New tax law, or a change in the existing tax laws that directly affect a person’s estate, can be a sufficient reason for reviewing an estate plan. A review of the estate plan may also be necessary when certain events happen in a person’s life. These events include relocating to another state, changing assets or liabilities, and changing objects of affection.
Relocating to a Different State
Estate planning laws vary between states. The variations can be slight. Some states, for instance, require a specific number of witnesses for a will to be considered authentic. The variations can also be more significant. For instance, a spouse is entitled to a minimum portion of the estate as an inheritance in many states. This requirement, however, varies from state to state. Some states still deduct estate or inheritance taxes, while others don’t.
State laws may also differ based on other estate plan elements, like advanced healthcare directives, living wills, and powers of attorneys. If a person relocates following a career change, he or she will need to have these documents reviewed and updated to be in line with the new state. He or she should also work closely with an estate planner to provide evidence of residence change. This is especially crucial when a person has a significant estate and relocates from a state with the estate or inheritance taxes. Otherwise, the state with those taxes will assume that the person has maintained his or her legal residence and subject his or her estate to taxes in the old state.
Changing Assets or Liabilities
A need to review and update an estate plan may arise if there is a substantial change in the value of an estate since the plan was created. This change may be either an increase or decrease in the estate’s value. The estate owner must review how assets are distributed and determine whether that is what he or she still wants given the new events.
The estate owner may also need to have the plan reviewed if there is a change in his or her estate composition. He or she might have bought a highly valued asset, like a business or real estate, that becomes a significant part of the estate. Additionally, he or she might have sold such an asset.
Changing Objects of Affection
For most people, this change may be an addition of a new family member, such as a child or grandchild. This development may create a need to review the estate plan. Through a review, new family members can be named and specifically added to the estate plan. This move is a perfect example of responsible estate planning because it would prevent possible conflicts and litigations in the future.
Circumstances may arise that make it necessary to remove someone who formerly was named and added to the estate plan. This is true when there is a divorce or death in the family. The estate owner might also want to cut off someone on bad terms with the family or is careless with money.