Estate plans require updating after family changes

A person's family may change more than once during a lifetime. A relatively high divorce rate, marriages or civil unions, adoptions and stepchildren can make a person's family makeup highly dependent upon individual circumstances. In some cases, such as with same-sex couples, state law may not follow a person's wishes regarding property and asset distribution after death. That is among the reasons why estate planning, which should be done for the young and old alike, may need to change with a change in life circumstances, whether it be to take care of a life partner or to ensure a stepchild will have money for higher education. Unfortunately, many people ignore their will or trust once completed or simply fail to plan for asset distribution upon their death.

For example, many people will list a spouse or domestic partner as beneficiaries on their life insurance policies, retirement plans, bank accounts and other financial instruments. After a divorce or separation, however, a person's wishes regarding this designation may change. A will or trust may designate heirs, but many financial instruments are distributed outside of a will if there is no preplanning involved.

Because a 401(k) and life insurance may play a large role in a person's estate, it is all too common that a lifetime of savings are not distributed according to the wishes of the deceased. A bank account, for example, will often have a "payable-on-death" beneficiary or may be jointly held by two people. If a person fails to list a new beneficiary or become the sole account holder, upon death the assets in the account may go to an ex-spouse rather than to children or a current life partner.

Many times this is unintentional and can cause disagreement and contention during the distribution of an estate. Other times a child or family member may intentionally put themselves as a beneficiary in order to circumvent the deceased's wishes and obtain more money, perhaps leaving out other siblings and family members in the process.

A comprehensive, updated estate plan needed

Reviewing an estate plan every year will pay dividends. While big life changes such as a change in job, divorce or new children are obvious reasons to change beneficiaries, it is helpful to review an estate plan every year. An easy way to ensure financial institutions have proper beneficiary information is to contact them after receiving a 1099 Form for tax purposes.

A well-thought out estate plan is necessary for almost everyone. A will or trust is not simply for the "well off" or wealthy individuals. Keeping beneficiaries up-to-date allows a person the security of knowing that hard-earned assets will go to where they're most needed, rather than simply whatever state law designates.

People who need to create, review or modify their estate plans should contact an experienced estate planning lawyer to discuss their wishes regarding a distribution of assets.

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