Making a plan for your estate after your death shouldn't be a one-and-done event. Creating an estate plan with the help of an experienced estate planning attorney like the lawyers at Bebout, Potere, Cox & Bennion, is a great first step. But you also should update your will from time to time to make sure it still reflects your intent.
General Rule: Update Your Will Every 3 to 5 Years
Many people put off creating an estate plan. Getting everything in order and signed can feel like a major accomplishment, and it is. According to one report, only 1 in 4 Americans has a valid will, and more than half (56%) say they have no estate planning documents at all. So if you have created an estate plan, you are already ahead of the curve.
But it would be very unfortunate if you let those estate planning documents sit in a drawer or your personal safe for decades. Failing to update your will can result in accidentally omitting intended beneficiaries (like later-born grandchildren or new sons- and daughters-in-law), failing to account for all your property, or even having a will that can't be enforced when the time comes, simply because things have changed since the documents were signed.
That's why it is important to revisit your estate plan and update your will every 3 to 5 years, at minimum. Taking a second look at what you decided can help make sure everything is up to date, reflects the assets, property, and people that are most important to you today, and ensure that nothing has changed in the law that could throw a future estate administration off track.
Life Events That Could Mean You Need to Update Your Will
While it is a good idea to update your will every 3 to 5 years no matter what, there are also certain life events that should trigger an estate plan review.
Getting Married to a New Spouse
Under Michigan law, your spouse has certain rights to assets and property after you die no matter what your will says. That means if your marital status changes, your will should too. If your new spouse isn't a primary beneficiary, it could create a problem for your family after your death because your spouse may elect to take his or her statutory share, leaving less than you intended to your other beneficiaries.
Getting a Divorce
The same is true when your spouse becomes a former spouse. The legal effect of divorce is to terminate either spouse's right to inherit property from the other. Basically, Michigan law revokes the parts of your will giving your former spouse power over your estate (including being named your power of attorney or personal representative) or property in the final distribution. But this can leave holes in your estate plan. You should update your will soon after your divorce is entered to reallocate those assets and name new people to serve as your personal executive or to make decisions on your behalf.
As an added note, while a judgment of divorce cuts off your spouse's ability to inherit from your probate estate (under a will), it will not change the named beneficiary on any federally controlled retirement accounts (like your 401k). In addition to updating your will after a divorce, you should also fill out new beneficiary designations for each account you hold to make sure your fiduciaries don't send your assets to your ex-spouse after your death.
The Birth of a New Child (or Grandchild)
The birth of their first child is often the trigger that gets many new parents to create an estate plan in the first place. After all, you need to be prepared to make sure someone is there to take care of your children if you are not. This is usually done through a guardianship designation in your will, and by creating a trust (either a Revocable Living Trust or a trust created upon administration of your estate), providing for their financial needs until they become adults. However, any time a new child comes into the family (by birth or adoption), you should update your will to make sure that child is accounted for.
Receiving a Major Medical Diagnosis
Another good time to update your will is if you or someone you provide for receives a major medical diagnosis. You want to take that action early, before anyone in your family has reason to question your legal capacity. Sitting down with an estate planning attorney soon after diagnosis can make sure everything is as you want it before your physical and mental abilities deteriorate.
In addition, if your loved one develops special needs, there are special precautions that need to be taken to protect their ability to receive an inheritance without threatening the state support they need to survive. Many types of government benefits are “means-tested,” so a well-meaning gift or inheritance can make them ineligible for benefits and actually make their financial situation worse. You should work with your estate planning attorney to prepare a special needs trust to provide for your disabled loved one in a sheltered way.
Gaining or Losing Significant Assets
A well-written estate plan usually tries to account for everyday changes to your accounts and assets. But if you buy a new home or vehicle, receive valuable artwork or jewelry you don't want liquidated, or dispose of a business interest as part of retirement, these changes could affect your existing estate plan making it necessary to update your will. You may want to give those pieces of property to a specific beneficiary to avoid having them sold and the proceeds divided among your next of kin. In addition, if you receive an inheritance yourself, you will need to update your will to say what happens to those family heirlooms and assets upon your own death.
When Your Beneficiaries Have Financial Trouble
One reason to update a will that is often overlooked is to shield your assets from your beneficiaries' creditors. If you have a child or loved one with significant debt due to medical bills, credit cards, or even student loans, you may want to use a trust to prevent them from receiving their inheritance from you directly, making it available to creditors for collections. This is also helpful when your children become legal adults. Young adults often do not have the financial literacy to protect significant assets. Using a trust can protect their inheritance and make sure it is available to them when they need it most.
Changes in Michigan or Federal Law
The biggest reason you should regularly update your will is that sometimes the law changes and, as a layperson, you will have no way to know how those changes will affect your estate plan. For example, if the federal government changes the threshold for estate taxes, your beneficiaries may suddenly have to pay a significant portion of their inheritance to the IRS. Your estate attorney's job is to stay up to date on all the latest legal changes, so they will be able to guide you to make sure your will still makes the most of your estate.
Get Help Updating Your Will from a Michigan Estate Planning Attorney
At Bebout, Potere, Cox & Bennion, P.C., we care about you and your family. We help individuals and families in Rochester Hills, Rochester, Troy, Lake Orion, Oxford, Oakland County, Macomb County and throughout Southeast Michigan. We can help you create update your estate plan to make sure it continues to honor your wishes. Call us at 248-651-4114 or contact us here to speak to an attorney.
