In June, I discussed the myriad issues clients often overlook or ignore that require changes in their estate plans. That column mentioned key life events that may necessitate estate plan updates. I merely listed them because the implications for planning seemed obvious. But on further reflection, I realized that some changes, such as the birth of a new child, have implications that are not always obvious. Although parts may seem basic, the list contains good talking points for advisors and clients.

BIRTH

After the birth of a child or grandchild, clients will often call their estate planner to update their will or revocable trust and add the new heir to the list of beneficiaries. In most cases, however, no change in these documents is actually needed. But there are many other steps that the birth of a new child or grandchild might warrant considering.

Let's say Grandma, your client, establishes a trust for the new grandchildren. This trust not only benefits the new heirs, it also serves as an integral component of more significant family planning. For example, Grandma can set up a trust for each of her three grandchildren, and Grandma and Grandpa can each immediately gift $13,000 to each of the trusts. If they each make a $13,000 gift both this year and in the first few days of 2011, they will have given $78,000 ($13,000 x 2 x 3).

After the gifts are completed next year, the trustees might contribute the cash or securities they were given to a new family limited liability company (LLC), to which your client can also contribute substantial family wealth. The LLC becomes an asset-protection device for your client and her assets.

DEATH

Unlike birth, the death of a family member usually requires updating documents. Too often, though, heirs are focused on transferring assets as quickly as possible from the decedent to the named beneficiary. That can be a huge mistake.

The most common client oversight is failing to understand and utilize disclaimers. A disclaimer is a person's irrevocable refusal to accept an interest in property he or she would otherwise receive. Often tiers of disclaimers are necessary to shift assets from the person named on an account as beneficiary to the preferable beneficiary. Given the uncertainty surrounding estate-tax repeal, the fact that few clients have updated their planning documents and the significant changes in asset values in recent years, disclaimers are more important than ever.

The assets disclaimed must pass to someone other than the person making the disclaimer. The disclaimant cannot direct where the disclaimed property should go and cannot benefit from it. There is one exception: A surviving spouse can disclaim even though the interests pass to a bypass or credit shelter trust for his or her benefit.

The critical issue for many clients is the prohibition against accepting benefits of the property to be disclaimed. Generally, if heirs retitle assets to their names or accept distributions from partnerships or dividends on stock, they will forfeit their ability to disclaim assets.

FIDUCIARIES

If a trustee or agent under a power of attorney or living will dies, the next named agent will serve. Most clients name at least one successor for each fiduciary. But what if a trustee is aging or becomes infirm? What if your clients no longer talk to the person they named as guardian of their minor child?

While clients know that a deceased fiduciary will be replaced by a successor, often they don't recall whom they named as successors or how to replace someone for anything less obvious and objective than death. Further, the fact that an agent or a trustee had a falling out with the client is irrelevant if the person is empowered to serve as a fiduciary under an irrevocable trust.

Clients need to engage in periodic housekeeping, formally replacing inappropriate fiduciaries or if necessary asking them to resign. Many documents include mechanisms to appoint additional successor fiduciaries. Properly handling succession is vital to assuring that a properly authorized person will be available to sign investment policy statements and other critical documents.

FAMILY

Clients know that a major event like marriage or divorce requires planning action. However, most newlyweds are so preoccupied that they never properly evaluate their new financial, tax and legal situation in sufficient depth.

They might buy a term life insurance policy and open a joint checking account, but have they reassessed their new income tax status? The new Medicare tax on passive income, which starts in 2013, will apply a 3.8% tax to net investment income if the client's adjusted gross income is over $200,000 (single) or $250,000 (joint). Pre-marriage both may have had income under $200,000, but post-marriage they may easily exceed the $250,000 threshold.