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For most people, reviewing a set of comprehensive estate planning documents and updating them can feel like going to the dentist. You don’t like to think about it, but you know it’s necessary. Like your six-month dentist visit, ongoing attention and care are needed to keep your current estate plan healthy and in working order.

Think about it this way: when your estate plan is drafted, it’s a snapshot of the best plan for you at that exact moment in time. As time passes, the estate plan that used to be perfect, based on your financial life, family life, and the federal and state tax dynamics at the time, now may no longer be relevant. That is why attorneys often refer to your estate plan as a “living document” and is created to be updated and grow with you. We generally tell clients that they should review their documents about every five years or upon certain life events. What are these events? The following are a few that may trigger the need to update your documents.

Change in Marital Status

A new marriage or a divorce will likely change where you want your assets to go upon your death. Typically, you will name different individuals to act as your executor, trustee, and agent under your powers of attorney for health and property.

Loss of a Loved One

Similar to a marital status change, loss of a loved one may affect who you want to receive your assets upon your death. Based on the circumstances of the passing, we often see survivors who want to name charitable organizations surrounding their loved one’s illness (e.g. American Cancer Society or a local hospice).

Grown Children

  • Part One – If your child is age 18 or older, they should have their own estate planning documents drafted (minimally, powers of attorney for health and property giving you the ability to act on their behalf as their agent). Without this in place, should something happen to your child while they are at college or otherwise living on their own, the hospital might not be able to talk to you.
  • Part Two – The second change we typically see with children growing older and more mature is that parents are more likely to name them to act in an executor, trustee, or agency role. Based on how the kids have matured, we also see parents altering the distribution provisions of their estates (either accelerating access or further postponing access to assets).

Move to a New State

When clients move to another state, they often ask whether their old estate documents still work. The answer is typically yes. Documents drafted in Illinois do not become void just because you retire to Florida. However, we still recommend that families update their documents using an estate planning attorney licensed in their new state. While out-of-state powers of attorney are valid in other states, health care providers and financial institutions are accustomed to seeing the statutory form of their own state. Providing them with the local form may prevent headaches and unnecessary delays down the road. Each state also has its own unique estate and tax laws, which creates nuances in how wills and trusts can be drafted to best take advantage of the differences.

Changes in Tax Law

Over the last several years, we have seen tax law changes that have significantly impacted how estate planning attorneys structure their clients’ documents. The estate tax exemption amount (the amount you can pass on to heirs estate tax free) exploded to almost $12 million per decedent. This fundamentally shifted the estate planner’s focus away from drafting for estate tax minimization for the decedent to income tax minimization for the heirs (because almost no estates had to worry about federal estate tax). If the exemption drops down again, they may refocus on crafting a plan to minimize potential estate tax.

This is just a small snippet of the potential issues that can arise during the passage of time. We can more easily plan for some events than others (we know our kids will get older). Other events are completely beyond our control (law changes). For these reasons, it is important to have a relationship with a professional who monitors these factors.

To have the best plan in place for your family, information needs to flow back and forth regularly between you and your advisor. You need to let your advisor know what is happening in your life and the estate professional needs to update you on the external forces that may affect your plan. It’s only through this continuous exchange of information that we can ensure that your estate plan fits your current situation, not your situation five years ago.

About Savant Wealth Management

Savant Wealth Management is a leading independent, nationally recognized, fee-only firm serving clients for over 30 years with more than $7 billion in assets under management. As a trusted advisor, Savant Wealth Management offers investment management, financial planning, retirement plan and family office services to financially established individuals and institutions. Savant also offers corporate accounting, tax preparation, payroll and consulting through its affiliate, Savant Tax & Consulting.

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