Reviewing Estate Plans: The New Years Resolution Everyone Avoids (1Q20 Newsletter)

Updated: Dec 8, 2020

January 15, 2020

CWC President Chris Weil explains why one of our core activities is to undertake a review of client family financial circumstances at least once a year.

#estateplanning2020 #nyresolutions #planningahead #problemsolving #willsandestates #cwcculture

“Review my estate plan” is not usually high on the list of typical New Year’s resolutions. Nor will your heart likely skip a beat (as it might, for example, if someone slips you a hot stock idea) when your lawyer or your accountant or your financial advisor tells you that it’s time to update your estate plan. Estate planning – like going to the dentist – is one of those activities most people view as at best a bore and at worst a trial. Who wants to plow through thirty or forty pages of densely written text, some of which (even despite your attorney’s best efforts to simplify) remains incomprehensible? And what’s worse: at some level you know you’re in the process of memorializing plans for an event you almost certainly don’t want to happen, that is going to have some serious (and, at least perhaps, unintended) consequences.

So you put “estate planning” on your to-do list – where it remains with your other aspirational “objectives” (lose weight, read War and Peace, collect debt from brother-in-law, visit mother more often). Your intentions are honorable, but somehow another year goes by and “estate planning” never makes its way to the top of the list. Which is a shame ... or worse than a shame. The documents that constitute your estate plan fix your intentions as to who gets what, when and how much (and who makes the decisions as and when decisions have to be made) at the moment of document execution.

That said, it may be an exaggeration – but not a misrepresentation – to say that every estate plan, even the simplest and the most elegant, is basically obsolete the day after it is executed.

Why? Because the documents, the terms and conditions of which are fixed, reflect a tacit assumption that the lives of you and your family will remain unchanged, such that what was applicable in your plan at the time of signing will be applicable at the time some future event causes plan provisions to be triggered. But life doesn’t work that way. Plan terms and conditions are static, but lives are dynamic. There are (again, to exaggerate) a thousand changes in life circumstances over time that should, but often don’t, trigger so much as a tweak, let alone a substantive modification, to your estate plan.

The law recognizes this static versus dynamic “disconnect” and so provides for plans to be amended or restated as and when life circumstances dictate a needful change. But see paragraphs one and two above. We often discover client plans written five or even ten years ago or more with no changes since then, even though current client circumstances are materially different.

How different? If I had the time, and you had the patience, I probably could put together a list of “a thousand material changes in life circumstance that should trigger review of an estate plan,” but here are ten representative ones:

  • change in state of residence;

  • divorce;

  • disability or other special needs of a child or grandchild;

  • cognitive issues with one (or both) spouse(s);

  • significant income discrepancies between adult children;

  • insufficient liquidity to pay estate tax liability (creating a need to borrow or sell assets);

  • material increases (or decreases) in family wealth;

  • guardianship responsibilities;

  • uncollectable debt owed to parents by an adult child; and

  • the creation