When was the last time you revisited your estate planning documents? If your answer is when you initially signed them at your attorney’s office, you’re not alone. Many individuals complete their estate plans and then forget to review them for years. This oversight is where most estate planning strategies falter.
Regularly reviewing your estate plan is crucial due to evolving laws and significant life events such as marriage, childbirth, divorce, or the death of a family member. Ideally, you should update your estate plan every 3 to 5 years to ensure it complies with current laws. In this article, we will explore why many estate planning strategies fail during the probate process.
Common Pitfalls in Fiduciary Selection
An executor or fiduciary is an individual appointed to manage someone else’s estate legally. It is their duty to act in the best interest of the beneficiaries. Therefore, choosing the right person to represent your estate in court is critical. If this selection is flawed, your estate planning strategies may fail from the outset of the probate process.
Typically, executors named in a will are given control of the estate during the probate process until the assets are transferred to the beneficiaries. They are responsible for gathering all assets of the deceased, paying debts and expenses, and filing any necessary tax returns.
A trustee, on the other hand, manages the assets held within a trust, which may have been established while the person was alive. While an executor’s role is usually temporary, a trustee’s responsibilities may continue indefinitely or until the trust is terminated. A key duty of the trustee is to make distributions to beneficiaries according to the terms of the trust agreement.
Overlooking the Growth of Your Children
When children are young, parents often designate a guardian for them. However, if your child is now an adult, a guardian may no longer be necessary. Complications can arise if the adult child gets married or has children of their own, necessitating the inclusion of new family members in the estate plan. This oversight is a common reason why estate planning strategies fail, as people often do not account for future changes.
Trusts are frequently created for minors, but as children reach adulthood, the original terms of the trust may no longer be applicable. Additionally, outdated estate plans may not align with current wishes or circumstances. For example, one child in a family may be financially stable while another is not. Initially, equal distribution of assets among children might have been the goal, but this may need to change over time.
Neglecting to Update Wealth Accumulation
Financial security is a goal for everyone, but with increased wealth comes increased complexity. An increase in wealth often leads to higher annual income taxes and may also elevate the estate’s value and future estate taxes. Current federal law allows each citizen to transfer a certain amount of their assets to beneficiaries without incurring taxes such as the gift tax.
If the estate plan was created years before the person’s death, it might only include the assets owned at that time. Failing to update the estate plan to include newly accumulated wealth can render the old plan ineffective, and the court may disregard it entirely.
Conclusion
estate planning should not be a one-time event. If your plan was created several years ago, it might now be obsolete. To avoid complications during the probate process, you should update your estate documents every two to three years. Remember, not everything goes as planned, and being prepared for any outcome is essential. If you need assistance or guidance, consider hiring a probate lawyer.
