If you have an estate plan, congratulations, you are already ahead of a large portion of the population. This plan can serve as a source of comfort about the future of your estate as well as a valuable financial planning tool. Those who take the time to put together an estate plan dig into their financial standing and consider various tools, like trusts, that can help to make the most of their assets.
Having a plan in place is the first step, knowing when to review and update the second. Three examples of events that trigger the need to review an estate plan include the following.
#1: Changes to your family
Birth, death, marriage, divorce … these events all directly impact the structure of a family. These events should trigger a review of an estate plan. You may need to adjust to better ensure assets do not go to unintended beneficiaries or shift distributions to include new family members.
#2: Changes to your assets
Perhaps you were able to sell your business or decided to shift into retirement. Whatever led to a change in financial standing, either positive or negative, should also lead to a review of the estate plan. You may find that a trust is beneficial now when it was not before. This moment of review can lead to a discussion of your future plans and an opportunity to change the estate plan if those goals have changed.
#3: Changes to the law
Estate plans are directly impacted by estate and tax laws at both the federal and state levels. Although California has a reputation as one of the highest income tax states in the country, its policy around estate taxes is much more favorable. California is one of 38 states that does not have an estate tax. It is important to note that although there is not a state death tax, certain assets are still subject to different tax obligations upon transfer. This can include retirement accounts and capital gains. Estate planning tools can help you reduce these tax obligations but the rules that navigate these decisions often change. As such, it is important to review your plan whenever there is a change in tax or estate law.