If it’s been a few years since you completed your estate plan, chances are your documents need some updating. Here are some key areas of your estate where potentially perilous gaps can crop up.
1. You’re missing critical plan components
Many individuals should consider having, at a minimum, a will, a financial power of attorney and an advance medical directive, and these documents should be reviewed by an attorney periodically and after any major life events, like a marriage, divorce, birth or death. Without them, the consequences can be serious. For example, if you become incapacitated and don’t have a financial power of attorney, your family may have to go to court to be appointed your guardian just to pay your bills.
2. You haven’t updated your beneficiaries or executors since the plan was drafted
When we talk about beneficiaries here, we mean the people named in your will or trust. Your retirement accounts and life insurance have their own beneficiary designations, which we’ll cover next.
You may have new beneficiaries you wish to add, such as grandchildren, or beneficiaries you wish to remove, since you established your estate plan. Many times, parents and grandparents want to ensure that assets are held in trust until grandchildren have reached certain ages, but their plan may distribute assets outright, perhaps against their current wishes.
The same thinking should be applied to the executor of your will. If your will lists an individual who has died, or is unable to serve, and no successors are named, the court will appoint someone else. Oftentimes, this will be a beneficiary, who may not be the person you’d have chosen for the job. That’s why it’s so important to name a successor executor and keep both your executor and beneficiaries current.
3. Your retirement account beneficiaries aren’t current
There are significant benefits to inheriting retirement savings through a beneficiary designation, as opposed to leaving these assets to your estate, and having them distributed by the terms of your will or intestate law. Passing these types of accounts on via a direct beneficiary designation generally avoids the probate process, which may help reduce time and costs. It can also give your beneficiaries more flexibility in how and when they take distributions, since naming your estate as beneficiary may result in different distribution requirements and timelines.
The catch is that beneficiary forms are easy to forget. They sit with your employer, your IRA custodian or your insurance company, not with your will, and they override whatever your will says. If you’ve been through a divorce, a remarriage, a death in the family or the birth of a child or grandchild, it’s worth confirming who’s named on each account, including your contingent beneficiaries, the backups who inherit if your first choice has passed away. Divorce, for example, doesn’t always remove a former spouse from an employer retirement plan. If their name is still on the beneficiary form, plan documents and applicable law will generally govern the distribution of benefits.
It’s also worth understanding what your beneficiaries will inherit. Under current tax law, most beneficiaries other than a spouse must empty an inherited IRA within 10 years. With a traditional IRA, every withdrawal is taxed as income, which can push heirs into a higher tax bracket, especially if they’re in their peak earning years. Roth IRA distributions, on the other hand, are generally tax free for both the owner and beneficiaries. Heirs still must empty an inherited Roth within 10 years, but they can let it grow tax free for up to a decade before the funds must be fully distributed.
4. You picked a trustee without thinking through your job
This is a common issue we encounter when individuals and couples plan their estate. People often name a family member or close friend as a trustee, but most of the time, these individuals are unaware of what being a trustee involves, let alone the fiduciary responsibilities that come with the role, meaning the legal duty to act in the beneficiaries’ best interest, keep careful records and avoid conflicts of interest. In reality, it can be a huge burden to place on someone you care about.
Consider the available trustee options:
Family member or friend. A trusted individual may still be the right choice, but carefully consider whether that person has the time, experience and willingness to serve.
Professional trustee. A bank or trust company can provide expertise in asset management, administration and fiduciary responsibilities while relieving loved ones of that burden.
Serving together. A family member can also serve alongside a professional trustee, combining personal knowledge with professional experience.
5. You haven’t made plans for your personal effects
Though not as critical as other aspects of an estate, leaving it to beneficiaries to determine the ownership of personal items, like jewelry and family heirlooms, can cause a tremendous amount of family discord. It’s easy to divide an investment account, but it’s not as easy to split an engagement ring. If you do not spell out who should get your personal items when you die, you may unintentionally leave your loved ones with a host of difficult decisions to make, which can put unnecessary stress on family relationships.
If you’ve already signed your will, a codicil (a short amendment to your will) can spell out who gets what. Depending on your state, your attorney may also be able to set up a separate written list that’s easier to update.
6. Your life insurance policies haven’t been reviewed in years
Many retirees own life insurance policies that haven’t been reviewed since they were originally purchased. We recommend having them reviewed to determine whether they continue to align with their intended purpose. In many cases, a review turns up changes like an outdated beneficiary or an ownership structure that pulls the death benefit into your taxable estate, along with other planning considerations that may warrant further review.
One of the most common issues we see with a neglected policy is that it hasn’t been funded properly and is headed toward a lapse. This is especially common with universal life insurance, a type of permanent policy where the premiums and cash value can change over time. If the cash value runs low, keeping the policy in force typically requires a hefty premium.
7. Your plan does not reflect the current estate tax exemption
The federal estate tax exemption has jumped from $2 million per person in 2008 to $15 million in 2026. For most families, federal estate tax simply isn’t a concern anymore, though a number of states, including Pennsylvania, have their own estate or inheritance taxes with much lower thresholds.
The bigger risk is an outdated plan. Many older plans for married couples automatically move as much as possible into a trust at the first spouse’s death. With today’s exemption, that may cause a larger portion of assets to be directed into trust structures than originally intended, limiting the surviving spouse’s flexibility and potentially creating capital gains tax considerations that may not align with current planning objectives, all to solve a tax problem most families no longer have. If your plan was written before 2018, it’s worth having your estate attorney and our wealth planning team take a fresh look.
8. You’ve moved, but haven’t updated your estate documents
If you move from one state to another, it is generally advisable to have an attorney familiar with that specific state’s laws review your documents to ensure they are compliant with your state of primary residence.
If you own property in multiple states, your executor will have to go through the probate process in every state in which you own property. In these cases, individuals may wish to discuss with their estate planning attorney whether holding property in a revocable living trust may be appropriate, as it generally avoids the probate process and the costs and time associated with it.
Medical powers of attorney and other advanced directives executed in a previous state also may not be recognized in your new state, so it’s important to have these reviewed by an attorney.
Final thoughts
It’s easy to view estate planning as a “one and done” process, but life rarely stands still. Marriages, divorces, new grandchildren, a move or a change in tax law can all quietly pull your plan out of step with what you actually want. The good news is that most of these gaps are straightforward to fix once you know they’re there.
At Confluence Financial Partners, reviewing estate plans is a regular part of how our wealth planning team works with clients. We look at how your documents, beneficiary designations, account titling and insurance fit together, identify areas that may warrant further review, and coordinate with your estate attorney regarding potential updates. If it’s been a few years since you’ve looked at your plan, we’d be glad to help.
Confluence Wealth Services, LLC d/b/a Confluence Financial Partners is a SEC-registered investment adviser. Registration of an investment adviser does not imply any level of skill or training. The content on this page is provided as general information only and should not be construed as an offering of advisory services or a recommendation to buy or sell any security or financial instrument by Confluence Wealth Services, LLC. Investing involves risk; clients may experience a profit or a loss. Confluence Financial Partners does not provide legal advice. Estate planning strategies should be reviewed with qualified legal and tax professionals who are familiar with your specific circumstances. Please refer to our Form ADV Part 2A and Form CRS for further information regarding our investment services and their corresponding risks. Additional information about Confluence Wealth Services, LLC is available on the Investment Adviser Public Disclosure (IAPD) website at: www.adviserinfo.sec.gov.
