As the end of the year approaches, it’s the perfect time to revisit your estate plan. Changes in your life and in the law might make your current plan outdated. Estate planning is a crucial step in protecting your legacy, ensuring that your wishes are honored, and that your loved ones are cared for. Here are five key updates to make before January 1st.
1. Review and Update Your Will 
A will is one of the most important components of any estate plan. It’s essential for dictating how your property will be distributed after your death, and it can also provide for the care of minor children or other dependents.
As the year draws to a close, take some time to review your will. Have there been any major changes in your life that may affect its content? Perhaps you’ve had a child or grandchild, gotten married, or divorced. Any significant change in your family structure should be reflected in your will to avoid confusion or conflict later on.
Additionally, it’s important to check if your assets have changed over the year. Have you acquired more property, investments, or valuable possessions? These should be clearly accounted for in your will. If you haven’t updated your will in a while, it may be time to ensure that everything is properly addressed, and all instructions are clear. Without a valid will, your estate may be distributed according to state laws, which might not align with your wishes. A will helps ensure that your desires are carried out and that your loved ones are taken care of the way you envision.
If you don’t yet have a will, now is the time to create one. A well-crafted will can provide peace of mind knowing your wishes will be followed and that your family won’t face complications after your passing. Seek guidance from an experienced estate planning attorney to ensure that your will is legally sound and covers all necessary aspects.
2. Consider a Trust for Greater Control
A trust can offer several advantages over a traditional will, especially for those with larger or more complex estates. While a will goes into probate court after your death, which can be a time-consuming and expensive process, a trust can allow your estate to bypass probate entirely, saving your loved ones time and money. Additionally, a trust can offer greater privacy because it does not become a matter of public record as a will does.
Trusts can also provide more control over how and when your assets are distributed. For example, you can create a trust that holds assets for minor children until they reach a certain age, or you can designate a trustee to manage the funds for a beneficiary who may not be financially savvy. You can even set conditions on how the funds can be used.
Trusts are not just for the wealthy, but for anyone who wants to ensure their assets are distributed in a more controlled and private manner. They can be particularly helpful if you own real estate, business interests, or have complex family dynamics. If you’ve recently accumulated significant wealth or made substantial investments, consider speaking to an estate planning attorney to explore whether setting up a trust might be beneficial for your estate.
3. Update Beneficiaries on Retirement Accounts and Life Insurance Policies
Beneficiary designations on retirement accounts, life insurance policies, and other financial assets can supersede what’s written in your will, making it critical to keep them up to date. If you’ve experienced major life changes—such as a marriage, divorce, or death of a beneficiary—you should revisit these designations to ensure they reflect your current wishes.
It’s not uncommon for individuals to forget to update their beneficiary forms after a divorce or remarriage, which could result in unintended people inheriting your assets. For example, if your ex-spouse is still listed as your primary beneficiary, they might inherit your retirement funds, even if your will states otherwise.
Also, ensure that the beneficiaries are clearly defined for each asset. Whether it’s a life insurance policy, IRA, or 401(k), double-check that the names listed are correct. Consider adding a secondary or contingent beneficiary in case your primary beneficiary predeceases you. This simple update can prevent legal complications after your death.
Review your financial accounts and any policies that may have a beneficiary designation to ensure that everything is accurate and up to date. If you’ve recently acquired new assets, be sure to designate a beneficiary for them as well. This step is vital in making sure that your estate plan functions seamlessly.
4. Review Your Power of Attorney and Healthcare Directives
A power of attorney (POA) and healthcare directive are essential documents that allow someone you trust to make decisions on your behalf if you become incapacitated. A financial power of attorney allows an agent to manage your financial affairs, while a healthcare directive specifies your wishes for medical treatment if you are unable to communicate them yourself.
At the end of the year, it’s important to review these documents to ensure they still reflect your desires. Has your agent or trusted person changed? If so, you’ll need to update the document. If your healthcare preferences have changed, you should also update your healthcare directive. For example, you may want to modify your wishes regarding life support or organ donation.
These documents should be updated regularly to ensure that they reflect your current wishes, especially as your health care needs change. If you don’t have a healthcare directive or power of attorney in place, now is the time to consider setting them up. These documents can be invaluable in a medical crisis, allowing your loved ones to act quickly on your behalf.
Additionally, you should have conversations with your designated agents to ensure they are aware of your wishes and are prepared to step in if needed. Keep copies of these documents in a safe place and ensure that your family or loved ones know where to find them.
5. Take Advantage of Tax-Efficient Giving
As the year winds down, consider making charitable donations to reduce the size of your taxable estate and take advantage of tax deductions. Giving to charity can lower the taxable value of your estate, potentially reducing estate taxes upon your death. If you have charitable organizations that are meaningful to you, now is a great time to make contributions that can benefit both your legacy and the cause.
A strategy like charitable giving can provide you with significant tax benefits, especially if your estate exceeds the federal estate tax exemption limits. You can make gifts to individuals or organizations, but be sure to keep track of all charitable donations for tax purposes. There are also a variety of tax-efficient giving methods you can explore, such as setting up a charitable remainder trust or gifting appreciated assets, which can provide even greater benefits.
Review your estate planning documents to ensure that charitable gifts are included, if desired. If you want your estate to benefit a charity or multiple charities, discuss this with your estate planner to ensure the funds are directed in a way that aligns with your intentions.
As we approach the new year, it’s important to ensure your estate plan reflects your current wishes. A year-end review allows you to address any life changes, financial updates, and legal modifications to safeguard your legacy and your loved ones. If you’re unsure where to begin, it’s wise to consult with an experienced estate planning attorney to make sure that your plan is comprehensive, up to date, and legally sound.
By taking the time now to update your will, trust, beneficiaries, powers of attorney, and charitable giving plans, you can start the new year with confidence, knowing your estate plan will work as intended when the time comes. For assistance with any of these updates, contact Bowen Law Firm, PLLC, your trusted Houston estate planning attorneys.