irrevocable trust may be another, depending on your situation. There is a five-year look-back for any Medicaid benefits, so planning in advance is critical.
For many families, placing their primary residence into a trust while retaining the right to live in the home, retaining any STAR or Veteran’s exemptions and possibly even securing capital gains advantages for heirs is a possibility but requires the help of a skilled estate planning attorney.
Is gifting part of your estate plan? Most people know about the annual exclusion gift, which allows anyone to make a gift in the amount of $15,000 per year to a beneficiary with no gift tax consequences. However, if you need to apply for Medicaid coverage within a five-year period, any gift will trigger a waiting period before you can be eligible for Medicaid. Therefore, you can make a gift for tax purposes but it’s not something you can do for Medicaid planning. This is an expensive mistake. Talk with an estate planning attorney to make sure you get this one right.
Who is your Power of Attorney? Everyone should have a Power of Attorney. This is a person who is your legal representative, if you become incapacitated. The durable power of attorney gives your agent the authority to handle banking matters, real estate transactions and other financial matters. You’ll also need a health care proxy and a living will.
All these issues are part of a comprehensive estate plan, which is best created with an experienced estate planning and elder law attorney.
“What would happen to your pet’s if you died tomorrow? Would a friend or relative take them? Are you sure?”
If you have pets that you consider family members, you’ll want to make sure you have made plans for their care, after you have passed. That’s the message from U.S. News & World Report in the article “How to Build an Estate Plan for Your Pets.”
How much time and money you devote to your pet’s care after you are no longer able to care for them, varies widely from state to state and depends on what you consider a comfortable lifestyle for your furry pals. You might include your pet in your estate in some states, or you may do better with a pet trust.
Include your pet in your will. One option is to use your will to leave your pet and some money to a trusted caretaker. This is kind of like leaving a collectable car to someone, as opposed to asking someone to be a guardian for your minor children. You are transferring the pet as an asset and making a bequest of a certain amount of money for their care. However, remember that the funds are being transferred with the hope and trust that the person will use them as you intend. The use of the money is not legally binding.
Have a pet trust created. This is admittedly a more expensive way to go but it gives you more control over the care of your pet. It allows you to set up a plan that mirrors how you’d create a plan for guardianship, rather than a piece of property. Your estate planning attorney will know what your state allows for pets.
The key part of a pet trust is the designation of a primary caretaker or physical custodian who will be responsible for caring for your pet on a daily basis. The second is a trustee, who will be sure that funds allocated to the pet trust are managed, invested and paid out as needed.
Get buy-in from the trustee and the caretaker. This is not something you want to spring on someone after you’re gone. Make sure the people you have in mind understand what you want them to do and what their responsibilities will be. You also want a back-up plan. Some shelters, especially no-kill shelters, have plans for taking in pets for the rest of their lives, although they do request a donation be made. Visit the facility and make sure you understand how their program works, before naming them as a back-up on your pet care plan.
Know how much this will cost. Caring for a quarter horse will have a completely different cost than caring for a 70-pound golden retriever. If you can, track the cost of care, including food, toys, vet visits, groomers, etc., over the course of a year. Talk with your vet about expected medical costs for the future, especially if your pet is very young. Plan out your budget carefully, so the caretaker will have enough money, then leave a little extra for unforeseen circumstances.
Keep your pet care plan up to date. Just as your estate planning documents need to be kept up to date, so do those for your pets. If you add another furry member to the family, or if one dies, make sure that your estate plan reflects these changes.
“The client wanted her surviving spouse to have access to her work email, but her employer shut down the email account following her death.”
This is one of those situations that does not have a happy ending. A woman died unexpectedly, and her employer shut down her email immediately after her death. Her surviving spouse knew that the woman had wanted him to have access to her emails, but it was too late.
These are the details, says an article from the Chicago Sun Times titled “Estate Planning: Now’s the time to prepare,” that can make the difference between a time when grief takes a back seat to logistics and a time when loved ones can focus on a major life-altering event.
As soon as you have assets to pass down to loved ones, you need to start planning your estate. If you start in your early 20s, it will become a habit and an on-going process.
Even if you don’t have a lot of assets, it doesn’t mean that you’re excused from planning for the worst situation.
Whether you do a basic estate plan, like putting a will, powers of attorney or a health care directive in place or if you need complex trusts and tax sheltering strategies, having an estate plan means you have a voice in what happens, even if you aren’t able to convey your wishes.
What do you need?
Everyone needs a will.
Everyone should review their beneficiary designations every few years to make sure the people named are still the people intended to receive the proceeds. That includes bank accounts, insurance policies, IRAs and more.
Everyone needs health care and financial power of attorneys to outline their wishes.
If you are a parent, in most states, you need a will to name guardians for your minor children. You also need a 529 College Savings plan to start saving for college, which comes up faster than you can imagine.
You may need a trust, which offers more privacy than a will, because it keeps details about your private belongings and assets out of probate court.
You also need to organize your digital assets, as well as your financial and physical assets. Keep a list of your accounts and passwords. Most digital platforms from Facebook to Google to your financial institutions, have policies about what happens to the accounts and who has access.
Keep a list of your advisors and their contact information. That includes your estate planning attorney, CPA and financial advisor. You may want to have them meet your family members, so they are more comfortable with these advisors, when the time comes for them to work together.
As you move through the various stages of life, your plan will change. However, you should get started now, so the process becomes second nature. Your family will thank you.
“Although we typically associate the term “estate” with the ultra-wealthy, estate planning is not just for the rich. Everyone, regardless of family dynamics or financial status, can benefit from having an estate plan—a collection of documents that specify how you want your assets distributed.”
Estate planning has a purpose while you are alive, with medical directives and power of attorney, as well as when you have passed. That is something most people don’t understand. As described in a recent article in Forbes, “6 Reasons Why You Need an Estate Plan,” most people continue to neglect to put a plan in place. A recent survey from caring.com found that less than half of American adults have estate planning documents, such as a will or a trust. Here are a few reasons why that’s a big mistake:
Plan for your needs. If you should become incapacitated or unable to make your own decisions, an estate plan will protect you, your assets and your family. Part of your estate plan is preparing for this type of scenario. What kind of cash flow will you need and is there insurance missing from your plan? You should designate a healthcare proxy or a power of attorney who can make medical and financial decisions on your behalf, if necessary. Speak with the people who you want to name to these key roles, so they are prepared and understand your wishes in advance.
Dispose of your assets. With no will, your state will decide how to distribute your assets. At the very least, check your beneficiary designations on accounts so your financial and investment accounts and insurance proceeds go to the right people. A will clearly defines how you want your assets distributed at your death and saves your family from the time, expense and frustration of trying to figure out what you wanted, and what the law allows.
Minimize taxes. If there’s a substantial amount of wealth involved, that you want to transfer it to other family members or loved ones, the estate planning process can help you do this in the most tax-efficient way possible. Speak with your estate planning attorney about different types of taxes to consider: the estate tax, gift tax and generation-skipping transfer taxes. Since the IRS places limits on how much money can be transferred and to whom without being taxed, an estate plan outlines a wealth transfer strategy.
Create a philanthropic legacy. How do you want to be remembered after you die? Do you want to create a family foundation, endow a scholarship or participate in a donor-advised fund to support a cause that is important to you? There’s also the question of giving while you are alive, to enjoy seeing the results of your generosity.
Protect the wealth of the family. Your assets can come under pressure in many different ways, while you are living. Frivolous lawsuits can become an expensive nuisance. Estate planning can remove your name from assets and put them into legally-protected vehicles, such as trusts or limited liability entities. Insurance is also a part of estate plans, with certain types of insurance used to protect you against a variety of legal challenges.
Prepare future generations. For families that have accumulated large amounts of assets, instilling and preserving the family values over generations is a difficult but do-able task. Families that are successful in building long-lasting legacies devote time to teaching children about stewardship, civic and fiscal responsibilities and their role as part of a family that takes its achievements seriously.
An estate planning attorney can help you to create an estate plan that will protect your family and your legacy across generations.
“If you're part of a married couple, it's highly likely that one of you will become a widow or widower at some point.”
If it’s any comfort, there are now some 20 million widows and widowers in America, according to a study from Merrill Lynch and Age Wave that focuses on widowhood, as reported by CBS News’Moneywatch in “A retirement planning must-do for married couples.” The study, “Widowhood: The Loss Couples Rarely Plan for—and Should” takes a detailed look at what happens, when the first spouse dies.
It should be noted that women are three times as likely as men to be the surviving spouse, since women historically tend to live longer. Widowers tend to marry younger women, leaving many older women to need to learn how to live as senior singles.
More than half of all of those surveyed who had lost a spouse, said they had not planned for it. More than three-quarters of married retirees said they would not be financially prepared for retirement, if their spouse passed away.
Losing a spouse is the hardest thing for married people, particularly if they have never been single. Some 75% of those who had lost a spouse, said it was the single hardest thing they’d ever had to deal with. Half of them experience a household decline in income of 50%—or more. Adjusting to that loss of income is a big concern.
When the first spouse passes, the surviving spouses report that they were overwhelmed with paperwork and didn’t know how to begin.
You can plan for this unpleasant eventuality, and you should. Just as having an estate plan in place will help loved ones, planning for one of you to become widowed will help the other.
What should couples do in advance?
Know what all your assets and accounts are and how to access all accounts.
Make sure both names are on all accounts and deeds.
Be able to access cash.
Keep credit card debt separate
Establish an estate plan that includes a living trust, pour-over wills, advance healthcare directives, durable powers of attorney, and personal care plans.
Have an honest discussion whether the estate plan should have provisions that protect the deceased spouse’s assets if the surviving spouse remarries or whether the estate plan should have provisions that protect the surviving spouse’s assets from creditors, lawsuits and nursing homes.
Here’s some advice from the surviving spouses:
Avoid making big decisions, until at least a year has passed.
Find all important documents and pay bills on time.
Notify banks, financial advisors and employers.
Reevaluate your retirement strategy, following a financial audit of your new situation.
Update your estate plan and check all beneficiary designations.
Losing a spouse is a difficult and painful experience. However, a solid estate plan would go a long way toward reestablishing balance in your life.