Some people think that once they draft a will, they're finished with it and they can wash their hands of the whole experience. Unfortunately, that's not always the case. In fact, there are several times throughout one's life when it makes sense to review and revise a will. Read on to find out what life events should prompt you to re-examine your will and the consequences of letting this important document collect dust. (To learn more, read Getting Started On Your Estate Plan and Top 7 Estate Planning Mistakes.)
Tutorial: Estate Planning
New Children, Friends or Relatives Enter the Picture
Generally speaking, if a will outlines that a person's estate is to be divided equally among his or her children, even children that are born after the document is signed will be included. In other words, they will get a share of the estate, just as if they had been born when the document was drafted.
However, if you've had additional children since you first drafted your will, it pays to take a look at the document just to make sure it is worded in the correct manner and to consider reviewing it with an attorney to see if any alterations need to be made. With any changes to your will, an attorney will usually be more familiar with your state's laws than you are and will be able to provide you with valuable guidance and suggestions. (For more on this topic, see Problematic Beneficiary Designations.)
Of course, wills don't only involve providing for children. Suppose you reunite with a long lost cousin or friend and, after giving it much thought, you decide that you want him or her to enjoy that 1968 Mustang you have sitting in your garage. In this case, a formal change to your will may be in order to make sure that he or she will receive the asset upon your death.
Different states have different rules when it comes to estate taxes and the way they treat property. Therefore, if you move from one state to another, it may make sense to review your will and possibly consult an attorney to make sure you have all your legal bases covered under the laws of the state in which you reside.
You've Come Into Money
Death and taxes are said to be the only things that are guaranteed in this lifetime. However, that old adage is wrong: change is a certainty as well. Our lives change every day, and our planning must adapt to that change.
In regard to your will, suppose a rich uncle or a parent passes away and leaves you with a large, unexpected sum of money. Maybe you wouldn't change a thing and you'd pass any asset on to your heirs in exactly the same manner as before. On the other hand, with your newfound financial flexibility, maybe you'd like to divide up your worldly belongings in a slightly different manner than you were planning to before. In such a case, a change to your will may be in order.
It's also important to note that if you come into a large sum of money, you may want to consider drafting a trust that will help soften the blow of estate taxes owed after your death. As a general rule, if an individual comes into a large sum of money or inherits a substantial asset, such as a home it makes sense to talk to an attorney and an accountant for planning purposes. (To learn more, read Pick The Perfect Trust.)
You Get Divorced
In the event of a divorce, most people don't want to leave money or certain rights to an ex upon their death or risk that he or she will contest the document. To that end, if you've gotten divorced since you last signed a will, consider discussing with an attorney what changes your will might require. Of course, regardless of your planning, your ex may still attempt to contest the document. However, an attorney can make some suggestions about how to limit his or her chances of success. (For more on this topic, check out Update Your Beneficiaries.)
Your Spouse Passes Away
Generally speaking, wills are written or should be written in such a way that there are backups for everything. In other words, if a spouse were to predecease you, your assets might go to another relative. However, it does pay to review a will if your spouse has died. That's because you may feel differently about things if that were to happen, and you might want to distribute your assets in a different manner. You also might need to provide new backup recipients in your will.
You've Had a Change of Heart
Many people draft their wills when they are first married or when they are young. While it's great to start planning at an early age, keep in mind that what seemed appealing when you were young may not work when you are older.
For example, maybe you want to give that '68 Mustang to your cousin Larry, who would enjoy it, rather than to your kid sister, who would just sell it. Or maybe you and your brother were inseparable in your 20s, and giving him your valuable baseball card collection sounded like a great idea then, but now you can't stand the guy and you want to make sure he ends up with nothing.
In any case, if you've had a total change of heart, it makes sense to review your will and consult with your attorney.
You Want to Account for Charitable Giving
Later in life, some individuals become attached to certain charities or organizations, such as a church. If you want these parties to receive money or some other asset that will benefit them upon your death, a formal change to your will may be in order. (For more insight, see Gifting Your Retirement Assets To Charity.)
Wills can be extremely valuable tools that facilitate the transfer of your assets to your heirs upon your death. But just because you've drafted one and signed it doesn't mean you're done. Throughout life and certainly when any major changes have taken place, you should review this document and change it as necessary.
For further reading on this subject, see Three Documents You Shouldn't Do Without.