We set out the ‘when’, ‘why’, ‘how’ and ‘what’ of updating your estate planning documents.
Your estate planning documents are the key to ensuring your estate is managed smoothly and in accordance with your wishes. This covers the time from when you may lose your mental capacity, to after your death when your estate passes to the people you have selected to benefit from all your hard work.
We are often asked how much damage outdated estate planning documents can do. The answer is clear: a lot. The worst examples tend to relate to when someone has a major life change (e.g. a separation from a partner or spouse, the birth of a child, or a change in business structures) and fails to update their estate planning properly.
When should you update your estate planning documents?
As a general guideline, we tend to recommend that people update their estate planning documents every 3 to 5 years.
In between updates, people should regularly review their documents as an estate planning ‘check-up’. We suggest people review their documents annually, perhaps at the same time as a compulsory annual event (such as tax time), so you remember to do it. However, the real guide is how changeable your life circumstances are – and how changeable the life circumstances of your beneficiaries is.
For example, someone in their 30s and 40s is likely to go through several life-changing events in quick succession, such as marriage and children (and possibly divorce). On the other hand, someone in their retirement years often has more stability in their personal and financial lives, and may not need to change their documents as often.
Why should I update my estate planning documents?
A major life event is the main trigger for the need to update your estate planning documents. This is because a big life change (either affecting you or one or your beneficiaries) generally overhauls your existing plans, so your estate plan needs to be modified, too.
Generally speaking, a Will is voided by marriage or divorce so you will likely be left intestate (without a Will) if you do not update after these events. Other significant changes in your personal or financial situation will usually give rise to a need to update your estate planning documents. However, with some good advice and some forward-planning, your documents can cater for many expected life changes – but the unexpected and involuntary can be much more difficult to predict and manage.
We recommend that you seek some advice if any of the following events occur:
- You marry;
- You commence a de facto relationship;
- You separate or divorce;
- You have more children (or grandchildren);
- Any of your appointees (i.e. executors, trustees, attorneys, guardians or Substitute Decision-Makers) die, or you no longer consider them appropriate to undertake the task;
- There are any significant changes to your financial position;
- There are any significant changes to your investment structure or business affairs; or
- There are any significant changes in the life or business circumstances of any of your beneficiaries.
Another significant reason to update your estate planning documents is if there has been any significant change in the law. Most changes in law will not affect the operation of previous documents. However, it is a good idea to keep abreast of legal changes as they are usually improvements on existing documents or procedures, so the changes may give you increased control or flexibility in managing your affairs.
How will I know if my documents can be updated or improved?
By asking us! Any lawyer worth their salt should be happy to talk to you about your existing documents and whether there is room for improvement. In our experience, there are ongoing changes in the area of estate planning to enable people to better record and implement their wishes, and we think that you should be able to capitalise on that.
For example, the use of Testamentary Trusts in estate planning was a fairly new and niche concept only 15 years ago, but is now commonplace in Wills and we rarely prepare a Will without one. Similarly, Advance Care Directives are a fairly new concept (and were only formally introduced in South Australia in 2014), but are an excellent way to ensure that the right people are involved in making your medical and end-of-life decisions when you are not capable of deciding for yourself.
What else can I do to safeguard my wealth and my family’s interests?
It is a great start to ensure that your own estate planning documents are up to date, but that is not the end of the story. If your beneficiaries (i.e. your partner or your children) do not have their own estate planning documents up to date, your best laid plans may be undermined by unexpected and unintended problems.
Picture this scenario: you make a Will that leave all your estate in equal shares to your 2 adult children. Your eldest child then separates from their spouse, whom you never liked. You pass away a few months later, and your eldest child receives their inheritance and buys a new house to “start afresh”. That child then dies unexpectedly, without updating their Will. The sting? Their estranged spouse (the one you never liked) receives everything, including your inheritance. This could have been avoided if your eldest child had made a new Will post-separation, and is a good example of why it is important that your family keep their estate planning up to date.
You should encourage family members to review their estate planning on a regular basis and to update their documents if any trigger events occur (as discussed above). Many people think it is not their business, and for this reason they avoid saying anything. However, it is your business what happens to the money you leave behind. We will also find that people are generally happy to talk once the lines of communication are opened – so take it upon yourself to be the person to start the conversation.
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