The latest anniversary of my birth recently passed; I am now a provider and a beneficiary in the Medicare system. Fortunately, I have learned to celebrate these annual events, and the changes they bring, rather than dread them. I now appreciate that life gets better as we get older, on all levels – except, perhaps, the physical.
But I have also learned that birthdays are a good time to pause and consider the various financial arrangements that I’ve set up over the years, and to determine whether any of them need updating.
Estate plans, in particular, need regular review and revision. Nothing important has changed in your life since you drafted your will, you say? Well, chances are the laws have changed, or other factors may have rendered your plan obsolete without your even realizing it.
I am assuming, of course, that you have in fact drafted a will. If not – regardless of your age – do it as soon as possible. Stuff happens; if you die without a will (“intestate,” in lawyer lingo), your heirs will be at the mercy of attorneys, bureaucrats, state and federal laws, and greed. Quarrels will ensue; decisions will be made that are almost certainly at variance with what you would have wanted; and a substantial chunk of your estate that could have gone to loved ones, or to charity, will be lost to taxes and legal fees.
In other words, if you don’t write a will, others will write one for you – one your heirs probably won’t like. Don’t let that happen. That said, let’s consider some variables that mandate your constant vigilance:
Laws change. Trust laws, in particular, have changed a great deal in recent years, and trust strategies have changed with them. New instruments such as perpetual trusts, trust protectors, directed trusts, and total return trusts may or may not work to your advantage, but you won’t know without asking. State laws change too.
Once a year, my wife and I meet with our estate lawyer to learn about any new legislation that may have affected our plan. A few years ago, for example, I learned that my irrevocable trust was no longer irrevocable; new laws now permit certain provisions to be modified.
Laws that don’t directly regulate wills and trusts can impact your plan as well. For instance, the ever-popular Health Insurance Portability and Accountability Act (HIPAA) applies to your estate as well as your practice; under its provisions, your family cannot access your medical information or make treatment and life-support decisions without your specific permission. So if a Health Care Power of Attorney is not already part of your will, add it. And remember to modify it if your medical status, or your philosophy of life, changes.
Financial markets change. It’s not exactly a secret that asset values and interest rates are considerably different than they were even a few years ago. Real estate or securities bequests could now be significantly larger or smaller. Your accountant and estate lawyer should take a look at your assets periodically, and their apportionment in your will, to be sure all arrangements remain as you intend. And be sure to notify them whenever the composition of your assets changes, even if their value doesn’t. Say, for example, you sell a business or property, and reinvest the proceeds in something completely different; a different set of tax laws will apply, and your will must reflect that.
Fiduciaries change. Keep track of the executor of your estate and the trustee(s) of your trust(s), and be prepared to make changes if needed. If your brother-in-law is your executor, and your sister divorces him, you may want to name a new executor. A once-vigorous trustee who is now old or sick should be replaced. Trustees are often financial institutions; if a corporate trustee goes belly up, or the employee you were working with leaves or retires, you’ll need a replacement.
Personal circumstances change. Some changes – marriage, divorce, the death of an heir, or the birth of a new one – obviously require modifications to wills and trusts. But any significant alteration of your personal or financial circumstances probably merits a phone call to your financial planners. The need for changes, and your options, are not always obvious.
Dr. Eastern practices dermatology and dermatologic surgery in Belleville, N.J. He is the author of numerous articles and textbook chapters, and is a longtime monthly columnist for Dermatology News. Write to him at email@example.com.