I am asked this important question several times each week. There is no right answer to the question. Consider the following guidelines to determine when and how often your estate plan should be reviewed.
At a minimum, I recommend you review the basic terms of your estate planning documents every 2 years. You should sit down with your estate planning attorney at least every 3-5 years, although I encourage my clients to sit down at least once a year to discover any new assets and review any changes to the law. As you review your documents, you should focus on the following issues:
You should consider the party or parties you selected as fiduciaries (trustee, personal representative, attorney-in-fact). Are they still living? Are they able to fulfill the role? Is this person or person still a trusted friend, family member or advisor? If the answer to any of these questions is no, then you should have your documents updated.
If you have minor children, are the guardians you have nominated still the right choice to raise your minor child or children? Do you want to name different guardians or successor guardians?
Do your beneficiary or beneficiaries receive their inheritance outright? Has anything changed with your beneficiaries that would make the terms (outright, in trust) for their inheritance out-of-date? Do any of your potential beneficiaries have special needs? Is it likely that the potential beneficiaries will be eligible to receive government benefits as a result of a disability? If any of these conditions exist, it may be time to update your documents.
If you have created an irrevocable life insurance trust, the trustee should review the insurance policies at least every 5 years to make sure that the policies are still appropriate. In some cases, a better life insurance policy (either with a lower premium or a higher death benefit) may be available. Additionally, if you are making annual gifts to an insurance trust, you should make sure that you and the trustee are properly documenting the gifts by providing any required notices and filing any gift tax returns that might be required.
If you or a beneficiary is likely to become or is currently incapacitated, you should consider the provisions in your estate planning documents for such beneficiary. Have you provided sufficient funds to meet their needs? Does the named fiduciary understand the beneficiary’s needs and how trust funds may impact a beneficiary’s aid?
Significant Changes in Your Assets
If the nature or extent of your assets has changed substantially, then you should make sure your estate plan works as you expect. As an example, if you have sold a business, your estate may need to be updated to reflect that the beneficiary of the business should receive other assets (or the sale proceeds). If you have had a significant liquidity event, your plan may no longer be estate or income tax efficient. If your beneficiaries have had a significant change in financial position, such as creditor problems, it may be worth making sure that the assets they will inherit are properly protected from creditors.
Keeping your estate plan up-to-date will provide better protection for your beneficiaries and help ensure that the plan works as you expect. If you are using trusts to avoid probate, regular review of your assets can address any trust funding issues that may have arisen.