5 big life events that should have you revisiting your estate plan

Elizabeth Anderson, CFP®, Senior Analyst, Client Needs Research 

Life is full of ups and downs. Whether it’s welcoming a new addition to the family, tying the knot, parting ways with a spouse or laying a loved one to rest, life has a way of keeping you on your toes. And when life changes, your estate plan may need to change too. That’s because failing to update your estate-planning documents could make it more difficult for your wishes to be carried out as you intend. To keep your plan on track, review your estate plan every three to five years and when any of the following life events occur.

1. Marriages

Getting married marks the beginning of an exciting new chapter in life — just don’t let all the celebrations distract you from updating your estate plan. Many assume that marriage means you’ll share everything with your spouse and that they’ll automatically be able to make financial and medical decisions on your behalf. Unfortunately, it’s not that straightforward. While some assets — such as 401(k)s and certain pensions — default to your spouse as your beneficiary, others — such as checking or savings accounts — require you to update asset titling if you want to share access with your spouse. Ensure your plan is updated to provide for your spouse as you see fit and that you have the desired individuals appointed as agents under your powers of attorney.

Marriage also doesn’t give your spouse the right to make financial or medical decisions on your behalf. As a result, every adult should have a will (or a will and revocable trust), a financial power of attorney, a health care power of attorney and a medical directive. Depending on your situation, you might also want to consider whether a prenuptial agreement or separate property agreement (common in community property states) might be appropriate. These documents can establish the ownership status of certain property or future interests in property and how those assets will be treated in the future.

If a loved one (such as a family member or relative) marries, consider how you intend to treat the new spouse with regard to your assets. Do you want them to receive your loved one’s share in the event your loved one predeceases you? Are any changes needed to your appointed decision-makers? Your estate-planning attorney can help you decide.

2. Births and adoptions

The addition of a child is a joyous time — and it’s also a trigger to update your estate plan. Failing to create or update your plan can leave your new loved one unprotected or lead to mismanagement of funds.

If you’re a new parent, you’ll want to decide who should serve as a guardian should something happen to you. In your will, you can appoint an individual (or multiple) to serve as either guardian of the person and/or guardian of the estate of any minor children or dependents you might have at your passing.

• A guardian of the person cares for the minor on a day-to-day basis.
• The guardian of the estate makes the financial decisions.

You might also want to think about other updates, regardless of whether it’s your new addition or a loved one’s. For example, you may want to update the terms of your will or trust to provide for lifetime trusts. Trusts allow you to appoint a trustee — a trusted individual or corporate fiduciary, such as Edward Jones Trust Company — who will be responsible for managing their assets and making distributions according to your wishes. Planning for how assets will be distributed can help ensure your legacy is carried out according to your wishes. Your attorney can assist you with adding your new family member to your estate plan and help you understand how they’d be treated in the event of your death, while your financial advisor can help you update beneficiary designations.

3. Divorces and separations

Divorces or separations can require a complete overhaul of your estate-planning documents. Since spouses are generally named as a primary beneficiary and appointed to decision-making roles, you may need to update your beneficiaries. Additionally, a divorce between other parties (such as family members or relatives) might prompt you to revise your plan, including who you name as a beneficiary or who you appoint to serve as a guardian, executor, trustee or agent under your power of attorney. Failing to update your plan could lead to assets benefiting unintended individuals (e.g., ex-spouses or in-laws) or legal battles to establish decision-making rights.

While many states have laws that will invalidate beneficiary designations, provisions in wills or trusts, or the appointment of a former spouse as agent under a power of attorney in the event of a divorce, not all states do. And those laws that exist may not impact your plan if it’s someone other than you getting divorced.

4. Deaths

The loss of a loved one is a devastating experience — and while updating your estate plan might be the last thing on your mind during this difficult time, it’s an important step to take. Failing to update your plan following your loss could leave you without an agent under your power of attorney or could result in your assets passing contrary to your wishes.

When your loved one passes, review your plan to assess how that individual’s share will now be treated. In addition to reviewing your estate documents, work with your financial advisor to check your beneficiary designations on assets such as retirement and brokerage accounts and life insurance policies. Your attorney can make any needed changes to your estate documents, including updating the appointment of your loved one as power of attorney, executor or trustee.

5. Moving to a new state or buying property in a different state

Even if you don’t change residency, buying property in a new state could impact your estate plan. Estate and tax laws differ by state — sometimes drastically. For instance, your new state could treat marital property differently than your former state. Or it may have different default beneficiaries.

Owning land could subject you to estate or inheritance taxes in the nonresidency state. It could also force your executor to open probate in an additional state. Proper estate-planning updates can address these concerns. Consult a local estate-planning attorney in the new state to review your existing plan and make any needed changes.

How we can help

These and other major life events — like getting a new job, retiring or receiving an inheritance — should prompt a review or change to your estate plan. Work with your Edward Jones financial advisor to think through how life’s milestones could affect your overall financial strategy.