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Take the Time to Update your Will

April 11, 2005

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James P. Dean

Article Originally Published: Spring 2005

The information contained in this article is not intended to be legal advice. Readers should not act or rely on this information without consulting an attorney.

By some accounts, 70% of adult Americans do not have a will. If you at least have gone to the trouble of getting a will, consider yourself ahead of the curve. But your work is not completely done. A will is not a static instrument.To serve its purposes, it must keep current with life changes, including an individual’s financial circumstances, and with some external factors, such as tax laws. With the help of a professional, you should periodically review your will, staying alert to new or different circumstances that might call for updates.

Marriage, Divorce, and Remarriage. Obviously, a marriage usually brings a new beneficiary into the picture, and a divorce may remove one. Some of the changes in a will prompted by a change in marital status may not be so apparent. For example, when a widow or widower remarries, the will may need to be updated to show how children from the previous marriage and the new spouse are to be provided for.

Additions and Subtractions. A new child is a new beneficiary, but a will can and should cover more than just the distribution of property to heirs. Parents can name a guardian, and even an alternate guardian, to care for their children in the event that something happens to both parents. Absent such a provision in a will, a court will appoint a guardian.

The death of an executor, guardian, beneficiary or trustee creates a gap in how the will is supposed to operate. Fill in the gaps by making necessary changes, such as naming a new individual or, in the case of a deceased beneficiary, simply removing the lost beneficiary from the will.

Changing Fortunes. If you enjoy an unexpected windfall, you may still want the larger pie divided up as before. But it is likely that some changes in your will are called for. If the increase in the potential estate is large enough, it might trigger the need for planning to avoid or minimize estate taxes. A reversal of fortune also could suggest some changes. For example, you may have to revise downward that fixed sum you were planning to leave to a favorite charity.

Moving Out of State. You will not have to start from scratch if you move to another state, because all of the states recognize a will that was properly created in another state. Nonetheless, legal advice should be sought in the new state because changes in the law from state to state could require some tinkering with the will, especially if you move to or from a community property state.

Changes in Tax Laws. The government’s intentions can change even if your intentions have not. Some of the changes benefit individuals with wills, but you can take full advantage of them only if you are aware of them. The big item here is the schedule of changes to the federal estate tax exemption, which is the amount an estate can reach before it is subject to a hefty estate tax. The exemption amount is $3.5 million in 2009 and, under current law, it will be unlimited in 2010 (i.e., no federal estate tax at all) and then $2.0 million in 2011.

You Change Your Mind. If you decide you want to change beneficiaries, a guardian, or anything else in a will, you can do so. For example, you want to make sure that the beneficiaries in your will are the same as the beneficiaries you have named in your insurance policies and retirement accounts. Otherwise, the beneficiaries actually named in those documents will get the money from them, not the beneficiaries under the will. Bear in mind that no amount of talking about your new intentions will make them happen. The changes must be indicated in a properly executed will.

You should keep the finished product in a safe place with your other important papers. And be sure that your family knows where to find the executed will.