Major life events that can affect estate planning goals

The ABCs of estate planning: In essence, estate planning entails the preservation, management and distribution of the assets of an individual after their death or incapacitation due to ill health. Such assets could include houses, jewellery, cars, pensions, insurance policies, stock holdings, personal artwork collections and any other valuable assets.

The most sought-after routes for estate planning are writing a will or creating trusts. People take up estate planning for various reasons: preserve their family wealth, ensure that their dependents are taken care of, or leave behind a philanthropic legacy, etc. Estate planning isn’t just reserved for high net-worth individuals (HNIs) or Ultra-high-net-worth individuals (UHNIs). A good estate plan will ensure that a person’s assets are distributed among deserving beneficiaries as intended and without any familial conflict. Here, we highlight the major life events that call for a change to an estate plan.

Matrimony or separation: One of the major tasks during estate planning is the naming of beneficiaries for bank accounts, insurance policies, wills, and other such important assets. In the event of a marriage or divorce, the list of these beneficiaries will most likely change. For example, if a person gets married, they would most likely want the name of their spouse to be included in their estate. And in the event of a second marriage, the name of the new spouse will have to be included. Furthermore, a person would want to ensure that children from their first marriage are accounted for; this could even be applicable to an ex-spouse, to a certain extent, if the split was amicable.

Children: Having a child means a significant reassessment of life’s priorities. There can be different scenarios within this category, depending on whether the child/children in question are biological, adopted, fostered or even stepchildren. Each of these situations needs to be accounted for in the estate plan. For example, while an adopted child is a legal heir by law, a step-child, no matter how loved, will need to be officially named in a person’s estate plan as a beneficiary.

Personal wealth: This is especially crucial for HNIs and UHNIs with exceptional wealth who have investments in successful startups and young companies with the potential of turning into Unicorns. For them, estate planning can help minimise the impact of gift and estate taxes and shield assets from creditors during a person’s lifetime. It can also help extend this protection to the chosen beneficiaries and shield their inheritances from creditors and mismanagement after a bestower’s death.

Medical emergency: A medical or health emergency can affect anyone at any time. Hence, in the case of a serious health diagnosis or prolonged illness, a person must review the estate planning documents and assess who they would like to entrust with the responsibility of their financial and medical decisions in case of loss of mental capabilities or incapacitation in the future. Such documents must also be put on record and shared with financial institutions as further proof of a person’s wishes.

Death: It is sadly possible that you may outlive an intended beneficiary, successor, healthcare proxy or guardian named in your estate planning documents. Hence, it is important to keep reviewing and updating your estate plans to reflect the latest developments and remove the names in the event of a beneficiary’s demise.

Residential status: A change in residential status is also an important factor that can impact a person’s estate plan as it entails a change in tax status and many other financial compliance rules and regulations. Hence, in the event of a permanent move to another country or a change in nationality status, an estate plan must be reviewed and updated to reflect all the changes.

Not making an estate plan could mean that your hard-earned wealth and assets could go into the wrong hands, leaving your loved ones in a difficult situation.

Sreepriya NS is director and chief operating officer, Entrust Family Office