Estate plans contain important legal documents that outline your wishes for your assets and care. A good estate plan reflects your current life situation and goals. Thus, over time, you’ll need to update it periodically, especially after major life changes or every three to five years. However, before updating your estate plan, consider these three key steps.
Review your current asset inventory
Take a fresh look at what you own. Has your financial picture changed since you last updated your plan? Maybe you’ve acquired new property, started a business or seen significant changes in your investments. Your estate plan should accurately reflect your current assets to ensure they’re distributed according to your wishes. Don’t forget to include digital assets like online accounts or cryptocurrencies, which are increasingly important in today’s world.
Assess the impact of potential 2025 federal estate tax changes
The federal estate tax exemption is scheduled to decrease significantly in 2025 unless Congress acts. This change could affect estates valued over approximately $5 million. If your estate might exceed this threshold, you should consider strategies to minimize potential tax liability. These might include gifting, creating trusts or adjusting your charitable giving plans.
Evaluate the timing of your estate plan update
Is it really time to update your plan? This question is crucial, as unnecessary updates can be costly and time-consuming. However, certain situations do warrant a review:
- Major life events: Marriages, divorces, births or deaths in the family often require immediate updates to your estate plan.
- Major financial changes: A substantial increase or decrease in your assets, starting a new business or receiving an inheritance could affect your plan’s effectiveness.
- Legal and tax changes: New laws, especially those affecting estate taxes or inheritance rules, might impact your current strategy.
- Regular review: Is your estate plan still up-to-date? Review it every three to five years, even without major changes, to keep it aligned with your current wishes.
If any of these apply to you, it’s likely time for an update. Remember, an outdated plan may not effectively carry out your current wishes or take advantage of new legal strategies. When in doubt, consider consulting with an estate planning attorney to determine if changes are necessary.