Your financial plan isn’t something you should just set and forget. Your life changes in so many ways as you get older and accumulate wealth, and your financial plan needs to be agile enough to respond to those changes.

But it’s not just your investment portfolio that needs to be reviewed and evaluated on a regular basis. You should also check in regularly on your estate plan.

5 Times You Should Reevaluate Your Estate Plan

It’s a good idea to get in the habit of reviewing your estate plan every three or four years, but there are also events in your life that will have a major effect on your financial and estate plans. In addition to reviewing your estate plan every handful of years, you should also be reevaluating your plan after these five major milestones:

1. Marriage or Divorce

This one’s a no-brainer, but it’s still worth mentioning. There are already a number of financial considerations for you and your partner before you get married, but once you’ve tied the knot, it’s important to think about what happens to your assets after one or both of you passes away—and whether your new spouse will be the beneficiary on all your accounts. Even though intestacy offers some protection to your spouse, it’s important to ensure that they’re listed on all aspects of your estate plan after you marry.

Similarly, if you end up going through a divorce, it’s important to review your estate plan to see which items your ex-spouse needs to be removed from. And remember: Beneficiary designations trump whatever is stated in your will. So, just because your ex may be removed from your will, if they’re still listed as the beneficiary of your accounts, they’ll be entitled to the assets in those accounts.

2. Birth of a Child

Whether it’s your own child or your grandchild, a new baby in your family will likely impact how you want to distribute your estate. For parents, make sure you designate a guardian to care for your child in the event that something should happen to you and your spouse.

For grandparents, your to-dos are a little less dire but important, nonetheless. Maybe you want to help pay for their higher education by setting up a 529 plan. Maybe you want to set up a trust on their behalf so you can ensure they’re financially stable. Maybe all you want to do is bequeath them some type of family heirloom. Either way, grandparents have things to think about too when a child is born.

3. Change in Your Career

Switching jobs may mean a significantly higher salary, which may make you more susceptible to estate taxes in the future. Make sure you revise your calculations and implement strategies that could reduce a future tax burden if it seems likely your estate could be taxable. If you have a life insurance policy through your former employer that you’re currently using, check to see whether you can maintain the policy at your new job. If not, make plans to purchase a policy on your own or through your new employer if you still need coverage.

Additionally, a new job may mean new 401(k) and other retirement accounts. You’ll need to decide what you want to do with your old accounts if you participate in your new company’s retirement plan.

4. Death of a Beneficiary

Losing a loved one is always emotionally challenging, but it’s critical to review your beneficiary designations when a loved one passes to ensure they’re still up to date. The person designated as the beneficiary on a life insurance policy or a retirement savings account will supersede whatever is written in your will.

5. Retirement

If you’ve been diligently preparing your finances for retirement, you’re probably very familiar with where all your assets are. This is a natural time to review the beneficiary designations on all your accounts. In addition to helping you efficiently transfer your assets to your loved ones after you pass, having the right beneficiaries can also help preserve the assets you’ve been accumulating.

Next Steps

Milestones mark significant moments of change in our lives. Reviewing your estate plan during these times can help ensure that you and your loved ones are protected, no matter how your life changes.

It might seem like a daunting task, but you don’t have to do it alone. Reach out to your financial advisor or estate planning professional, as they’ll be able to help you navigate all of life’s critical moments.

 

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.

Prior to investing in a 529 Plan, investors should consider whether the investor’s or designated beneficiary’s home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state’s qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.

Jim Sandager

Jim Sandager

Senior Vice President, Financial Advisor

CFP®, MBA, Series 7 Securities Registration,1 Series 66 Advisory Registration, † Life & Health Insurance License As a CERTIFIED FINANCIAL PLANNER™ professional, Jim brings an extensive retirement income planning background to the team. He regularly writes a personal finance column for The Des Moines Register’s Business...Read More