Yahoo Finance I’m a Financial Advisor: Here’s How Often You Should Review Your Estate Plan
Making an estate plan isn’t fun. If you’re like most people, deciding how your assets will be appropriated upon your death and who will make important decisions on your behalf if you are unable to do so on your own isn’t a particularly pleasant experience.
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However, making an estate plan is necessary. It’s also important to periodically dust it off to make sure the directives still accurately state your wishes.
“I recommend reviewing your estate plan at least once a year,” said Eric Jochimsen, CFP, founder and financial planner at JBY Financial Planning. “This ensures it stays up-to-date with your current life situation.”
In some cases, he said you might even need to review it more often.
“Life events might also trigger a spot check review of an estate plan,” he said. “After major life-changing events like moving, a job shift, a death in the family, a divorce or concerns about capacity to act on your behalf.”
If needed, one of the key items to review is who you’ve named to act on your behalf, he said.
“I feel it’s important to confirm your beneficiaries are still accurate and that the people you’ve designated as personal representatives, powers of attorney and trustees are still capable of fulfilling their roles,” he said. “This is especially important considering they may be grieving during a difficult time.”
Here’s more about estate planning.
Creating an Estate Plan
If you’re not thrilled about regularly reviewing your estate plan, you’re not alone.
“Estate planning is not the most exciting part of financial planning, so it is often neglected by individuals and their advisors,” said Robert J. Allan, CFA, CFP, CPA, managing director at Welon Partners. “But like any part of the plan, it should be updated regularly.”
He said his firm has what they call the “Core Four” estate planning documents that all clients are encouraged to have. This includes a last will and testament, power(s) of attorney, advanced care directive and a healthcare proxy.
“The will explains how the estate is to be settled,” he said. “In other words, how all of your ‘stuff’ is divided up amongst your heirs.”
He said a power(s) of attorney allows you to name someone to act in your place if you are unable to do so.
“Usually they are triggered in the event of incapacitation,” he said. “The power you give this individual can be broad in scope or narrowly defined, depending on your needs.”
He said an advanced care directive gives explicit directions to your doctors on the type of care you would like to be provided.
“It is frequently used to provide a ‘DNR’ or “do not resuscitate” for individuals who do not want to be on life support,” he said. “It can also include various other treatments that you do or do not want.”
Finally, he said a healthcare proxy is essentially a power of attorney solely dedicated to healthcare issues.
“If you become incapacitated, you can name an individual to make medical decisions on your behalf,” he said.
While it’s ultimately up to you to periodically review these documents and update them as needed, he said working with the right team is important.
“A good advisor should be monitoring your personal situation and may recommend times where they see external factors that necessitate a review or modification to your documents,” he said.
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Who Needs an Estate Plan?
If you don’t already have an estate plan, you might be wondering if you need one. Most people start estate planning after getting married, having children or a death in the family, but you can begin this process anytime after turning 18 years old, according to Legal Zoom.
One of the first places to start is deciding if you need a last will or a living trust. Creating a last will might be easier, but they often need to go through the probate court after the owner’s death. Alternatively, a living trust may take longer to set up and require additional paperwork, but will likely avoid probate.
Exactly how you go about creating an estate plan is up to you. This process can be in-person or online, with the latter typically the cheaper option.
You can purchase a basic online estate planning package for less than $200, according to the National Council on Aging. Comparatively, the cost to hire an estate planning attorney can be several hundred dollars per hour.
The option you take will vary according to several factors, including the complexity of your estate plan — i.e., whether or not you have dependents or aren’t sure how to divide your estate — and budget. Many online services also offer packages that allow you to work directly with an attorney, which could be both a thorough and affordable option.
Ultimately, creating an estate plan is a very personal process. There’s no right or wrong way to go about it, as long as the documents involved cover all your bases.
Taking this step can be intimidating, as it may feel morbid to create directives surrounding your death. However, this is important, because doing so will make life easier for your loved ones while ensuring your last wishes are known.
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