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How often should you review your estate plan?

Notice that I didn’t ask how often you should update your will. Sure, you should update your will when there’s a change in the estate tax law, major life events, a significant change in your financial situation, a change in who you want named as executor and guardian for minor children, etc. But there is more to your estate plan than just your will. In fact, it’s possible that there’s not much for your will to do, depending on how your assets are structured. We’ve reviewed very well-written wills only to find out no assets would be directed by the will. Due to the nature of the assets and how they were structured, the client’s assets would pass to heirs outside the will. It didn’t matter much what the will said or how up to date it was. Trusts that were to be formed at death to benefit spouse and/or children wouldn’t have any assets to go in them.

This could lead to unintended consequences that could be avoided with a review and monitoring of your overall estate plan to see how everything comes together, how it would flow, to whom, when and in what amounts. This would allow you to make informed decisions on any changes that may be needed.

Just when you think you have it all set, your estate balance sheet might change, which can alter how your estate plan would actually work. You might change how an account is owned or who the beneficiaries are, or the balance may significantly change. One client rolled over his $700,000 employer retirement plan (with certain beneficiary designations) to an IRA he already had (with different beneficiary designations). That created a shift in the distribution of his estate, all while his will was still perfectly up to date. Another client changed investment institutions and in the process, she added her spouse to the account when it was in her individual name previously. She also added a transfer-on-death designation to an account. These changes impact how the respective asset is distributed at death and it happens outside the will. Another client added his son to an account to ease bill payment when he wasn’t available, but the account balance grew from a nominal balance to $1.5 million. That created a significant shift in how his assets would be distributed outside his will—all unintended. Luckily, we caught those issues with periodic reviews.

Also be aware that record of beneficiary designations on IRAs, etc., often get lost when institutions are bought out or merge, creating an unintended change in beneficiaries. Make sure to get written confirmation of what they show on file for both primary and contingent beneficiaries, and make corrections as needed.

As you can see, it is important to keep your legal documents up to date, but also understand how they would work in conjunction with the make-up of your estate as things shift and change. Revisions might be needed on asset titling and beneficiary designations as well.

Cindi Turoski is a managing member of Bonadio Wealth Advisors based out of our Albany, NY office.

This material has been prepared for general, informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Should you require any such advice, please contact us directly. The information contained herein does not create, and your review or use of the information does not constitute, an accountant-client relationship.