Creating a will and estate plan is essential if you hope to have control over who inherits your assets after death. However, they can’t just be created and forgotten about. Just as life changes, your will and estate plan should also change.
Here are three reasons to update your will and estate plan this year.
1. Tax Laws Frequently Change
Tax laws change regularly. When they do, your will and estate plan should also change. In 2018, for example, the federal estate, gift and generation skipping transfer tax exemptions increased to $11.18 million per person. This increase is set to expire in 2025, after which the exemption amounts will revert back to $5 million per person, adjusted for inflation.
Many states also have estate tax, but the rules change from state to state. Even income tax changes can have an impact on how assets are left to heirs.
The implementation of trusts can help mitigate some tax issues that may impact your estate.
A will can be used to transfer anything the testator owns to anyone (or anything) he or she wants. Upon the death of the testator, a court-supervised process called probate reviews the will and makes sure the property is distributed according to the instructions.
2. Individuals Named in the Will Have Died
It's important to update your will if anyone named in it has died. There have been cases people failed to update their wills after their first spouse died and they remarried. In cases like this, the will may only name the children from the first marriage as heirs. The second spouse and any children from that marriage may have to fight to get a share of the estate.
Don’t make this same mistake and update your will if any named individuals die.
3. Life Changes
Life is constantly changing, and those changes may affect your decisions about the transfer of your wealth to intended heirs. Marriage, divorce, children and changes in net worth are all reasons to update your will.
Debts will also impact your will, so you may want to take steps to mitigate the problem by updating your estate plan and will.
“Before any assets are transferred to the beneficiaries, the estate must first settle any remaining debts owed by the testator,” says the Law Offices of Marc J. Blumenthal, Ltd. “Therefore, if the testator had a significant holdover debt (like student loans or a mortgage), the estate must pay off the debt through monies or, if necessary, by selling assets (like the family home).”
It’s crucial to keep your will and estate plan up to date. Failure to do so could leave your family and intended heirs fighting over your assets after your death.