Amid the demands of everyday life, updating your estate plan may feel like something you can put on hold. “People become so busy building their estate, they may lose focus on what’s going to happen to it,” says Jen Galvagna, Head of Trust, Estates, and Tax for Bank of America. In the 2024 Trends in Trust and Estate Planning survey, sponsored by Bank of America, legal and financial professionals reported that just 27% of clients update their plans every one to four years, and only 39% do so every five to nine years.
Yet, as your life evolves, your estate plan should change as necessary to reflect your current wishes. Regular reviews (every year or every other year) may help you stay ahead of any planned or unexpected life events. Bringing your family or beneficiaries into some of these conversations may help avoid unnecessary family stress down the line. One-third of the respondents in the 2024 Bank of America Private Bank Study of Wealthy Americans said that issues related to inheritance caused emotional strain for their families.
While there are any number of reasons to update your estate plan, here are five of the more common changes that can trigger important updates.
1. Your children’s needs have evolved.
When you start a family, your estate plan may amount to a simple document (known informally as an “I love you” will) stating that everything goes first to your spouse and ultimately will be divided equally among your children. Yet as your children move through childhood and into adulthood, your estate plan may need to adjust to their changing lives and circumstances.
“If one child has a disability, you may adjust your estate plan accordingly to help ensure they’ll have the money they need for support throughout their lives,” says Colin Korzec, Head of Trust and Estate Settlement Services for Bank of America. Or, if you’re concerned that one of your children may be a spendthrift, having the inheritance go through a trust, with a trustee in charge of how and when distributions are made, offers some protection.
Later, your plan might also reflect your children’s different career choices—for example, by giving more to a child working in a low-paying career that may not offer the potential to accumulate wealth, Korzec says. Such decisions need to be handled sensitively, says Sara Dorosti, a Wealth Strategist at Bank of America. “If there is a trust, you may still want to provide each child with an equal share,” she says. “You could help the less affluent child with lifetime gifts to pay for a wedding or help with a home purchase.”
2. A change in your marital status.
“A divorce decree will often dissolve an existing trust as part of the financial settlement. People sometimes mistakenly assume that covers everything.”
— Wealth Strategist, Bank of America
While divorce presents an obvious need to rethink an estate plan, the emotions involved and the desire to move quickly to the next phase of life make it easy to overlook key details or put off making the necessary updates. “A divorce decree will often dissolve an existing trust as part of the financial settlement. People sometimes mistakenly assume that covers everything,” Dorosti says. It’s vital to review all financial and legal documents that might name the ex-spouse. “If your marriage ends, make sure your power of attorney and medical directives reflect your new marital status,” she adds.
“Also, be sure to change the beneficiary designations for your IRA, your 401(k) and your life insurance,” says Korzec. “Forget to make those changes and your death could wind up being a windfall for an ex-spouse and a loss for your surviving spouse, if you’ve remarried, and for your heirs.”
3. Your son or daughter marries or enters a long-term partnership.
A child’s pending marriage naturally evokes parents’ generosity. Yet, if you have significant assets to hand down to the next generation, now is an important time to consider ways to protect family wealth even as you help give the couple a financial head start.
“In most cases, young married couples commingle their assets—mixing the money they brought into the marriage with money they generate while married,” Dorosti says. Especially in states with community property laws, this means everything will be split evenly in case of divorce. If you gift your child’s inheritance outright, money you hoped would benefit them throughout their lives could wind up leaving the family. “One way for parents to get ahead of that situation is through a trust designed to prevent the inheritance from being commingled,” she says. In this case, while your child receives periodic distributions that can help support the couple’s lives together, the bulk of the money remains protected.
4. Your company has grown, or your succession plan has evolved.
It’s not just our lives that change—so do things you’ve created. Suppose a business you started years ago to support your young family has taken off. Now you see it as a family enterprise that could live on after you’re gone. “A simple will dividing things equally could endanger that dream, especially if some kids want to manage the business while others don’t,” Galvagna says. “Rethinking the estate plan might involve setting up trusts and making gifts of voting and nonvoting shares to help protect your business.” Another option could be to leave the business to the child or children involved in running it, while compensating the others as beneficiaries of a life insurance policy.
5. The value and scope of your assets have changed.
“Revisiting your plans every year or so with your advisors can help you identify and make adjustments when changes in assets have created imbalances among your beneficiaries.”
— Head of Trust and Estate Settlement Services, Bank of America
Whether you own a business or not, your overall wealth comprises a range of assets that may include everything from marketable securities and cash to real estate, commodities, family heirlooms, artwork and more. As you buy or sell assets, or as market forces drive their individual values up or down, estate plans you created years ago may create inequities for your beneficiaries. Suppose you have three real estate properties of roughly equal value that you plan to leave to three children. “If you sell one of those properties and forget to adjust your estate documents, the child who was supposed to receive it could wind up with nothing,” Korzec says. “Revisiting your plans every year or so with your advisors can help you identify and make adjustments when changes in assets have created imbalances among your beneficiaries.”
Communicating your intentions
When changes to your family and your assets result in alterations to your estate plan, you’ll need to consider how to communicate what you’ve done. While you could simply let family members find out after you’ve passed away, that approach can create additional issues. In our Study of Wealthy Americans, 32% of respondents aged 21–43 cited lack of communication around estates as a source of family strain. “If you’re comfortable letting them know about the changes while you’re still around, that may be preferable to having them hear about it from a third party,” Korzec says.
How Bank of America can help
“Periodically review the list of people you’ve named to step in on your behalf, and consider replacing any who may no longer be able to serve.”
— Head of Trust, Estates and Tax, Bank of America
Frequent conversations with your advisor about what’s going on in your life can help ensure that your estate plan continues to carry out your wishes as intended. “Also, periodically review the list of people you’ve named to step in on your behalf, and consider replacing any who may no longer be able to serve,” Galvagna suggests. A corporate trustee such as Bank of America, serving as trustee or as co-trustee with a family member or friend, can help provide continuity across generations.
If your family or your wealth has changed, or it has been a while since you revisited your estate plan ask your advisor for a meeting.
