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Aligning your estate plan with financial realities: a tax season guide

by Legacy Plan
March 26, 2024

Tax season, marked by the meticulous gathering of financial documents and receipts, serves as a timely reminder for an equally important but frequently overlooked financial task: reviewing and updating your estate plan and beneficiary designations. This practice goes beyond mere financial accounting and is a crucial exercise in ensuring that your legacy and future intentions align with the evolving landscape of your life.

Estate planning is a dynamic process, not a static one. It should adapt to reflect significant changes in your family, finances and personal aspects of life. As you compile your financial records for tax purposes, you also compile a comprehensive overview of your current financial standing. This overview provides an invaluable snapshot, offering clarity on assets, liabilities and overall net worth – all key components of an effective estate plan.

The act of reviewing and updating your estate plan and beneficiary designations during tax season can prevent future legal and emotional complications for your heirs. It's not uncommon for major life events such as marriages, divorces, births or deaths to occur between these annual financial reviews. Each of these events can have a profound impact on how you might wish to distribute your assets. Failure to update your estate plan to reflect these changes can lead to unintended consequences, such as assets being allocated to outdated beneficiaries or not in accordance with your current wishes.

Tax season also prompts a close examination of your financial growth or shifts over the past year. This examination might reveal changes in asset values, acquisitions or disposals of property or modifications in investment portfolios – all of which could influence your estate planning decisions. For instance, an increase in asset value might warrant a redistribution of assets to avoid potential tax burdens for your heirs, or newly acquired property may need to be integrated into your estate plan.

In essence, the convergence of tax season and estate planning offers a practical and timely opportunity to ensure that your estate plan is not only up to date but also a true reflection of your current financial situation and personal wishes. By taking the time to review and update these crucial documents now, you can rest assured that your estate will be managed and distributed according to your most recent desires, bringing peace of mind to both you and your loved ones.

What is the connection between tax preparation and estate planning?

The annual ritual of preparing tax returns, often viewed solely as a financial obligation, can serve a dual purpose as a strategic moment for estate planning. This process, which requires a thorough collection of financial information, presents a unique opportunity to conduct a holistic review of your estate plan. It's a time when you're already delving into the intricacies of your financial life, making it an ideal moment to ensure that your estate planning documents are in alignment with your current financial reality.

The task of tax preparation often necessitates a detailed look at various forms of income, investments, property holdings and other assets. Similarly, it involves an assessment of debts and liabilities. This comprehensive financial review provides a clear picture of any changes in your assets and liabilities over the past year. Significant changes, such as an increase in investment value, acquisition of new property, sale of assets or changes in debt levels, can have implications for your estate plan.

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As you compile and review these financial details for tax purposes, it's important to consider how these changes might affect your estate planning goals. For instance, acquiring new assets such as property or stocks may require you to update your will or trust documents to include these items in your planned distribution of assets. Similarly, if the value of your estate has increased significantly, it may be prudent to reassess your plan for potential tax implications and ensure that your assets are distributed in the most tax-efficient manner.

Tax season naturally lends itself as a prompt to revisit your estate plan. It’s a time when financial matters are already at the forefront of your mind, making it less daunting to tackle estate planning, which can often be overlooked or postponed. Utilizing this period for estate plan review ensures that it becomes a regular part of your annual financial routine, reducing the likelihood of your estate plan becoming outdated.

It's also an opportune time to consider recent changes in tax laws and regulations that could affect your estate. Tax laws are continually evolving, and changes can impact estate planning strategies. For example, adjustments in estate tax exemptions or alterations in the tax treatment of certain types of assets can necessitate changes in your estate planning approach.

Ultimately, the goal is to ensure that your estate plan accurately reflects your current financial status and intentions. An estate plan crafted years ago may not be suitable for your current situation. By synchronizing your estate plan with the financial information gathered during tax preparation, you can help ensure that your estate plan is effective and aligns with your current financial goals and life circumstances.

Assessing changes in financial circumstances

A critical step in aligning your estate plan with your current financial situation is a thorough assessment of any changes in your finances since your last review. This step is not merely about noting the balances in your accounts but understanding how shifts in various aspects of your financial landscape might affect your estate planning decisions.

Start by examining the current value of all your assets. This includes checking the latest statements of your bank accounts, retirement accounts, investment portfolios, and any other financial holdings. Pay particular attention to how the value of these assets has changed. For instance, a significant appreciation in your investment portfolio or a rise in the market value of your real estate holdings might increase the overall worth of your estate, which could have implications for estate taxes and the distribution of assets.

If you have recently bought or sold property, these transactions should be reflected in your estate plan. Purchasing a new home, for instance, means you have an additional asset to consider in your estate, while selling a property might leave you with liquid assets that need to be allocated differently. Ensure that these changes are accurately represented in your estate documents.

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Review any changes in your investment portfolios, especially if you have rebalanced your investments, sold off certain assets or invested in new financial products. The current composition of your investment portfolio might necessitate a different approach to how these assets are managed or distributed upon your passing.

Significant changes in the value of your assets can impact how you wish to distribute your estate among your beneficiaries. For example, if certain investments have grown substantially, you may want to adjust your will or trust to maintain a balanced and fair distribution among your heirs. It's important to consider not only the financial implications of these changes but also the potential emotional impact on your beneficiaries.

Alongside assets, assess any significant changes in your debts and liabilities. Paying off a mortgage, taking a new loan or changes in other debts will affect your estate's net worth. These changes should be considered in your estate planning to ensure that any liabilities are adequately addressed and do not unduly burden your heirs.

Assess any changes in your life insurance policies, as they play a vital role in your estate planning. Changes in policy amounts or beneficiaries should be reflected in your estate plan to ensure that your family is adequately protected and that the proceeds are distributed according to your wishes.

Why is it important to review and update beneficiary designations?

The review and update of beneficiary designations on key financial accounts and policies are critical components of comprehensive estate planning. These designations, often set up when an account or policy is first established, can easily become outdated as personal circumstances evolve.

Beneficiary designations are legally binding and typically supersede instructions in wills or trusts. They apply to a range of financial instruments, including retirement plans like 401(k)s and IRAs, life insurance policies, annuities and certain types of investment accounts. These designations determine who will receive the assets in these accounts upon your death, making it crucial that they reflect your current intentions.

Various life events necessitate a review of your beneficiary designations. These include:

  • Marriage or divorce. Newly married individuals often want to add their spouse as a beneficiary, while divorce might require removing a former spouse's name from your accounts.

  • Birth or adoption of a child. The arrival of new family members means updating designations to include them as beneficiaries.

  • Death of a beneficiary. The passing of a designated beneficiary requires modifications to ensure that the benefits are not distributed according to outdated wishes.

  • Changes in relationships. Alterations in family dynamics or relationships may prompt a shift in whom you wish to benefit from your assets.

  • Potential consequences of outdated designations. Failing to update beneficiary designations can have significant and unintended consequences. For instance, if a former spouse remains the beneficiary of a retirement account or life insurance policy, they will receive those assets despite any contrary intentions expressed in a will or other estate documents. Similarly, if a beneficiary predeceases you and no update is made, it can create complications and potentially lead to legal disputes among surviving family members.
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The process of reviewing and updating your beneficiary designations involves:

  • Gathering all relevant documents and account information to review current designations.

  • Contacting financial institutions or insurance companies to request beneficiary change forms if updates are needed.

  • Clearly indicating new beneficiaries and their relationship to you, along with specifying the proportion of assets each should receive.

  • Submitting the updated forms and following up to ensure changes are processed.

  • Keeping copies of updated designations with your other important estate planning documents.

  • Making sure that your beneficiary designations align with the broader objectives of your estate plan. Inconsistencies between these designations and your will or trust can lead to confusion and possibly legal challenges after your death.

Make a habit of reviewing your beneficiary designations periodically, such as during tax season or at the end of each year, and especially after major life events. This practice ensures that your estate plan evolves along with your life circumstances.


Properly aligning your estate plan with your current financial and personal circumstances is an indispensable aspect of ensuring your legacy is managed according to your true intentions. The tax season, with its inherent focus on financial assessment, provides a timely and pertinent reminder of the need to review and update your estate plan and beneficiary designations.

As you delve into your financial records, it presents an ideal opportunity to reflect on the changes that have occurred in your life since your last estate plan review. This reflection is not just about the growth or reduction of assets but also about contemplating life’s significant events that may impact your estate planning decisions.

Updating your estate plan and beneficiary designations in accordance with these changes ensures that your assets are distributed exactly as you wish. It prevents potential disputes among heirs and beneficiaries, avoids legal complications, and, most importantly, honors your personal and financial legacy. The peace of mind that comes from knowing your estate plan accurately reflects your current situation is invaluable. It reassures you that, in the event of your passing, your affairs are in order, and your loved ones are duly protected and cared for according to your latest wishes.

How do I create an estate plan?

There are numerous options and scenarios to consider when developing an estate plan that protects your legacy and achieves your objectives, and important decisions should be made with the advice of qualified lawyers and financial experts. Membership with Legacy Assurance Plan provides members with valuable resources and guidance to develop comprehensive estate plans that take life's contingencies into consideration and leave a positive impact for generations to come. Legacy Assurance Plan members also receive peace of mind that a team of trusted, experienced professionals will assist them in developing legal, financial and tax strategies that will meet their needs today and for years to come through periodic reviews.

This article is published by Legacy Assurance Plan and is intended for general informational purposes only. Some information may not apply to your situation. It does not, nor is it intended, to constitute legal advice. You should consult with an attorney regarding any specific questions about probate, living probate or other estate planning matters. Legacy Assurance Plan is an estate planning services company and is not a lawyer or law firm and is not engaged in the practice of law. For more information about this and other estate planning matters visit our website at

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