Estate plans tend to become outdated over time, making it essential to update and revise your estate plan regularly. But what happens if you don’t update your estate plan?
When an estate plan is not updated, it can become invalid and unusable, leaving your assets and wishes vulnerable to legal problems.
This blog post will explore the consequences of not updating your estate plan and explain why staying on top of the process is important.
We will also look at the legal and financial implications and offer tips on keeping things up to date.
Potential Reasons to Update Your Estate Plan
If you don’t update your estate plan, you may leave your heirs and other beneficiaries in the dark about your wishes for your estate.
Therefore, there are several reasons to update your estate plan that you need to be mindful of.
To help you understand its true needs and the consequences of not updating an estate plan, we have compiled a few factors below.
Let’s start with the easy one first,
1 – Divorce
If you don’t update your estate plan after a divorce, you might be in for some unpleasant surprises.
For one thing, your ex-spouse could inherit your assets, even if you’d rather they didn’t. And if you have children from your previous marriage, they could be completely removed from your estate heirs.
This is because, in most states, divorce does not automatically revoke a last will or beneficiary designation.
Plus, this could also mean that your ex-spouse could make decisions about your health care or finances if something happens to you.
However, you can do a few things to avoid this issue.
● First, update your will or revocable trust to exclude your ex-spouse from inheriting any of your assets.
● Second, change the beneficiaries on any life insurance policies, retirement accounts, or other financial accounts to exclude your ex-spouse.
● And finally, transfer ownership of any property from joint ownership into your name.
2 – Adopted Children
Another crucial time you will want to update your estate plan is after child adoption. So, what happens if you don’t update your estate plan after adopting children?
Well, the very first concern is that the biological children you already have could inherit everything. This could leave your adopted children without any financial support.
Also, if you have other children from a previous relationship, they can receive more of your estate than your adopted children, even though you may have intended for them to receive equal shares.
And most importantly, in your absence, your spouse may not be able to make decisions on your behalf regarding your children, which can lead your adopted beloved to face a financial crisis.
Therefore, reviewing and updating your estate plan periodically is essential, especially after major life changes like adopting children.
You must also update the power of attorney and health care directive when you adopt children. These documents allow you to name someone to make financial and medical decisions for you if you cannot do so yourself.
3 – Marriage
You may inadvertently disinherit your spouse if you don’t update your estate plan after marriage.
For example, if you have a will that names your parents as beneficiaries and don’t update it after you get married, your spouse may not inherit anything.
Updating your estate plan after marriage is also important if you want to ensure that your spouse can decide on your behalf if you become incapacitated.
Without updated documents, your spouse would undergo a lengthy and expensive legal process to be appointed as your guardian or conservator.
4 – Death of a Beneficiary
Your assets cannot be dispersed as you would like if your estate plan isn’t updated after a beneficiary passes away. Your possessions may eventually be given to someone you didn’t expect to obtain them.
For example, if you have a child who dies before you do, and you don’t update your estate plan accordingly, their share of your assets may go to their surviving spouse or children instead of the person or charity you intended.
Another problem is that if you don’t make the necessary changes, the person who is supposed to receive those assets after the beneficiary’s death might be unable to access them. This could happen because the documents are missing, improperly drafted, or not compliant with current laws.
Finally, if you don’t update your estate plan after the death of a beneficiary, it could lead to probate court proceedings. Probate courts need to be sure that the person receiving these assets is entitled to them.
To avoid this happening, it’s essential to review your estate plan regularly and make sure it reflects any changes in your life – including the death of a beneficiary.
5 – Child Birth
Failing to update an estate plan after the birth of a child can have profound implications. If a parent passes away without updating their estate plan, the child may not be adequately provided for financially.
Without a will, the court must appoint a guardian to oversee the child’s care and financial assets. Additionally, if the child is not named in a will, they may not be entitled to inherit any of the deceased parent’s assets.
Inadequate estate planning may also result in time-consuming and expensive judicial processes. Therefore, it is crucial to update an estate plan after the birth of a child to avoid such implications.
An estate lawyer can help review and update an estate plan to ensure it meets the family’s needs.
What Happens If You Don’t Update Your Estate Plan?
Without recurrent updates to your estate plan, the discrepancies between your current wishes and the documents could lead to a chaotic and drawn-out legal process.
Then, the court will be left to make decisions regarding the distribution of your assets, which may not align with your current wishes.
Additionally, taxes may be higher without an updated estate plan due to the lack of proper planning.
Other factors that could affect your loved ones are the possibility of an unfunded trust, guardianship being needed, the inability to use a power of attorney, and an intestate succession process occurrence.
What Things are Included in an Estate Plan?
Several legal papers, including a will, are part of an estate plan. It lays down the deceased’s desires for how their belongings should be distributed.
A power of attorney, which allows someone else to manage the estate of the deceased, and a living will, which states the medical wishes of the deceased.
Additionally, an estate plan may include trusts and beneficiary designations, which can be used to provide for individuals or organizations.
Finally, a few estate plans include a healthcare directive and HIPPA release, allowing the deceased’s medical information to be disclosed to those who need it.
Legal and Financial Implications of an Estate Plan
Estate planning is essential in ensuring financial security and protecting your legacy. Therefore, reviewing estate plans regularly to reflect current life and financial circumstances is crucial.
For instance, estate plans that are not updated may be rendered invalid by changes in the law or the death of beneficiaries or executors.
In addition, not updating an estate plan can result in assets not being transferred to the appropriate beneficiaries or assets being distributed in ways that do not reflect the wishes of the deceased.
So, there will be a major impact of legal and financial implications on you if you don’t update your estate plan when needed.
How to Keep an Estate Plan Up-to-Date?
An estate plan is an important document that outlines an individual’s wishes for their assets after death. And to keep an estate plan up-to-date, the individual should review it at least once a year.
Regularly reviewing the plan can consider any changes to the law, changes in family dynamics, or changes in the individual’s financial situation.
Additionally, any new assets acquired should also be added to the estate plan. It’s also important to review the beneficiaries listed on the estate plan as well as the executor to ensure they are still the appropriate individuals.
Finally, sharing the estate plan with family members is wise to ensure everyone is aware of the details. Also, consult an experienced estate planning attorney to help ensure the plan reflects the individual’s wishes.
So, what happens if you don’t update your estate plan? You might already be aware of the implications. The importance of updating your estate plan cannot be overstated.
An estate plan must be evaluated at least every three to five years and more frequently if major life changes occur.
Failing to do so can create a significant financial burden for your family and potentially result in the distribution of your assets not reflecting your wishes.
Now that you know what happens if you don’t update your estate plan. Be mindful of it and act accordingly.