You may already have estate documents, possibly executed many years ago. You should have an estate attorney look over your documents every 5 years or so. Here are a dozen points to review.
1. Do you have a will and powers of attorney (PoA) for health care and property?
These are part of every complete estate plan. With a health-care PoA, you choose an agent to act on your behalf if you become unable to make your own decisions. With durable PoA for property, you select an agent to act on your behalf if you are incapacitated and can’t sign a tax return, make investment decisions, make gifts or handle other financial matters.
Make sure your health-care PoA addresses the Health Insurance Portability and Accountability Act. This governs what medical information doctors can release to someone other than the patient.
2. Do you need to update or change any individuals named in your documents?
Life moves on and that means personal circumstances, relationships and those individuals you rely on can change. So consider whether your beneficiaries, executors, trustees, guardians or others need an update. Have any experienced a name change? Are all still living? Can someone else now fill a role better?
3. Do your instructions regarding specific property need updated?
Many wills contain addendums that specify who gets what of your personal property? Often I read wills that mention addendums for personal property and the addendums don’t even exist. This includes property that has been sold or acquired since the last update. Keep this list updated to avoid legal battles over claims of ‘missing’ items or no instructions at all on items that have been purchased.
4. Did you move to a different state?
Laws governing the transfer of property can vary widely state to state. If you have moved to a new state since your documents were last updated, seek out a local estate attorney to check any legal differences for planning between your old and new state of residence. It may be necessary to draft entirely new documents that align with the laws in your new state.
5. Do you still need your trust documents, or can you decant?
When circumstances change, terms of irrevocable trusts may require changes. This may require decanting, which allows you to change some provisions. Consider this technique of emptying the contents of an irrevocable trust into another newly created trust if you are unhappy with your irrevocable trust. Not all states allow decanting.
You may also want to discuss possibly moving assets out of a living trust (where a trustee holds them, a technique sometimes used to avoid probate) and holding them in the name of an individual.
This discussion will weigh the income tax benefits of a step-up in cost basis, the original cost of an asset, versus other reasons to keep the trust. (“Step up” means that the cost basis of an asset resets to the fair market value of the security at the date of the holder’s death – potentially a much higher value than when they bought the security.) The higher the cost basis, the less capital gains tax your heirs pay when they sell the asset.
You may also want to see whether you need an irrevocable life insurance trust, a device once used to move assets, typically life insurance, out of a taxable estate. Thresholds are currently higher but set to sunset in 2026 so it’s a good time to determine if this strategy is still viable.
Also check when your life insurance expires. Consider how long to keep it if you think you might outlive the policy.
6. Have your children passed the age triggers specified in the trust?
Many trusts contain age-based triggers that allow you designate money for such specific purposes as education, home down payments or weddings once the kids reach stipulated ages. If your estate documents call for a trust to give children access to money at certain ages after you die, you may be able to delete that language if the kids are older than the specified ages.
7. Is divorce a possibility for a child or other beneficiary?
One thing many parents worry about is what happens if one of your children gets divorced? A trust can help you protect assets for your child or grandchild and ensure they don’t become fodder in a divorce or transferring to someone other than the person you desire.
8. Do any of your heirs have special needs?
Unfortunately, typical estate documents are not designed to help such an heir. Leaving assets directly to an individual with special needs may disqualify them for critical government assistance or other care. Seek out a financial advisor and attorney who specializes in specialized planning for this situation.
9. Are your beneficiaries up to date?
Life changes so it’s critical to check beneficiary designations on brokerage accounts, insurance policies and retirement accounts regularly. Anybody you don’t want there? Have there been any name changes or updates in relationship status?
10. Understand how your financial firm handles assets when beneficiaries pass.
When you open an account at a financial institution that requires a beneficiary, it’s important to understand that firm’s policy for how they will distribute assets when one beneficiary dies before the others. If you want the share of the assets to pass by blood line – to the deceased’s children, for example – you may need to put in language specifying per stirpes (distribution of property when a beneficiary with children dies before the maker of the will).
Otherwise, the remaining listed beneficiaries may simply divide the assets which may not be what you intended.
11. Do you have an heir as a Joint account owner?
Often a parent names a child on a bank account so the child can access or use the money if the parent can’t act. Understand that if you name your child as a joint owner on an account, the money passes to your child no matter what your will dictates.
The child splitting the money with someone else constitutes a gift and may require the person transferring the money to complete gift tax forms, which counts against THEIR lifetime allowed gifts. You are also relying on that person to freely give up assets that they are listed on the account as being the legal owner of which can deliver its own tension. Think carefully so you keep the family peace and not cause unintended harm.
12. Do your heirs know where to find all your important information?
Your heirs will need to know where to access all of your original documents, but in today’s digital world that’s often not enough. It’s also important to let someone know your passwords all of your financial, utility, social media accounts and other important applications. You must remember digital assets now, too.
Ignite Financial has created an Information Gathering Form designed to make collecting, storing, and sharing this critical information easier. To download our form, simply click here.