Major Life Changes and Updates to Estate Planning

People can be unaware and lax about updating their estate planning, both when major life events occur and also after time, as life incrementally creeps up over the years; the second shortcoming leaves people with misplaced confidence in old estate planning documents that are outdated as the law and/or the estate planning goals materially changed.

Let us discuss some possible life scenarios within different generational contexts where they often occur. Naturally, this discussion involves generalizations and assumptions; individual situations may vary.

When a minor becomes an adult they are often unaware that their parents no longer have the legal authority to control their health, property and legal affairs. As adults they now need a power of attorney and an advanced health care directive to protect themself in the event of an incapacity; otherwise a court supervised conservatorship may become necessary.

Since January 1, 2023, California also recognizes Supported Decision-Making which may enhance the capacity of a disabled person with border-line understanding to enable them to sign estate planning documents, including a Supported Decision-Making agreement itself.

Furthermore, when young people get married and when they have children their estate planning goals expand to protect not only themselves but also their dependents. Specifically, this includes transferring their real property into a living trust to both avoid probate and to control assets for the benefit of their dependents. It also means updating death beneficiary designations on retirement accounts and life insurance policies accordingly.

Next, a middle aged person needs to consider updates if and when they get divorced or remarried, adopt children or raise step-children. Specifically, a middle aged person in a second marriage is often concerned about preserving the separate property character of assets they earned or inherited prior to marriage. They may also be concerned about balancing how their estate plan provides for their new spouse and their own children from before the second marriage, often a careful balancing act.

In second marriages, a married person may want a trust just for their own separate property assets to avoid co-mingling separate assets with community property assets acquired in the second marriage. The separate property trust may provide some support for the surviving spouse, including, for example, lifetime use of a residence and also protect their children’s inheritances. A second trust may be used to hold community property assets if the couple acquires a residence together that will benefit the surviving spouse.

Also, a middle aged person with a disabled dependent child (e.g., developmentally disabled) will consider how best to protect their children if and when they are no longer able to do so themselves. They may consider placing assets into a special needs trust that will supplement and preserve any needs based government benefits received by the child.

An elderly person needs updates to their estate plan if and when their spouse dies and/or if a child unfortunately were to predecease them. Also, they will need updates when they sell their real property and move into an assisted living, skilled nursing or other dependent care situation.

A person who has sold their real property may also no longer need a living trust and may, depending on the situation, prefer to avoid any post-death administration of their estate, including a trust administration. They can do so using pay on death bank accounts and transfer on death beneficiary forms to brokerage investment and retirement accounts. The elderly person may still need a will (usually), a power of attorney, advanced health care directive, and (nowadays) possibly a supported decision-making agreement.

Too often people neglect to administer and/or to update their estate planning (such as after the death of a spouse). Anyone whose life situation has substantially changed, or more than 5 years has elapsed since when they last did estate planning, may want to revisit their estate planning arrangements.

The foregoing raises a variety of concerns. It is neither exhaustive nor legal advice. Consult an estate planning attorney for guidance.

Dennis A. Fordham, attorney, is a State Bar-Certified Specialist in estate planning, probate and trust law. His office is at 870 S. Main St., Lakeport, Calif. He can be reached at Dennis@DennisFordhamLaw.com and 707-263-3235.