In today’s society, most people are eager to keep certain things current. For example, my daughter must have the latest smartphone available or the latest designer shoes on the market. However, most people use the “set it and forget it” philosophy when it comes to their important legal documents.

The following is a list of important documents that should be kept up to date:

Power of Attorney

The Power of Attorney is a document that one can sign to appoint someone to make financial decisions on their behalf. If you have an existing Power of Attorney in place, are you still confident with that person handling your affairs? If a person’s name has changed because of marriage or divorce, or there is a legal name change of any kind, it might be important to update the document.

Health Care Proxy            

A Health Care Proxy is a document that one can sign to appoint someone to make health related decisions on their behalf. If you have an existing Health Care Proxy in place, are you still confident with that person handling these often difficult decisions?  

Living Will

Your will may be the most important document you will ever write. When it comes to estate planning, people generally make out wills to guarantee the proper allocation of their money and property.  When your will is kept up to date it ensures that your estate is distributed as you wish. 

A few reasons to review or update your will include the following:

• Death, Diagnosis, or Divorce – When there is a death in the family, a serious medical condition arises, or a divorce occurs that affects a named agent or beneficiary.

• Charitable Directive – It could be since writing your will you have become more charitable, or now volunteer at a non-profit, and want to leave money for them in your will. Conversely, you may have had a change of heart about a certain charity listed in your will.

• Change in Financial Situation – If your will contains details of exactly how much money will be distributed, but the size of the estate is not the same as when the will was written.  In addition, if certain possessions listed in your will no longer exist, the recipient will be passed over and will not get anything in their place.

Life Insurance Policies

As a general rule of thumb, any insurance policies should be reviewed on an annual basis.  Performing regular reviews will ensure that your beneficiaries are always covered, it will keep your premiums costs where they should be, and determine if your current policies are still meeting your needs.

Bylaws or Operating Agreement

For business owners, these will vary based on the legal formation of the business. An operating agreement is drafted for a limited liability company. Time should be taken to make sure the agreement contains the proper information about the LLC’s activities, members, tax and financial provision, capital provisions, as well as membership withdrawal and transfer provisions.

Similar to an operating agreement, bylaws are created for a corporation to provide a set of rules and regulations. Corporate bylaws define a corporation’s purpose and how it will operate.   Corporate bylaws also let you specify shareholder ownership rights, plan annual meetings, and establish how to select and remove officers. 

Employee Manual

If you cannot remember the last time the employee manual was updated, it has been too long, especially if company policies have changed.   Review the employee manual to see what should be updated, such as dress code, time off request procedures, and social media use.

Buy-Sell Agreement

An effective buy-sell agreement will eliminate or reduce the disputes arising from the death or retirement of a shareholder or partner.  To avoid or reduce dispute, the buy-sell agreement should include how the business will be valued, the effective date of the valuation, and what events will trigger a sale.

To determine if a buy-sell agreement is still effective for a business, the value of the business should be determined as if a triggering event has occurred. If all parties agree with the value, and the interpretation of the agreement, the agreement is still effective. Please contact your Dermody, Burke & Brown tax advisor if you want to discuss any legal documents or if you have any questions.  

The information reflected in this article was current at the time of publication.  This article will not be modified or updated for any subsequent tax law changes, if any.