We often hear clients say “I should probably update my will.” We always ask, “why do you think so?” because often times it is not necessary. At Bedford Family Lawyer, we take an evergreen approach to estate planning and help clients create estate plans that endure over time.
What’s in an estate plan? A thorough estate plan usually includes a will, healthcare proxy, power of attorney, life insurance, and naming beneficiaries on your assets like investment accounts. Many estate plans also include trusts.
It’s still a good idea to evaluate your estate plan periodically, every three to five years (or more often!) as your situation may change over time. There are some key life events that require updates. Here are some things that may trigger an update to your will, trust, or other estate planning documents.
Changes in Legislation
Changes to federal or state laws can affect your estate plan. Many people want to transfer as much of their wealth as possible to their loved ones when they die. If they have a certain amount of wealth, this means they need to take steps to minimize estate taxes.
The federal government and state government each impose estate tax, so it is important to be aware of both rules. The federal estate tax threshold changes every year. In 2024, people who die with less than $13.61 million ($27.22 million for married couples) do not have to pay estate and gift tax. This means they can transfer $13.61 million to loved ones tax-free over their lifetime. Given the current exemption, very few people will pay federal estate taxes and no planning is currently needed.
Massachusetts updated its estate tax rules in 2023. The biggest change was that Massachusetts doubled the estate tax exemption. Prior to 2023, the estate tax exemption was $1 million ($2 million for married couples), which meant that only $1 million of individual assets were protected from estate tax. Now, the estate tax exemption is $2 million ($4 million for married couples). At Bedford Family Lawyer, our credit shelter trusts are drafted to account for future changes in the estate tax exemption. So, our clients don’t need to update their trusts just because the law changed.
For those folks with just over $1 million in assets, this means that they may no longer need to create credit shelter trusts to protect their assets from estate taxes.
You Have More Money or Assets
If you recently inherited a significant sum of money, won the lottery, or otherwise experienced a dramatic change in wealth, your estate plan should be reviewed. First, you may want to reduce your estate tax liability.
You may also want your assets to transfer to your loved ones without involving the probate court. No one would blame you for that! To avoid probate might be as simple as designating beneficiaries on your new assets or it may require a trust. These steps will minimize the stress on your loved ones when you pass.
You Moved to a Different State
You moved out of state — congratulations on your move! Now that you’re settled in, it’s time to put your estate plan back on your radar to make sure you review it for your new state’s rules.
Federal rules on estate taxes apply wherever you live in the U.S. But each state has different rules on how property is transferred when you die. All states will recognize your current will and trust as long as it doesn’t violate your new state’s laws. However, your new state may have some laws that require you to make some changes.
In particular, your healthcare proxy or power of attorney form may need to be updated to comply with that state’s rules. On the other hand, your new state may allow you to do things Massachusetts does not, such as drafting a legally binding living will. If your new state has a lower estate tax threshold, you may need to do some tax planning whereas you didn’t have to do so before.
You Bought Real Estate
“Real estate” is the legal term for property that is land or buildings. It has particular rules about how it is transferred when you die. If you’re contemplating a real estate purchase you just bought land, it’s important to make sure that your deed or estate plan transfers the real estate to the right person.
For married couples, owning real estate together allows the transfer to the surviving spouse without involving probate.
If you own real estate individually, when you die the Probate Court must get involved in the transfer to your loved one. Needless to say, it adds an extra layer of bureaucracy and delays the process. We recommend establishing a trust to own the property. This allows the property to pass to your loved ones without involving probate and has the benefit of naming a trustee to care for the property if you become incapacitated.
You Got Married or Had your First Child
Getting married and having children are two major life events that motivate people to create estate plans. A will and trust provide peace of mind and serve as the roadmap for financial support and guardianship of your minor children in the event of tragedy. Married couples typically appoint their spouse to serve as their health care agent, power of attorney, personal representative of their will and guardian of their minor children. It can be challenging to determine alternates for these roles. We recommend speaking to the family member or friend who you appoint to ensure alignment in expectations and priorities.
At Bedford Family Lawyer, we draft estate plans to account for children who may be born or adopted after the documents have been executed. This eliminates the need for clients to update their estate plans as their families grow. The term “issue” is legalese for children and encompasses all children, including those who are born or adopted after the will goes into effect. Unless you specifically request to omit later born or adopted children, our wills and trusts include all children born or adopted after the effective date. Note that you should update beneficiary designations on retirement accounts to include newly born or adopted children if your accounts name them as designated beneficiaries.
You Got Divorced
If you are divorced and have an estate plan from before your divorce, the Probate Court revokes inheritances to your former spouse that still exist in an estate plan executed during the marriage. That means if you previously designated your spouse as the first person to get all of your assets, the Court will skip your former spouse and go to the next person in line. If your estate plan doesn’t have a “next person in line,” then the rules of intestacy will apply. That means, Massachusetts default rules for who inherits your property will take effect.
For many people, this is going to create an unintended outcome.
When you get divorced, it’s critical to review your estate plan and designated beneficiaries to make sure your former spouse is not named as the first person on the list — unless your Separation Agreement or Judgment for Divorce requires it.
Many divorced parents are required to keep their former spouse on their life insurance. Do you want your former spouse to be the trustee of your life insurance for the benefit of your children? If not, then you can establish a trust for those funds and name a trustee.
Let us help you plan for your new chapter of life, post-divorce.
Schedule a Consultation Today
Schedule a consultation with us today if you would like to take a fresh look at your estate plan!
