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How Regular Legal Reviews Can Save Your Estate

Posted by James Burns | Jun 30, 2024 | 0 Comments

Estate planning is a critical task that ensures your assets are managed and distributed according to your wishes. However, it's not a one-time event. Regular legal reviews are essential to keep your estate plan current and effective. According to a survey by Caring.com, only 33% of Americans have a will or living trust, highlighting the need for ongoing legal reviews to avoid potential pitfalls.

1. Keeping Up with Changes in the Law

Tip: Stay Informed on Legal Updates

Estate laws are continually evolving. For instance, changes in federal estate tax laws or state-specific regulations can significantly impact your estate plan. It's essential to review your estate plan annually to ensure it remains compliant with current laws.

Mistake to Avoid: Ignoring Legislative Changes

Ignoring legislative changes can lead to unintended tax liabilities. For example, the California Probate Code Section 21310 states that certain actions can invalidate a trust. Regular reviews can help you avoid such pitfalls.

Example:

Consider a fictional scenario where John, a resident of Aliso Viejo, set up a trust in 2010. Without regular reviews, he was unaware of changes in the law that impacted his trust's validity. By 2020, his trust was partially invalid, leading to costly probate proceedings for his heirs.

2. Life Events That Necessitate Plan Updates

Tip: Adjust Your Plan After Major Life Changes

Significant life events such as marriage, divorce, birth of a child, or the death of a beneficiary necessitate updates to your estate plan. Regular reviews ensure that these changes are reflected accurately in your documents.

Mistake to Avoid: Neglecting to Update Beneficiaries

Failing to update beneficiaries can result in assets being distributed contrary to your current wishes. California Family Code Section 2040 underscores the importance of updating estate plans post-divorce to avoid ex-spouses inheriting assets.

Example:

Imagine Susan from Orange County remarried but did not update her will to include her new spouse. Upon her death, her assets were distributed according to her old will, causing significant distress and legal battles for her current family.

3. Evaluating Asset Performance and Distribution

Tip: Regularly Assess Asset Values

The value of your assets can fluctuate over time. Regularly reviewing your estate plan allows you to adjust distributions based on current asset values, ensuring fair and equitable distribution among beneficiaries.

Mistake to Avoid: Overlooking Asset Reallocation

Not reallocating assets can lead to unequal distributions. For instance, if you initially allocated stock to one child and real estate to another, significant changes in market values could create disparities. Regular reviews help balance these allocations.

Example:

Tom from Aliso Viejo allocated his tech stocks to his daughter and real estate to his son. Over ten years, the stock value tripled while real estate values stagnated. Without regular reviews, this led to an unintentional inequity in inheritance.

4. Ensuring Executor and Trustee Suitability

Tip: Verify Executor and Trustee Competence

The individuals you appoint as executors and trustees play crucial roles in managing and distributing your estate. Regular reviews ensure that these appointees remain suitable and capable of fulfilling their duties.

Mistake to Avoid: Retaining Unsuitable Appointees

Retaining unsuitable executors or trustees can lead to mismanagement. Under California Probate Code Section 8502, courts can remove an executor for various reasons, emphasizing the need for careful selection and regular reassessment.

Example:

Alex appointed his brother as the executor of his estate. Over time, his brother developed health issues that made it challenging to perform his duties. A regular review would have highlighted the need to appoint a new executor.

5. Addressing Tax Implications

Tip: Plan for Tax Efficiency

Tax laws impacting estates can change. Regular reviews help identify opportunities to minimize tax liabilities, ensuring more of your assets go to your beneficiaries.

Mistake to Avoid: Overlooking Tax Planning

Failing to incorporate tax-efficient strategies can significantly reduce the value of your estate. For example, changes in the federal estate tax exemption could impact your value of your estate if not regularly reviewed.

Example:

Linda from Orange County had a significant estate. She initially set up her estate plan when the federal estate tax exemption was lower. Over the years, she did not review her plan, missing opportunities to adjust her strategies in light of higher exemptions, leading to unnecessary tax burdens on her heirs.

6. Protecting Against Legal Challenges

Tip: Regularly Update Legal Documents

Keeping your legal documents up-to-date helps protect your estate from challenges. Regular reviews ensure that all documents reflect your current wishes and are legally sound.

Mistake to Avoid: Outdated Legal Documents

Outdated documents can be contested, leading to costly legal battles. According to California Probate Code Section 6100, inconsistencies in your will or trust can provide grounds for contesting your estate plan.

Example:

Michael from Aliso Viejo had a will drafted in the 1990s. Over time, several of his beneficiaries passed away, and his financial situation changed. Without regular updates, his outdated will was contested, leading to a prolonged legal battle.

7. Ensuring Health and Medical Directives Are Current

Tip: Regularly Review Health Directives

Health care directives and powers of attorney should be reviewed regularly to ensure they reflect your current wishes and appoint the right individuals to make decisions on your behalf.

Mistake to Avoid: Neglecting Health Directives

Neglecting to update health directives can result in inappropriate or unwanted medical decisions. The California Health Care Decisions Law (Probate Code Section 4600) highlights the importance of clear and current health care directives.

Example:

Emma had named her sister as her health care proxy 20 years ago. After her sister moved out of state and they grew apart, Emma's health care decisions were no longer aligned with her sister's understanding of her wishes. A regular review would have allowed Emma to appoint a more suitable proxy.


Conclusion

Regular legal reviews are crucial for maintaining an effective and compliant estate plan. By staying informed about changes in the law, adjusting for life events, evaluating asset performance, ensuring suitable executors, planning for taxes, protecting against legal challenges, and keeping health directives current, you can safeguard your estate and provide peace of mind for your loved ones.

For expert assistance with your estate planning needs, contact the Law Office of James Burns at (949) 305-8642 or visit www.jamesburnslaw.com. With over 24 years of experience serving Aliso Viejo, Orange County, and California, James Burns is dedicated to helping you secure your estate for the future.

About the Author

James Burns

Estate Planning, Asset Protection, Business and Real Estate Transactions, nutraceutical Law and franchising:

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