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Why You Should Review Your Estate Planning Documents Every 3-5 Years

Posted on May 28, 2019 by Carol Hill

Upon finishing the estate planning process, clients often ask the understandable question, “how often should I update my estate planning documents?”

Best practice is to review and/or update your estate planning documents either (1) every three-five years, or (2) after major life changes occur. Major life changes can include the birth of new children or grandchildren, dramatic change in assets or type of assets, divorce, or the death of close family members.

Periodic Changes in State and Federal Law may Create New Planning Opportunities

The most common reason why we recommend revisiting an estate plan every three-five years is due to the variety of changes that occur over time with state and federal law. By reviewing the estate planning documents periodically, we can be sure to update documents as  needed to reflect the most current changes to state and federal law.

For example, just within the last five years, Washington adopted a series of new laws affecting estate planning, including a new Power of Attorney Act (2015 – RCW Ch. 11.125), a new Directed Trust Act (2015 – RCW Ch. 11.98A) and new trust decanting provisions (2017 – RCW Ch. 11.107). Also, in 2018, Congress enacted the sweeping Tax Cuts and Jobs Act (TCJA), which dramatically changed the federal estate tax exemption amounts.

Old Powers of Attorney may Create Procedural Headaches

Powers of Attorney, more so than the other common estate planning documents, should be regularly updated every three to five years even without the occurrence of any major life changes. This recommendation comes down to one simple reason: banks. More specifically, the banking industry’s reputation for being difficult to work with when presented with a Power of Attorney that was executed more than just a few years ago. Although older Powers of Attorney are no less legally valid because of their age, many banks are notorious for refusing to honor an “old” Power of Attorney. Similarly, health care facilities, while not as notoriously fickle as banks, may on occasion question the validity of a Power of Attorney that was executed many years ago.

In short, everyone would be wise to regularly update their Power of Attorney documents every three tofive years, so as to avoid the procedural headaches that may arise when exercising “old” documents.

Major Changes in Life Circumstances May Warrant Updating Estate Planning Documents

There are several common life-changing triggers for updating estate planning documents that may not come as a surprise, such as the birth of a new child or a divorce, even a pending divorce. Major changes to the composition of a family often warrant a review or update of an estate plan simply to ensure that the major change is accounted for in all of the estate planning documents.

Other less obvious triggers include dramatic changes in levels wealth or asset types, such as the purchase of a home in a different state. Additionally, the death of family members sometimes necessitates updating estate planning documents, especially when the deceased individual was a beneficiary under the Will or “fiduciary” party such as an executor named in the Will or agent named in a  Power of Attorney.

A Last Will and Testament can be a fairly flexible document with built-in planning for future major life changes, but this flexibility alone cannot be relied on to accommodate for every future change in circumstances. As with many matters involving estate planning, taking time today to prepare the property documents can help avoid costly problems in the future.