As we often tell our clients, although you would like your estate plan to last forever, it probably won’t. Things change, laws change, family circumstances change, and your estate plan needs to change with it if you want it to continue to accomplish your planning goals. For most people these goals include making sure the right people are making decisions on your behalf and making sure your assets get where you want them to go with a minimum of delays, estate settlement costs and estate taxes to pay.
Here are five things that can derail even the best estate plan.
- Change in Marital Status. In Massachusetts, if you create an estate plan when you are married and then get divorced, the divorce will automatically revoke any provision in your estate plan documents that benefits your former spouse or any of his or her relatives (other than children you may have in common), and any beneficiary designations in life insurance or retirement plans that name a former spouse as long as you had the power to change those designations prior to the divorce. A divorce also revokes any nomination of your former spouse or his or her relatives to serve as your Personal Representative, Trustee, health care agent, etc. This may seem like exactly what you want to happen, and convenient that it happens automatically. However, you need to consider whether your documents address who will serve in these capacities if your spouse is disqualified, or who will receive your assets if provisions in favor of your spouse are automatically revoked. Also, although the law makes provisions regarding the automatic revocation of beneficiary designations, it is not wise to rely on these provisions, for example, as to life insurance issued by an out-of-state financial institution or a retirement account subject to federal ERISA law. Reviewing your documents and beneficiary designations and changing them as necessary is always the best approach. If you create an estate plan while you are single and then get married, your marriage will no longer revoke your Will (as was the case under prior law) but be aware that Massachusetts law gives your spouse a right to receive a certain portion of your estate whether your Will provides that or not. Make sure you understand what the law provides and create documents that consistent with your intentions if necessary.
- Death or Incapacity in the Family. Estate plan documents typically name certain individuals – your spouse, children, siblings, friends – to handle certain duties during your lifetime (as attorney-in-fact or health care agent) or after your death (as Personal Representative or Trustee), and also as beneficiaries of your estate. If someone named in your estate plan documents passes away before you or becomes incapacitated and unable to perform the duties they were nominated to perform, this can be an issue if successors have not been named in the document. Further, if the person is still alive but is not able to perform those duties appropriately, they may still insist they are able to do so when you (and others) may know they are not a good choice anymore. A little off topic, but also not uncommon, is the situation where a family member or friend is named as the guardian of minor children in a parent’s Will, but that person is no longer a good choice. To avoid probate court involvement in designating successor fiduciaries, and to avoid people serving who are no longer appropriate, make sure you revisit the people you have named in your documents from time to time and make changes as needed. If a beneficiary named in your estate plan is no longer living, make sure you understand how the documents (or beneficiary designations) will operate and where the assets designated for the deceased person will go instead, and make changes if necessary.
- Beneficiaries with Issues. There are few perfect families, and sometimes a person who is named as a beneficiary of your estate plan will hit a rough patch. Maybe your child is in a bad marriage and headed for divorce and you are concerned that your daughter’s inheritance may be shared with her estranged husband. Maybe your favorite nephew has developed an affinity for sports betting and you are concerned about how he will manage an inheritance he may receive from you. Maybe a family member is an unfortunate victim of the opioid crisis that has hit Massachusetts hard. Maybe a beneficiary has recently become disabled and you are concerned that an inheritance may disrupt receipt of public benefits. If any of these situations arise in your family, take another look at your estate plan and update your plan as needed. It may be that you want to disinherit a troubled individual altogether or retain their inheritance in trust in a way that it will be protected from their troubles but still be available to help them through the rough patches. An estate plan can do all of this and more, but proper planning is required.
- Lack of Trust funding and Improper Beneficiary Designations. Even the best estate plan can be derailed if attention is not paid to how assets are owned and how beneficiaries are designated. It is important to follow your attorney’s instructions regarding these matters to be sure the way in which your assets are owned and beneficiaries are designated is consistent with your estate plan. In our office, we provide our clients with written trust funding and beneficiary designation instructions. It is important to make sure the instructions are followed as to existing accounts or assets, and as to any new accounts that may be opened or new beneficiary designations that may be made after your plan is in place. It is always a good idea to sit down with your estate planning attorney at least every 5 years or so to review asset ownership and beneficiary designations, and make sure they are as they should be.
- Change of Domicile. Many of my clients (especially after this past winter) think about moving to warmer locations when they retire, even if they want to spend some time in Massachusetts during the year. It is important that your estate plan documents reflect where you consider yourself to be domiciled – where you intend to make your permanent home. Although estate plan documents created in Massachusetts will be valid in Florida (or any other state), it is generally a good idea to have your estate plan documents updated when you move to another state. In addition to making sure your documents operate cost effectively and efficiently under the laws of that state, your documents should be written in the state in which you are domiciled. This is especially important if you are moving from a state (like Massachusetts) that has a separate state estate tax, to a state (like Florida) which has no state estate tax, when your documents will serve as evidence of your intention to be domiciled in your new state. Further, documents like powers of attorney and health care proxies are often state-specific, and you will want those documents to be used easily in your new state without any question or delay.
Like it or not, an estate plan is not something you can create and forget about. Family circumstances change, the laws change, and often your goals change. For these reasons, your plan should be reviewed regularly, revised as needed, and kept up-to-date so it will be ready to do its job whenever and wherever it’s needed.
Maria Baler, Esq. is an estate planning and elder law attorney and partner at Samuel, Sayward & Baler LLC, a law firm based in Dedham. She is also a former director of the Massachusetts Chapter of the National Academy of Elder Law Attorneys (MassNAELA). For more information, visit www.ssbllc.com or call (781) 461-1020. This article is not intended to provide legal advice or create or imply an attorney-client relationship. No information contained herein is a substitute for a personal consultation with an attorney.
© 2018 Samuel, Sayward & Baler LLC