Major life events such as the birth of a child or a death in the family are widely known to be important times to revise your estate plan. But there are other, potentially less obvious situations that may lead to changes in your plans. Here are four scenarios that could trigger a review:
A significant change in your income or net worth
A gain (or loss) of income could mean adjusting your estate plan, particularly any life insurance policy you might have in place. You may also need to adjust your plan if you inherit a large sum of money that boosts the overall value of your estate — particularly if it leads to your estate exceeding the threshold for federal or state estate taxes.
An adjustment in the vision of your legacy
Your plan likely reflects your original vision for your legacy. But that vision can change over time. You may want to change how much money you leave to your heirs versus your favorite charities (and what you count as your favorite charities may change as well). Regularly reviewing your estate plan can help keep it aligned with your evolving wishes.
Shifting needs of your beneficiaries
Just as you continue to change and grow, so too will your heirs. You may need to make adjustments to your plan as your children grow up, including loosening limitations on the assets you leave them or perhaps tightening those limitations if you develop concerns about their ability to manage their own finances.
Changes in tax law
New legislation and tax changes can have a major impact on your estate plan. Review your plan every few years to make sure it accounts for any recent changes in the law, such as the updates to federal estate tax exemptions or new regulations around inherited IRAs that took place recently.
In the absence of these scenarios or other major life events, you should review your estate plan every three to five years. That way you can make sure your plans continue to reflect your current needs and wishes.