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When to Update Your Estate Plan in Texas

Keeping your estate plan updated is a crucial aspect of financial planning that many people tend to overlook past an initial preparation. Simply creating an estate plan is not enough. There are many reasons to review and update your estate plan, which you’ll read about in this article. Regularly updating your estate plan ensures that it reflects your current goals and circumstances. Major life events not accounted for can inevitably affect how assets and property are distributed. 

Reasons to Update an Estate Plan

Holman Law estate planning attorneys advise you to talk with your family first. Have a conversation with them about the estate planning process. Over the years, you’ll find there are many reasons to update your estate plan. Discussing with your family is the first step to avoid any potential pitfalls when your will, trust, advance directives are out of date.

Changes in personal relationships

Life is unpredictable, and your personal relationships can change over time. You may experience relationship changes such as marriage, divorce, or loss of a loved one. Do the beneficiaries on your estate plan may need to be changed? If you have minor children, does a guardian need to be named? These significant life changes can impact the individuals you need to consider naming in your estate plan.

Getting married? 

Update your estate to include your spouse in your estate plan and designate them as a beneficiary.

Getting divorced?

Remove your ex-spouse from your estate plan and update your beneficiaries accordingly.

Do you have children? 

Include them in your estate plan. If they’re a minor you can designate a guardian for them in case of your untimely death.

Loss of a loved one? 

You may need to update your beneficiaries and make changes to your estate plan to reflect your new circumstances. 

Changes in financial situation

Your financial situation can also change over time. You may acquire new assets, sell existing ones, or experience a significant increase or decrease in your net worth. These changes can affect the distribution of your assets and property after your death.

For example, if you acquire a new home, you may want to include it in your estate plan and designate a beneficiary to keep a bequeathed house out of probate. If you sell an existing asset, you may want to update your beneficiaries and estate plan accordingly.

Relocation

If you recently moved to a new state or to another country, updating your estate plan and business documents are in your best interest. If you’re considering moving to Texas, we have a blog about how to update legal forms when you move to Texas.

Changes in tax laws

Tax laws are constantly changing, and these changes can have a significant impact on your estate plan. For example, if you created your estate plan several years ago, the tax laws may have changed since then, and your plan may no longer be tax-efficient.

By regularly updating your estate plan, you can ensure that it is in line with the current tax laws and minimize the tax burden on your beneficiaries.

Business interests

It’s important for entrepreneurs, investors, and small businesses to consider the benefits of asset protection available within a trust. If you’re opening a new business, have rental or investment property consider the advantages of asset protection with a trust vs a LLC. The LLC provides one layer of liability protection. Adding a trust provides another layer of protection, providing privacy and safeguards for multiple business assets. If you have more than one asset manager, business assets, and real estate investments consider a Texas Series LLC with a trust. 

Consequences of neglecting your estate plan

Unintended beneficiaries

If you neglect to update your estate plan, your assets and property may end up in the hands of unintended beneficiaries. For example, if you get divorced and do not update your beneficiaries, your surviving family and relations can file for probate litigation. One of the most common reasons for probate is a change of family circumstances.

Similarly, if you have children and do not designate a guardian for them in your estate plan, the court will determine a legal guardian for your kids.

Outdated estate plans can also lead to legal challenges and disputes among family members. If your estate plan is not up to date, your beneficiaries may contest it, leading to lengthy and costly legal battles.

These legal challenges can cause significant emotional distress for your loved ones and may result in your assets being distributed in a way that does not align with your wishes.

Tax consequences

As mentioned earlier, changes in tax laws can impact your estate plan. If you neglect to update your plan now, your beneficiaries may end up paying more taxes than they need to later.

For example, the Estate and Gift Tax exemption is set to be significantly reduced at the end of 2025.  For estates with assets greater than seven million dollars, a 40% estate and gift tax will be claimed on your assets post-obituary. If you have a large estate and do not take advantage of tax-saving strategies, your beneficiaries may have to pay a significant amount in estate taxes, thus reducing the value of their inheritance.

Major life events that can impact your estate plan

As a general rule, you should review and update your estate plan after any major life event. This includes getting married, divorced, having children, or experiencing the loss of a loved one. Life changes that can prompt an urgent update to your estate plan are medical and financial changes.

Changes in health

If there are any major changes in your health, make sure that your medical directives, power of attorney, and trusts are in good order. Qualifying for Medicaid can also impact your estate plan and overall financial goals. Consider what options are best for you when planning for long-term care.

Changes in financial situation

You should also review and update your estate plan if there are any significant changes in your financial situation. This includes acquiring new assets, selling existing ones, or experiencing a significant increase or decrease in your net worth.

Regularly review your estate planning documents

Even if you have not experienced any significant life events, it is still essential to review and update your estate plan. A good rule of thumb is to review an estate plan every 3-5 years. This will ensure that your plan is in line with any changes in tax laws and reflects your current wishes and circumstances. 

How can an estate planning attorney help?

An estate planning attorney can help you create an estate plan that reflects your current wishes and circumstances. They can also assist you in regularly reviewing and updating your plan to ensure that it remains relevant and effective.

An experienced estate planning attorney can also help you take advantage of tax-saving strategies and minimize the tax burden on your beneficiaries.

Find a reliable estate planning attorney

Updating your estate plan is crucial to ensure that your assets and property are distributed according to your wishes. Neglecting to update your plan can lead to unintended beneficiaries, legal challenges, and tax consequences.

It is recommended to review and update your estate plan after any major life event, every 3 – 5 years, and whenever there are significant changes in your financial situation. An estate planning attorney can help you create and maintain an effective estate plan that reflects your current wishes and circumstances. Holman Law clients are provided with reminders, articles and resources so that their estate plan is current and up-to-date. Contact us today if you have any questions about updating your estate plan in Texas.

Steven C. Holman

Holman Law, Estate Planning Attorney

I love to spend time with my wife and four children and serving the Dallas Fort Worth community. I provide clients with a wealth of knowledge and experience navigating each individual’s Estate Planning needs including Trusts, Probate, Elder Care Law, and Long Term Care Planning. My law firm specializes in assisting clients with complicated legal forms and qualifying for the maximum Medicaid and Veteran (VA) benefits in Texas.

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