Estate plans are not "set it and forget it" affairs. Considering that only 40 percent of adults in America actually have an estate plan (as we wrote about earlier this month), you can imagine how difficult it might be to get people to understand that they need to update their estate plans periodically.
Estate plans should grow and change as your family does. Here are the top five situations that should prompt a second look at your estate documents.
1. The birth or adoption of a child
Children change everything. If you have a child or adopt one into your family, you'll want to make sure your estate plan includes him or her. You should also set up a guardianship in case something happens to you or your partner.
You may also want to update your estate plan if you've recently become a grandparent. This is true whether this is your first grandchild or your fifteenth. Even general provisions affecting all of your grandchildren will give your family much-needed guidance.
2. Divorce and remarriage
Divorce is another big reason to update your estate plan. You likely do not want an ex-spouse to have control over your assets and property.
You may also want to set aside assets for any children from a first or second marriage if you get remarried. As a community property state, California law dictates that your living spouse generally inherits all of your shared marital property if you die. Updating your estate plan ensures your children from a previous marriage will be taken care of.
3. Someone named in your estate dies
Let's say you set up your estate plan earlier than most people in your late 20s or early 30s. Without many assets, you may have listed a parent or older sibling as your executor, trustee or beneficiary. Now, several years or decades later, that person has themselves passed on. You'll want to update your estate plan to name new people to these roles so the court won't have to appoint them for you.
4. Your children turn 18
Success! You've finally got your children through the grueling years of high school. Now they are ready to try out their own wings as adults, perhaps heading off to college this fall or taking an exciting gap year. Now would be a good time to revisit your estate plan and perhaps help your new young adult with setting up their own.
5. Your estate's value drastically changes
You won the lottery. You came into money from a long-lost uncle. You made some bad investments. Your divorce drained most of your savings. All of these scenarios should prompt a look at your existing estate documents. Sudden changes in fortune (positive or negative) could affect how you want to leave things in case you pass on unexpectedly. It may be worth meeting with a tax adviser, financial planner and/or skilled estate planning attorney to talk about what to do to maximize your assets' protection given your new circumstances.