Estate planning is a crucial aspect of financial management that often gets overlooked. It’s not just for the wealthy or older people - anyone who has people relying on them financially should consider it. Here’s a guide to help you understand when to start estate planning and how often to update your plan.

When Do You Need to Start Estate Planning?

The simple answer is as soon as you have people relying on you financially. This could be because you’re investing in assets with someone else, taking on debt with someone else, or otherwise combining your finances.

One of the most obvious situations where you need to have a plan is if you have small children. However, there might be more people relying on you than you realize. For instance, if you’re supporting a parent or sibling, or if you have business partners who would be affected by your sudden death or incapacitation, you need an estate plan to explain what happens to your part of any asset or debt that you co-own with someone else. Hopefully, your co-owners will do the same courtesy for you.

How Often Should You Update Your Estate Plan?

Most plans start to need updates after about three years. It’s rare to go more than five years without needing any updates. However, events are more important than time. Critical life events such as a change in family due to marriage, divorce, birth, or death often necessitate an update to your estate plan.

Another situation that requires updates is when there is ambiguity around certain relationships. This is commonly seen when someone is living in a home that they have no documented right to live in (such as when an adult child is living with parents in their home) or when people are living out of alignment with their marital status (such as when people are living like a married couple even though they’re not married or are living separately but are married).

The Importance of Updating Your Estate Plan

Estate distributions are a zero-sum event, meaning that every dollar that goes to one person is a dollar that is not going to someone else. We have seen situations where someone might be able to prove they were married to the deceased person, in which case they will get that person’s entire estate. But if they are unable to prove they were married successfully, then they will get nothing, and everything will go to the deceased person’s biological family instead. This dramatically different result can turn on a very small number of facts.

In conclusion, estate planning is not a one-time event but an ongoing process. As your life changes, so too should your estate plan. Regular updates ensure your wishes are respected, and your loved ones are protected. If you have any questions or need assistance with your estate planning, don’t hesitate to contact a professional.