"Now that everyone has settled into the New Year, it is a perfect time to review and update your estate plan."

Situations change and, as a result, you need to consider any changes to your estate planning documents. There are marriages. Children are born and adopted. Loved ones and friends pass away. Because of these changes, taking the time to update previously drafted documents is critical.

Dairy Herd published a valuable article, "Legal: Review and update your estate plan now," which advised that you should at least have the basic estate planning documents in place. This includes a will, a power of attorney, a medical power of attorney and an advanced healthcare directive (often called a living will). Also, some should look into trusts, depending on individual situations.

Taking the time to prepare these documents now can help avoid fighting and stress for loved ones left behind.

Create a "Death File." After you have your basic estate planning documents in place, gather them in one place and inform two responsible people of the file's existence and location. It can be placed in a home safe, a bank deposit box or on file with an attorney. The person(s) named as your power-of-attorney and executor need to know the location of these documents and have the ability to access them if needed.

Review Documents for Updates. As mentioned above, it's important to review these drafted documents periodically to see if any changes are needed. Also, when you review a will or a trust, look to see if any of the property listed has been sold, transferred, or purchased. If it has, update the documents to reflect the change in ownership.

Check and Update Beneficiary Designations. Not all property passes in the estate by a will. Some assets, like a 401(K), are passed to the beneficiary of the account regardless of what a will says. This is also common with life insurance, pensions, transfer on death accounts, and accounts held as joint tenants with right of survivorship.

Look at Potential Estate Tax Liability. The federal estate tax exemption for 2016 is $5.45 million per person and $10.9 million per couple. To see if tax liability might be an issue, the estimated fair market value of assets needs to be calculated. Talk to an estate planning attorney if your estate may be close to the exemption limit. An experienced attorney will be able to discuss options to avoid the federal estate tax—a whopping 40% on any amount over the $5.45 million exemption.

An up-to-date and comprehensive estate plan will help ensure that your intentions are carried out and will help to avoid headaches among survivors. Once the planning is done, however, don't forget to conduct a periodic review.

Reference: Dairy Herd (February 9, 2016) "Legal: Review and update your estate plan now"