Major Life Events Should Mean Revisiting Your Estate Plan
When any major life event occurs, it’s understandable that you may be wrapped up in the moment. Then, you are likely spending the moments afterward soaking up some much-needed downtime. Weddings, births, your child’s graduation, moving, buying a house, getting a new job — all of these life events signal major changes in our life. And these life changes often translate to major changes in our own finances as well as our hopes for the future.
Because major life events cause changes not just in our bank accounts but in our own perspectives, they represent the perfect time to revisit planning for your estate. Life events in our children’s or our parents’ lives can also signal the need to revisit estate planning. You may find yourself in a different material position than before, and you may also find that the nature of who shares ownership of your assets has also changed.
After any major life event, you are bound to be tired, but putting off estate plan changes can have dire consequences should the worst-case scenario happen. You want to be certain that your will and other documentation reflect the current reality of your life situation. Having your estate plan up-to-date can give you peace of mind knowing that you can avoid confusion or heartbreak in the event of your unexpected death or medical incapacitation.
With this in mind, here are some updates you may wish to consider should each of the following events occur:
If you have recently gotten married or are currently planning a wedding, you may want to add estate planning to your to-do list.
Marriage means that you and your new spouse begin assuming community property. It also means that, without a will, any assets left after your death will automatically go to your spouse (unless you have children, who will split ¾ of your separate property evenly).
Marriage can also mean changes like moving to a new house or a new state. You are likely to receive many high-value items as wedding gifts, and you are likely to make many high-value purchases like appliances once you move in together.
Further, marriage can mean updates to other life-planning areas. Your spouse will benefit from having an advanced directive stating your preferences for care and other aspects in the event of your medical incapacitation. You will likely switch the beneficiary of your life insurance policies to your spouse, and your spouse may also be involved in your pension system, retirement plan, or insurance coverage. Another aspect to consider is that you may file taxes jointly, which can mean that tax liens or other aspects of tax law could create uncertainty about the final distribution of your estate.
On top of these concerns, many spouses will set aside funds to provide for the loss of household income, particularly if the couple has (or intends to have) children.
Overall, there are lots of legal aspects to consider on top of material changes. To ensure that you can feel confident that your affairs will be handled according to your wishes by your spouse — and possibly your children — speak to a New Mexico estate planning attorney as soon as possible.
Birth of a Child
Having a child means a whole new generation to consider within your estate plan. You will certainly want to plan ahead for who will become the guardian of the child should both of their parents pass on. You will also want to have funds set aside for the continuing care of the child, including any plans you may have for college. It is common to set up a trust fund that can provide for certain scenarios or create certain rules, such as the child obtaining the funds once they turn 18.
Intestate succession rules mean that your child only assumes ¾ of the property considered separate during your marriage in the event of your death. If you wish for certain assets to become theirs, particularly ones that are separate property, then you will want to provide specific instructions for the inheritance of the child.
The birth of another child means that siblings will now have to share, which also means changes need to be made for the intended distribution of assets. There may also need to be separate plans for the care of each child, particularly if the children are far apart in age or they do not share the same set of parents.
Childbirth in your close family can also signal the need for major changes to your estate plan, as well. Having a grandchild or niece/nephew can mean that you now want to set aside something to provide for them or to give them something to remember you. Since many grandparents are the designated guardian in the event of the grandchildren’s parents’ death, the grandparents will want to discuss alternative plans with their own children to determine options for who could become the presumptive guardians should the grandparents pass unexpectedly.
Divorce signals a major change in asset ownership as well as finances. Now, all divided community property becomes individual separate property once more. Further, it is very likely that the ex-spouse will no longer be designated the beneficiary of insurance policies or retirement plans. There will now also be a more complicated scenario with the children in the event of the death of one of their parents. Individuals will want an up-to-date plan that reflects their intentions in light of the divorce, the division of community assets, and the current parenting plan.
Moving to a New State
Buying a new house already merits changes to your estate plan, but moving from one state (or country) to another means that you must familiarize yourself with a whole new set of inheritance, finance, and probate rules. While planning to move, speak to an estate planning attorney in your new state to go over the broad changes you need to be aware of and how they might affect your current intentions. You can then revise your estate plan with the new state’s laws in mind.
Major Changes in Your Finances
Getting a major promotion, buying a second home, losing your career job, or filing for bankruptcy are all examples of life changes that may merit major changes to your estate plan. In some cases, you may need to completely overhaul your will and other plans to reflect these changes. In the event of bankruptcy, for example, you will need to include instructions for how to prove that certain debts have been discharged or resolved so that creditors do not unfairly (and illegally) pursue a claim against the estate.
Major Changes to Your Medical Condition
If you develop a chronic illness, suffer from a health crisis event, receive a serious diagnosis, or find your medical condition deteriorating for any reason, there are two major aspects of your estate plan that need changing.
First, you want to provide medical instructions and arrange for factors like who has power of attorney over medical decisions and financial decisions in the event you become incapacitated — temporarily or long-term.
Second, you will want to revise your estate plan to be up-to-date and to reflect the likely condition of your estate at the time of your possible death. You may wish to set aside funds for any possible medical debts, for example, or you may have changed your mind about how you want assets distributed.
Know that you don’t have to receive a terminal diagnosis for a medical event to have an impact on your current estate plans. Even a small health scare or the discovery of a chronic condition can change the plans you have for your own financial future and for what you want to leave behind to loved ones.
Speak to a New Mexico Estate Planning Lawyer Soon
Putting off estate planning can make it more difficult to revise your plans down the road. It will also leave an air of uncertainty in the event of your death.
New Mexico Financial & Family Law aims to give you confidence about your estate plans and provide you with the best advice possible given your current situation. Our goal is to always help clients put their intentions into clear words so that their loved ones will have all of the resources and instructions they need in the event they pass. We also keep clients informed of ongoing changes to state and federal laws concerning probate, medical incapacitation, insurance law, and more.
Assume control over your estate plan, and feel ready for anything when you call (505) 503-1637 or contact us online to schedule your confidential, no-obligation consultation today.