The point of having an estate plan is to define your wishes about what happens to your money and property after you die. But an outdated estate plan can ruin those plans – in ways you may not be aware of.
What can happen if you don’t review and update your estate plan?
Here are the top three consequences of dying with an outdated estate plan and examples of how they can happen.
Your estate can end up in the wrong hands
Alex, a man in his mid-50s, came to us for advice after his father, Richard, passed. Richard hadn’t updated his Will since he married his second wife in 1990, whom he had since divorced. Richard’s Will left half of his estate to his second wife and the rest of the estate to Alex.
Alex was surprised to learn that under Connecticut law, Richard’s Will was revoked because he had executed it before January 1, 1997 and had since divorced. Richard therefore died intestate (without a Will), and his estate was to be divided up according to state law. That meant that half his estate went to Alex, and the other half to Alex’s younger brother James, a drug addict Richard had chosen to disinherit. Unfortunately for Richard, James had a right to half his estate.
Your estate can be eaten up in taxes
After her husband died, Jennifer moved from Indiana to Connecticut to be closer to her children. She didn’t take into account that unlike Indiana, Connecticut has a state estate tax.
Jennifer’s estate of $4 million was well below the federal estate tax exemption amount ($5.49 million per individual as of 2017), but above the $2 million state limit. Upon her death, $2 million of her $4 million estate was subject to a 12% tax. Had Jennifer known, she could have taken steps to make sure that the money – nearly a quarter of a million dollars – went to her children rather than the state.
Your family can fall apart
By far, the most common negative consequence of not reviewing and revising an estate plan is stress on the surviving family members. Family members who never fought previously may find themselves in a bitter battle of Who Gets What that can last for years. Estate planning can be especially complicated with blended families, which we’ve written about before on this blog, and can lead to irreparable feuds.
Kathy and Bill each brought two young children from previous marriages into their blended family when they married. When Bill died, all his assets went to Kathy, as directed in his Will. When Kathy died, her estate went to her biological children only, because she didn’t know that stepchildren were not legally considered “children” and therefore didn’t automatically get an inheritance.
The four children who had grown up as close siblings now faced years of litigation as Bill’s children attempted to make a claim on Kathy’s estate. Their relationships were strained because of the ordeal and never returned to the closeness they once had.
Estate planning for now and for the future
Are you convinced? These stories demonstrate what can happen when you don’t review your plan regularly or fail to understand how applicable state and federal laws affect planning (which you can read more about on our blog right here).
Take care of your family’s future by reviewing your estate plan regularly. And if you are considering changes, give us a call. We can help make sure your wishes are spelled precisely spelled out.