Creating an estate plan is an important part of planning for your future. However, it is not the only step. Updating your plan is also key, and overlooking this important estate planning step could even have unintended consequences.Regularly reviewing your will, beneficiary designations and other important documents will help you identify any areas that may be lacking. Checking in on your estate plan once every one or two years might not be sufficient, though. You should also conduct a thorough review of your estate plan after significant life changes.
After marriage, divorce or kids
Some of the biggest transitions in life are those that happen after getting married, getting divorced or having children. Not only are your priorities usually different after these life events, but you may also want to include new people — a spouse or children, or exclude others — an ex, from your will. You also need to update beneficiary designations on things like retirement accounts, insurance policies and any accounts with beneficiary designations.You may be surprised to learn that your will does not actually control these types of assets. Instead, whoever is the beneficiary will receive the asset. This is true even if you list a different beneficiary in your will.
After acquiring a sizable asset
Married couples generally have lots of jointly owned property. Many do not realize that joint ownership can take one of two forms. These are:
- Joint tenants with rights of survivorship — JTWROS
- Tenancy in common — TIC
If you jointly own an asset as JTWROS, and you want your portion of the asset to pass on to children or grandchildren, you might not get your wish. Should you die before your spouse, the assets would automatically go to him or her. If you have assets titled with JTWROS, you can retitle them to TIC, which would allow you to handle your portion as desired.
After legal changes
In the past, you could leave a retirement account to an heir, who could then stretch disbursements out over the course of his or her life. The SECURE Act, which took effect in Jan. 2020, put a time limit on those distributions. Although there are exceptions, beneficiaries can only receive payouts from inherited IRAs for 10 years.You do not want to leave your family with a confusing or difficult estate to deal with upon your death. However, it can also feel a bit overwhelming to return to estate planning after every major life event. There is no need to approach this all by yourself. Instead, you may find that the process is much better when you work closely with an experienced attorney who is knowledgeable in Colorado state law.
