When was the last time you revisited your estate plan? If your answer is when you signed those documents at your attorney’s office, you’re not alone. Many people finalize their estate plans and then forget about 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. This article 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. This person has a legal duty to act in the best interests of the beneficiaries. Therefore, choosing the right person to represent your estate in court is critical. If you don’t, your estate planning strategies could 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 the deceased’s assets, 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 can 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 is a common reason why estate planning strategies fail, as people often overlook future changes.
Trusts are often created for children under 18, but as they grow older, 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 Additionally, outdated estate plans may not align with current wishes or circumstances.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, you may have intended to distribute assets equally among your children, 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 can also affect the estate’s value and future estate taxes. Current federal law allows each citizen to transfer a certain amount of their assets to their beneficiaries without incurring taxes such as gift tax.
If the estate plan was created years before the person’s death, it might only include the assets they had at that time. Failing to update the estate plan to include newly accumulated wealth can render the old plan useless, and the court may disregard it entirely.
Conclusion
estate planning is not a one-time task. If your plan was made 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. This ensures that your family won’t face unnecessary difficulties. Remember, not everything goes as planned, so be prepared for any eventualities. If you need assistance or guidance, consider hiring a probate lawyer.
