A proper estate plan is one of the most valuable assets you can leave to your family. A comprehensive estate plan will provide clarity, guidance, and stability for the family you love. However, your estate plan is only effective if it is up to date… adapting to changes and mitigating new challenges. Along with other events, it is wise to have your estate plan reviewed and possibly modified if you: (1) Experience a significant change in the value of your estate; (2) Purchase or sell real estate outside of Colorado; (3) Wish to change beneficiaries, guardians, personal representatives, powers of attorney, or trustees; or (4) Planned your estate more than three years ago.
If you have experienced a significant change in the value of your estate, it is prudent to have your estate plan reviewed. A significant increase in the value of your estate may cause your estate to become subject to additional taxes. Fortunately, you may be able to take advantage of additional estate planning tools to alleviate those new tax concerns. On the other hand, a significant decrease in the value of your estate may lessen the tax burdens that once threatened your estate. A reduced estate value may provide you with the opportunity to simplify your estate plan and consequently reduce the costs associated with administering your estate.
Acquiring real estate outside of Colorado may subject your estate to an ancillary probate process in the state where your additional property is located. To minimize the time and cost of administering your estate, it is important to adjust your estate plan to take into account any property outside the State of Colorado. Estate planning tools, such as a trust or a beneficiary deed, can be used to avoid an ancillary probate. Conversely, if you owned real estate outside of Colorado at the time of your original estate plan, you likely considered a revocable trust. However, a revocable trust and the costs associated with administering the trust may no longer be needed if you sold all real estate that was outside of Colorado since setting up your trust… especially if the sole purpose of the trust was to care for the real estate outside of Colorado.
It is your prerogative to change your mind when it comes to your beneficiaries and fiduciaries. However, you may not always be able to do so. So, while you still have the mental capacity to change your plan, you should modify your plan to reflect your current wishes. Failing to update your plan to reflect your current wishes may prevent your desires from actually being followed after your death or incapacity. If your family has experienced a new addition, a death, or a divorce since you originally made your estate plan, it is important to have your estate plan reviewed and possibly modified to account for the change in your family dynamic.
Finally, if your estate plan was created several years ago, it is important to have your plan reviewed in order to keep up with the changes in the law and tax code. Tax laws constantly change and new tax laws may present new threats against the hard-earned inheritance planned for your family. Also, if your plan was drafted prior to Congress passing the Health Insurance Portability and Accountability Act (HIPAA), your advanced directives, such as a medical power of attorney, would not include the required HIPAA release language that allows your agents to have access to valuable medical information often needed to make an informed decision on your behalf.
An estate plan can be one of the most valuable gifts that you can leave to your family. However, an estate plan can be more of a burden and less of a gift if it is left unattended, forgotten, and out of date. Be sure to review and update your estate plan so that you can maximize your plan's potential of providing clarity, guidance, and stability to your family.
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