No one can predict the future, and life can change in an instant. The evening news is full of stories about car accidents, train wrecks, and plane crashes. And, apparently, death by selfie is on the rise. So just like the boy scouts, everyone should be prepared.

Being prepared includes the estate planning process, which consists of planning for one’s death. It also means planning for one’s incapacity so that someone is in place to manage assets, pay bills, and make medical decisions if you are unconscious in a hospital room. If the estate planning process is not completed for one’s death or incapacity, then state law and the courts will dictate who inherits one’s assets and who will have authority to manage the affairs of an incapacitated individual.

Basic estate planning includes executing a last will and testament, a revocable living trust (if appropriate), a financial power of attorney, and an advance medical directive. While everyone should have these documents, it’s natural to think about completing these items during certain life events. Listed below are some of the most common.

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Life Events that Should Trigger Changes in Your Will

Marriage

Prior to a marriage, one’s primary beneficiaries are generally parents, siblings, or children. After the wedding, the primary beneficiary often shifts to the person’s new spouse. In addition to executing new estate planning documents, one should be sure to change beneficiary designations on retirement plans and life insurance policies. With second (or third) marriages where one or both spouses have children from previous marriages, estate planning is particularly important if one wants to provide for the new spouse but also ensure that his/her children from a previous marriage are not disinherited.

Birth of a Child

Upon the birth (or adoption) of a child, the parents should plan for the possibility that they both may die while the child is a minor. Their estate planning documents should appoint a guardian for the minor child and create a trust for any funds that the child may inherit. That way, a trusted person can manage the money for the child’s benefit until the child is a responsible adult. Otherwise, a court would appoint the child’s guardian. Additionally, any inheritance would be held in a guardianship account until the child turns age 18, at which time the child would receive all remaining funds.

Death of a Spouse

When one’s spouse dies, the primary beneficiary of one’s estate often switches to children. If they don’t have children, the estate may be left other family members or charities. Often a spouse is the executor, successor trustee, and primary agent under a power of attorney and advance medical directive. Thus, the surviving spouse’s estate planning documents should be updated to name new beneficiaries and to appoint new fiduciaries.

Death of a Child

Children often are the beneficiaries of one’s estate if there is no spouse. If a child dies, then the parent must make decisions about whether the deceased child’s share of the inheritance should to go to that child’s children (i.e., grandchildren) or to their siblings (i.e., the parent’s other children). If the deceased child was appointed as a fiduciary in the parent’s estate planning documents, then new fiduciaries should be appointed.

Separation and Divorce

When a married couple separates, often each spouse wants to remove their estranged spouse as a beneficiary of their estate. Most states have laws that provide that if someone gets divorced but does not change their will, then the former spouse is deemed to have predeceased. That means the former spouse does not receive anything under a will. However, if one dies while separated but not yet legally divorced, then this presumption does not apply. Thus, the estranged spouse may receive all of the deceased spouse’s assets. It is also important to change beneficiary designations for retirement plans and insurance policies to someone other than the estranged/former spouse so that the spouse does not try to make a claim for those funds.

Elderly Persons

It is very important for an elderly person to have current estate planning documents for several reasons. Not only do they have a shorter life expectancy than a young person, they also because have a greater chance of becoming incapacitated during their lifetime. This is extremely important if the elderly person’s spouse has died and they do not have children. If one does not have a “durable” financial power of attorney in place (a power of attorney that continues to be effective after the principal become mentally incapacitated), then the only way for someone to manage that person’s affairs is via a court-appointed guardianship or conservatorship. It is much easier (and less expensive) for someone to have a revocable living trust and power of attorney in place that appoints a successor trustee (for a trust) or agent (for a power of attorney) with full authority to access the incapacitated person’s funds. That allows the trustee or agent to pay the mortgage, utilities, medical bills, and other expenses. Also, having an advance medical directive which appoints someone to make medical decisions reduces any family fights about who will make these decisions, especially if the children have very different views about medical care.

Receive a Large Inheritance or Win the Lottery

If one receives a large inheritance or beats the odds and wins the lottery, then they may need to update their estate planning documents to incorporate provisions which minimize estate taxes. There is a federal estate tax that is imposed on assets over $5.45 million (at a tax rate of 40%). In addition, many states impose their own estate tax, and the exemption varies from state to state. For example, DC has an estate tax on assets over $1 million and Maryland has an estate tax on assets over $2 million, while Virginia does not have an estate tax.

Move to a New State

Each state has different laws regarding wills, trusts, and the probate process. In addition, as discussed above, some states have state level estate and inheritance taxes while others do not. Thus, if someone moves from one state to another, then it is a good idea to have an estate planning attorney in the new state review their current documents to determine if they need to be updated to incorporate the laws of the new state and/or estate tax planning provisions.

Birth of a Grandchild

Often grandparents want to make gifts to grandchildren to help pay for college or to ensure that the grandchildren receive an inheritance (especially if the adult children are not good with money). There are many ways grandparents can provide for their grandchildren, including creating an education trust, establishing 529 plans, or creating custodial accounts for the grandchild. This can be done during the grandparents lifetime or upon their deaths.

Beneficiary with Special Needs

If a child or grandchild is born with – or develops – special needs and receives needs-based benefits from the state, then an inheritance received by that child or grandchild may disqualify him from receiving the state benefits for a period of time. If the inheritance is placed into a properly-drafted special needs trust for that beneficiary, then the trust funds can be used to pay for items over and above what the beneficiary is receiving from the state and will not disqualify the beneficiary from receiving the benefits. Thus, a parent’s or grandparent’s estate planning documents may need to be updated to include a special needs trust.

Sale of a Business

If a business owner is contemplating a sale of his closely-held business, then they should consult with their estate planning attorney to discuss their option to minimize taxes. Charitable trusts can be created to generate an income tax charitable deduction to offset capital gains recognized from the sale. A family dynasty trust can be created to pass wealth onto future generations in order to reduce the estate tax burden on the owner’s estate.

Wrapping Up

Nobody knows what life will bring, nor do they know when it will end. If you haven’t completed your estate planning, do it right away. If you’ve had a major life change, make sure your will is up to date. It is sure to save your family a lot of grief when you are gone.