While it is usually better to have any estate plan than no estate plan at all, an out-of-date plan or poorly made plan could end up doing more harm than good.
Estate planning is not something you do once and forget about. It does not take long to revise it once a year and check if you need to adjust for anything. For example, if you have bought or sold a property, gained or lost assets or gained or lost a spouse or children, you need to update your plan to reflect this.
Why do you need to update your estate plan?
The main goals of an estate plan are to look after you in your old age and transfer assets to your family in a tax-efficient way. Tax laws, health care laws and your financial and family circumstances will all change over time. If you do not keep your estate plan up to date, three things could happen:
- You could end up less prepared for retirement or ill health than you realize
- You could pay more tax than necessary
- Your estate could go to the wrong people
Understanding how changes to tax laws will affect your estate plan requires knowledge of the topic. At the very least, you should check in with your legal advisor every time the government changes, as it can often bring significant changes which you may need to adapt your plan for.
There is one more element key to avoiding an estate planning disaster — you need to talk to your family about your plan. If there are surprises in your will, it could lead to family disputes over your estate. If you leave a considerable amount of wealth to someone, it could harm them if you have not prepared them to handle it.