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When It Comes to a Will Or Estate Plan, Don't Just Set It and Forget It. You Need to Keep Them Updated

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  • The pandemic appears to have generated a bigger interest in estate planning, which includes a will and other legal documents that address end-of-life considerations.
  • Whether you have only a will or a more robust estate plan, a review should be done every few years at least, although there are a variety of reasons to do so more frequently.

Whether you drew up a will recently or years ago, keep in mind it's generally not something you can set and forget.

Experts recommend revisiting your will and other estate-planning documents at least every few years unless there are reasons to do it more frequently — which is common. That could include things like marriage, divorce, birth or adoption of a child, coming into a lot of money (i.e., inheritance, lottery win, etc.) or even moving to another state where estate laws differ from the one where your will was drawn up.

"One of the main considerations for a review is a life event — when there's a major change in your life," said Nick Foulks, who oversees client engagement at Great Waters Financial in Minneapolis.

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The pandemic has spurred an interest in estate planning, which includes a will and other legal documents that address end-of-life considerations. For instance, 18- to 34-year-olds are now more likely (by 16%) to have a will than those who are in the 35-to-54 age group, according to Caring.com research. In the 25-to-40 age group, just 32% do, according to a survey from TrustandWill.com and 1Password.com.

Nevertheless, fewer than 46% of U.S. adults have a will, according to a Gallup poll in June.

If you're among those who have a will or full-blown estate plan, here are some things to review and why.

It's not you, it's them

Aside from reviewing your will in terms of who gets what, it's also worth checking whether the person you named as executor is still a suitable choice. This is the person who is charged with carrying out your wishes.

It's typically a big job.

Things such as liquidating accounts, ensuring your assets go to the proper beneficiaries, paying any debts not discharged (i.e., taxes owed), and even selling your home could be among the duties undertaken by the executor.

Also be sure the guardian you've named to care for your children is still the person you'd want in that position.

Additionally, take a look at the people you assigned powers of attorney to. If you become incapacitated at some point, the people with that authority will handle your medical and financial affairs if you cannot.

Often, the person who is given this responsibility for decisions related to your health care is different from whom you would name to handle your financial affairs.

As with choosing an executor, make sure whoever would hold the financial reins is trustworthy, experts say.

In other words, even if you've had no major life event, individuals you previously chose to handle certain duties may no longer be in a position to do so.

Account beneficiaries

Some assets pass outside of the will, including retirement accounts such as 401(k) plans and individual retirement accounts, as well as life insurance policies.

This means the person named as a beneficiary on those accounts will generally receive the money no matter what your will says. 

"You definitely see that happen," Foulks said. "We've seen accounts left to an ex-spouse and then the family has to go through a court process to try getting it back."

Be aware that 401(k) plans require your current spouse to be the beneficiary unless they legally agree otherwise.

Regular bank accounts, too, can have beneficiaries listed on a payable-on-death form, which your bank can supply.

If no beneficiary is listed on those non-will items or the named person has already passed away (and there is no contingent beneficiary listed), the assets automatically go into probate. That's the process by which all of your debt is paid off and the remaining assets are distributed to heirs. This can last several months to a year or more, depending on state laws and the complexity of your estate.

If you own a home, be sure to find out how it should be titled to ensure it ends up with the person (or people) you intend, because applicable laws can vary from state to state. Moreover, there can be other considerations when it comes to how a house is titled, including protection from potential creditors or for tax reasons when the home is sold.

It may be time for a trust

If you want your kids to receive money but don't want to give a young adult — or one prone to poor money management or other concerning behaviors — unfettered access to a sudden windfall, you can consider creating a trust to be the beneficiary of a particular asset.

A trust holds assets on behalf of your beneficiary or beneficiaries, and is a legal entity dictated by the documents creating it. If you go that route, the assets go into the trust instead of directly to your heirs. They can only receive money according to how (or when) you've stipulated in the trust documents.

The average cost to set up a trust using an attorney ranges from $1,000 to $1,500 for an individual and $1,200 to $1,500 for a couple, according to LegalZoom.com. Doing it yourself with online software could run at least several hundreds of dollars.

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