If you fail to update your estate plan, over time the plan may not work—for you or your loved ones. Reviewing estate plans at least once every three or four years will help to reach your goals and protect your family. Here are some tips for tidying up your plans.
Make certain that your plan is accurate and up to date. Your basic documents, which include your will, health care directive and power of attorney, should be in place and up-to-date. Review them to confirm that they’re consistent with your wishes and the current laws.
Review your named beneficiaries and fiduciaries. Confirm that the names of designated beneficiaries and fiduciaries are accurate. Most assets will pass under your will or through trusts, other accounts such as retirement, or life insurance may pass directly to a named (or contingent) beneficiary. If your planning circumstances have changed since creating these designations, update them.
Review your life and property insurance coverage. Be sure that these policies offer adequate coverage and meet their intended purpose. As your wealth increases, the planning purposes behind a term policy for risk mitigation purposes or a whole life policy to ensure ample liquidity upon death may become unnecessary. However, if your assets’ value has grown, you may need to re-examine if the current property coverage is sufficient to minimize your increased potential liability.
Ensure that your beneficiaries have enough liquidity. The estate administration process can be slow and tiresome. It’s possible that a person may not have immediate access to liquidity after a spouse’s death, depending on how assets are titled. A temporary (but major) burden can be avoided, by confirming at least some liquidity will be titled in or directly available to your spouse after you have passed.
Locate and compile important information and account identification. A difficult step in estate administration is locating a decedent’s assets. Make this process easier for loved ones, by creating a list of your accounts, property of significant value, liabilities and contacts at each financial institution. Make the list easily accessible to your family or executor, and update it whenever opening or closing an account.
Review digital assets and online accounts. These assets are frequently overlooked as to access and ownership after death. Instead of divulging passwords or allowing account access, you can add a “digital assets clause” to your planning documents. This lets named parties access specific items within the bounds of accepted legal standards.
Draft a letter of wishes. This document allows you to fully express your intentions and hopes, as well as any explanations or instructions you want to impart to your loved ones.
Plan to review. Repeat the review process regularly and calendar a reminder to give yourself an annual financial and planning checkup.
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