Many estate plans are built with some flexibility in their design. This flexibility allows for the normal changes that occur in life, such as the birth of a child or the increase in value of assets over time. However, sometimes there are large events that can change the underlying estate plan for you and your family.
An auto accident is one thing that can fundamentally alter your life and, in turn, your estate plan. That is because an auto accident affects your health, your financial outlook as well as alters your outlook on both the future as well as your current situation. Let’s look at each of these in turn.
Your health can be altered in both large and small ways from an accident in your automobile. Finally, your health can be a short-term problem, which you can overcome through time and effort in rehab. This still requires a significant amount of time in the short term to recover from the injury. In addition, long-term health can be significantly reduced. We had a client whose daughter was significantly hurt in an accident. So, the parents had installed a rail system throughout the house so that their daughter’s chair could move from room to room and upstairs using the rail system. This was a multiple-year problem that they had to solve due to someone else’s negligence. Their estate plan then had to change to allow for this massive change in the health of their daughter and provide for the needs of their daughter over multiple years.
For others, the change in health from an auto accident needs to be considered throughout the entire retirement process as an injury could reduce the health during retirement, which would necessitate a change in the plan. Changes could include a reduced travel lifestyle during retirement or a different travel situation (such as staying in a hotel instead of camping).
Your income can suffer in the short term from an auto accident. First, you could easily be sidelined for a while you recover from the initial accident. This recovery can, for some people, limit their ability to ability to provide income in the short term (such as limiting overtime hours, etc). Further, and more often, the injury can be a long-lasting problem that hurts their ability to work in the long run. For example, a neck injury could limit the number of hours an architect could sit in front of the computer and make drawings, which would limit their output and, in turn, reduce their long-term income potential.
Accordingly, the estate plan would then have to evolve to accommodate the changes in income. Even a small reduction in long-term income can create significant changes in retirement accounts. One way to take this into consideration is by reducing the income expectation in retirement. You can also mitigate expenses by purchasing long-term care insurance or retirement home insurance.
Sometimes, the change in income is significant as the auto accident carries with it a significant award at the beginning. This award can be used to mitigate all of the problems mentioned above. Further, the settlement award is good in that it can be used as an up-front “anchor” around which to plan for the future. This award is used as the backbone of the estate plan, which can be used to purchase the long-term care insurance, as well as offset the reductions in income and also provide for the health care needs that will be incurred in the future.
A car accident can easily affect your estate plan. It’s a good idea to revisit your plan with estate planning attorney Leawood KS if an auto accident causes a significant change in your health or your financial outlook (in either the short-term or long-term).
Thanks to our friends and contributors from The Eastman Law Firm for their insight into estate planning issues.