In this article, we discuss life events that may require a review of your estate plan. We discuss updating your estate plan when you get married, when you buy your first home, when you have a child, when your children reach adulthood, after a divorce, when you acquire new assets, when you want to change how your assets will be distributed when you pass, when you are ready to plan for long-term care.
For an overview of estate planning in general, check out our article: Illinois Estate Planning Explained.
If any of the following major life events occur, it is a good idea to meet with your attorney to review and potentially update your estate plan:
Most people start thinking about estate planning when they get married for the first time. Whether you are doing your initial estate planning or updating an existing estate plan, it is important to make sure that your spouse is provided for in your estate planning documents as well as listed as a beneficiary on insurance policies and retirement accounts.
If you own any real estate in Illinois, your estate is likely to require probate when you pass. Owning your real estate in the name of a revocable living trust can cause your estate to avoid a costly and time consuming probate process. Buying your first home or acquiring your first piece of real estate is likely to cause a revocable living trust to become the most appropriate primary vehicle for your estate plan, rather than a will.
It is important to have an estate plan in place if you have children in order to provide for their guardianship and financial security if you pass. If you already have an estate plan, your estate planning documents should provide for any children born in the future. These may not need to be updated when you have a child, but checking in with your lawyer to make sure the existing documents remain appropriate is a good idea. You will also want to make sure that each time you have a child, the newborn is added to your life insurance policies and retirement accounts.
When your children reach an age at which you believe they can handle the responsibility, you may want to update your estate planning documents to make them the executors of your will, the trustees of your trust, and/or the agents for your powers of attorney.
When you get a divorce, it is important to update your estate plan to ensure that your ex does not end up with control over your assets when you pass or become disabled. For more, check out our article: Estate Planning After a Divorce.
If your asset structure changes significantly, you may want to check with your attorney to see if your assets exceed the Illinois estate tax exemption. If so, you should begin estate tax planning in order to minimize estate tax. If you have already begun planning for minimization of estate tax, you should review your estate plan every time your asset structure changes significantly in order to ensure that your estate plan is structured in the most tax efficient manner possible.
A good estate plan will provide for expected life events such as the birth of additional children or grandchildren. However, you should review your estate plan if your wishes regarding asset distribution change significantly in other ways. This may mean leaving a particular asset, like the family home to a particular beneficiary, leaving a portion of your estate to charity, or adding or subtracting beneficiaries based on changing relationships.
As the relationships in your life change, you may want to change the people who you have placed in charge of managing your assets in the event of your death or disability. This may be caused by drifting apart from the initial people that you named as trustee, executor, or agent for powers of attorney, or it may be that your children become old enough to serve in these roles.
If you believe that long-term care will be necessary in the near future, you can work with your attorney to make sure that your assets are preserved for the next generation rather than expended on long-term care. In order to be effective, your estate plan must generally be updated at least five years before needing long-term care. For more on this, check out our article: Illinois Medicaid Planning Explained.