Reviewing Your Estate Plan after the Death of a Loved One

The death of a loved one is never easy. Regardless of your relationship with the deceased (blood relative, life partner, or close friend), you need space and time to process and grieve your loss. Once you have had time to cope with all that has happened, you should consider updating your estate plan in light of your loved one’s death. The following should be a guide for you during this difficult time.

Although your estate plan primarily focuses on what will happen if you become incapacitated (unable to make or communicate your wishes) or die, the death of a loved one can have a major impact on your planning. If you have an estate plan, one of the first items you need to do when a loved one dies is to review the documents with the following questions in mind:

Was your deceased loved one named as an heir to money or property under your last will and testament or a revocable living trust (RLT)? If so, do your documents address what happens to that money or property should your loved one predecease you?

One of the main objectives of having a will or an RLT prepared is for you to legally state in writing what will happen to your estate at your death. Because you may have strong feelings about who should receive the money and property, it is essential to consider who should receive them if your first choice dies before you.

If your will does not list a backup heir (contingent beneficiary), the gift in question may be canceled, and the accounts and property could become part of your general estate and will be distributed according to the remaining terms of your will. This cancellation can be problematic if your beneficiary has descendants whom you would like to receive that portion of the inheritance. You will need to review your will or trust to determine if gifts will pass to a pre-deceased beneficiary’s descendants or not.

Whether or not the documents state as much, some states have enacted anti-lapse laws to protect against this result. In these jurisdictions, the beneficiary’s heirs will receive the gifts. There are a few caveats and distinctions from jurisdiction to jurisdiction. Some states limit the heirs who can benefit from anti-lapse laws to blood relatives.

Regarding an RLT, there are typically provisions in the document that determine what happens to a gift if the beneficiary is deceased. However, if it has been some time since your RLT was prepared, review the document to make sure that it still reflects your wishes. An up-to-date RLT gives your trustee clear instructions about how to handle your accounts and property, making the administration process more manageable and reducing the possibility of fighting among family members with differing opinions.

Did you select your deceased loved one to be one of your trusted decision makers?

As part of your comprehensive estate plan, you selected several different important decision makers to act on your behalf if you become incapacitated or to wind up your affairs after your death. If your deceased loved one held any of these positions, make sure there is a backup. If not, update the document. If there is already a backup, update your document anyway to name a backup for your new first choice or to remove your deceased loved one’s name to prevent confusion when a third party reviews the document.

Personal representative (executor): This trusted individual, appointed in your last will and testament, is responsible for collecting all your accounts and property, paying your outstanding debts, and distributing your money and property to your named heirs. This person’s task is to wind up your affairs, which can be time-consuming. If your chosen personal representative dies before you and there is no named backup, the probate court will use your state’s laws to determine who is next in line to serve as personal representative when you die.

Co-trustee or successor trustee of your RLT: Serving either with you (co-trustee) or after you (successor trustee), this trusted person or entity is charged with managing, investing, and distributing the money and property from your RLT to you during your lifetime and to your chosen beneficiaries after your death. If your deceased loved one was a co-trustee, review your trust agreement to see what happens next. There may be a provision that either allows you to continue serving as sole trustee, names a specific person to step in and serve with you, or describes how to determine who your new co-trustee will be.

If you are currently the only trustee and your successor has died, nothing noticeable will happen with respect to how your trust is managed right now. If you die and there is no successor trustee, your beneficiaries will need to look to your trust agreement for guidance on how the vacancy can be filled. Your trust may provide that a certain number of your beneficiaries can appoint a new trustee without court involvement. Or your trust might require that the court approve any potential trustee. The outcome will depend on the trust’s wording and your state’s laws. Because the trust is revocable during your lifetime, while you are still able you can change any of these provisions to adapt to any changes that may arise.

Agent under a financial power of attorney: Your agent is an individual you choose to carry out financial transactions (such as signing a check or opening a bank account) on your behalf. If the person you selected is deceased and there is no named backup, no one else has authority to act on your behalf. Depending on the reason you appointed the agent, this situation may not be of immediate concern. But if you become incapacitated, your loved ones may have to go to court and have someone legally selected to take care of your financial matters. Not only is this process time-consuming during a stressful time, it can be expensive and exposes to public view personal details of your condition and family dynamics.

Agent under a medical power of attorney: Because this person will act only in the event you cannot make decisions or communicate your medical wishes, you may not feel an immediate need to revise your medical power of attorney. However, the unexpected can happen at any time, and this is one of the worst times when your loved ones must go to the probate court to have a guardian appointed to make medical decisions for you. The hospital or facility may have standard procedures for working with next-of-kin, but this may vary from facility to facility. This scenario has two drawbacks. First, the judge will look to state law in choosing the appropriate person, who may not be the person you would have chosen. Second, the selected person may not share your views about your medical care.

Guardian for your minor child: If you are the only living parent or if the other legal parent is unfit to care for your minor child and your chosen guardian predeceases you, the probate court will look to state law to determine who is next in line to raise your child. As with other roles, the selected person may not be the one you would have chosen and, absent input from you, the judge may have limited information when making this critical decision.

These are just some of the things you should review following the death of a loved one. If you have any questions, don’t hesitate to reach out.