Revisiting Estate Plans: Teaching Clients What to Look For
As great as it feels for a client to drive away from our office after signing their documents with a big to-do checked off the list, it’s important to give them good advice about how often and under what circumstances to review and consider updating their estate plan. Our clients often ask us this question, and these are some of the considerations we mention.
1. Life Events
There are certain milestones and life changes that should prompt a review of a client’s estate plan. Here are the main ones to watch for:
Marriage or Divorce
Marriage: Getting married in Texas means that community property laws kick in, which affects how assets are owned and distributed. It’s time to update the estate plan to reflect a spouse as a beneficiary, adjust fiduciary roles, and ensure any property agreements (like prenuptial or postnuptial agreements) are reflected in the planning documents.
Divorce: Divorce automatically revokes some provisions in Texas (like naming an ex-spouse as a beneficiary in certain documents), but clients still need to do a thorough review. Updating beneficiary designations, powers of attorney, and fiduciary roles is crucial to avoid surprises down the road.
The Birth or Adoption of a Child
Whether it’s a birth or an adoption, new kids should be added to the estate plan right away. This includes naming guardians for minors, updating beneficiary designations, and ensuring any trusts are set up to handle the child’s needs. This is also a good time to revisit other terms in the will or trust to make sure they still fit with the family’s new structure.
A Major Change in Financial Situation
Big changes, like selling a business, inheriting a large sum of money, or major growth of an asset, can shift your client’s financial landscape. These changes can trigger a need for tax planning and may call for new strategies to protect assets or minimize estate taxes. In these uncertain times relative to the estate tax exemption, it’s better for clients to err on the side of updating us than to risk missing a chance to plan ahead.
Health Changes
When health issues arise, clients should review not only their healthcare documents (medical powers of attorney, HIPAA authorizations, advanced directives) but also the legal and financial documents, especially the durable power of attorney. A new health condition may prompt clients to reconsider who’s designated to make medical decisions on their behalf. This is also a time to assess whether the client’s preferences around end-of-life care have changed.
Relocation
If a client moves to another state, it's essential for them to have their plan reviewed by counsel in the new state. Even though Texas documents are likely to be legally valid in other jurisdictions, each state has its own quirks and requirements. Clients should update their documents to reflect the new jurisdiction and take advantage of any state-specific benefits.
Beneficiary Designations
It’s easy to forget that even with a well-drafted estate plan, each retirement account, life insurance policy, and annuity will have its own beneficiary designation, which controls over the provisions of the plan.
Younger families that are accumulating more wealth in their retirement accounts may need to consider directing the proceeds into trusts for their children.
On the other end of the spectrum, families that are depleting retirement accounts through required minimum distributions may need to rebalance benefits under their plans to account for the lower account values, or they may wish to consider including charitable beneficiaries on tax-deferred plans to maximize the benefits passing to charities tax-free.
2. How Often Should Clients Review Their Estate Plans?
Even without major life events, estate plans should be reviewed periodically—ideally, every five to seven years. This gives clients a chance to catch any small changes in their personal or financial situation before they turn into bigger issues. It’s also a good time to check if their original goals are still relevant, especially as children grow up or financial priorities shift.
3. Other Factors to Consider During a Review
Changes in Texas Law
While Texas is relatively stable in terms of estate planning laws, the laws are always changing. For example, shifts in asset protection, trust administration, or homestead exemptions could affect how a client’s estate is structured. Keeping an eye on these changes ensures the plan remains up to date.
Members of REPTL can keep track of the proposed legislative changes from this session by reading the “Estate and Trust” Legislative Update paper, which is co-authored by Meredith McIver of Ytterberg Deery Knull LLP and our own Julia Jonas (this paper is only available to REPTL members with a log-in).
Federal Tax Law Changes
Tax law changes—such as adjustments to estate and gift tax exemptions or shifts in capital gains taxes—can directly impact an estate plan.
Fiduciary Changes
Fiduciary roles, like the executor, trustees, guardians, or agents, should be reviewed as part of any estate plan review. If a designated fiduciary passes away, changes their address, or has a falling out with the client, it may be necessary to update the documents.
4. Conclusion
An estate plan isn’t a one-time document, and as estate planning lawyers we know that reviews and revisions are necessary. We need to make sure that our clients know that, too, and teach them what to look for and when to call us.