The latest anniversary of my birth is fast approaching; but fortunately, I have learned to celebrate these annual events rather than dread them. I now understand that life gets better as we get older, on all levels – except, perhaps, the physical.
But I have also found that birthdays are a good time to pause and consider the various financial arrangements that I’ve set up over the years and to determine whether any of them need updating.
Estate plans, in particular, need regular review and revision. Nothing important has changed in your life since you drafted your will, you say? Well, chances are the laws have changed; or, other factors may have rendered your plan obsolete without your even realizing it.
I am assuming, of course, that you have in fact drafted a will. If not, do it now. Things happen; if you die without one ("intestate," in lawyers’ lingo), your heirs will be at the mercy of attorneys, bureaucrats, state and federal laws, and greed. Quarrels will ensue; decisions will be made that are almost certainly at variance with what you would have wanted; and a substantial chunk of your estate, which could have gone to loved ones or to charity, will be lost to taxes and fees. If you don’t have a will, regardless of your age or current financial status, have one written at your earliest possible convenience.
That said, let’s consider some variables that mandate your constant vigilance:
• Laws change. Trust laws, in particular, have changed a great deal in recent years, and trust strategies have changed with them. New instruments like perpetual trusts, trust protectors, directed trusts, and total return trusts may or may not work to your advantage, but you won\'t know without asking. State laws change, too, all the time.
Once a year my wife and I meet with our estate lawyer to learn about any new legislation that may have affected our plan. Last year, I learned that my irrevocable trust is no longer irrevocable; new laws now permit certain provisions to be modified.
Laws that don’t directly regulate wills and trusts can affect them as well. For instance, the ever-popular Health Insurance Portability and Accountability Act (HIPAA) affects your estate as well as your practice; under its provisions, your family cannot access your medical information or make treatment and life-support decisions without your specific permission. So if a Health Care Power of Attorney is not already part of your will, add it. And remember to modify it if your medical status, or your philosophy of life, change.
• Financial markets change. It’s not exactly a secret that asset values and interest rates are way different than they were even a few years ago. Real estate or securities bequests could now be significantly larger, or smaller. Your accountant and estate lawyer should take a look at your assets periodically and their apportionment in your will, to be sure all arrangements remain as you intend. And be sure to notify them whenever the composition of your assets changes, even if the value doesn’t. Let’s say you sell a business or property and reinvest the proceeds in something completely different; that will change how you leave that asset to your heirs, because a different set of tax laws will apply.
• Fiduciaries change. The executor of your estate and the trustee(s) of your trust(s) need periodic review. If your brother-in-law is your executor, and your sister divorces him, you may want to find a new executor. A once-vigorous trustee who is now old or sick should be replaced. Trustees are often financial institutions; if one of your corporate trustees goes belly up, or the employee you were working with retires or changes firms, you’ll need a replacement. Keep track of your fiduciaries and be prepared to make changes as needed.
• Personal circumstances change. Some changes – marriage, divorce, the death of an heir, or the birth of a new one – obviously require modifications to wills and trusts. But any significant alteration of your personal or financial circumstances probably merits at least a phone call to your financial planners. The need for changes, and your options should changes be necessary, are not always obvious.
Dr. Eastern practices dermatology and dermatologic surgery in Belleville, N.J. He is a clinical associate professor of dermatology at Seton Hall University School of Graduate Medical Education in South Orange, N.J. Dr. Eastern is a two-time past-president of the Dermatological Society of New Jersey and currently serves on its executive board. He holds teaching positions at a number of hospitals and has delivered more than 500 academic speaking presentations. He is the author of numerous articles and textbook chapters and is a long-time monthly columnist for Skin & Allergy News, a publication of IMNG Medical Media.