“As the nation grapples with the impact of the coronavirus pandemic, Americans are getting a stark reminder of our mortality. For many, this event is serving as a wake-up call to get their estate plans in order.”
Indeed, estate attorneys report a flurry of inquiries from people wanting to update their planning. Many more people, though, will continue the status quo – estate documents drafted years ago, if ever. Current planning can have a profound impact on the family of someone incapacitated or unexpectedly taken, whether by COVID-19 or for some other reason.
Every client should establish a foundational estate plan.
Financial advisors should consider talking to their clients about the importance of creating or updating a foundational estate plan. In the process of helping a client think through some of the deeply personal decisions that need to be made, the advisor will be strengthening the client relationship. Ultimately, the result will be a family better positioned to get through what may be a tragic situation.
The following contain a brief summary of what a foundational estate plan includes. It can serve as the basis of a meaningful conversation between advisor and client, ultimately leading to a more productive meeting between the client and his or her attorney.
Note – the effects of the pandemic mean it could be challenging for clients to actually update their planning documents. Simply getting an appointment could be tough because estate planning attorneys have been getting mobbed with calls since the crisis started. Getting documents signed while maintaining social distance may require some creativity, especially if state law requires signatures to be notarized. Clients should be prepared to persist in the face of such challenges given how important a solid foundational estate plan is to their family.
A health care power of attorney designates who can act as a patient advocate and who can make medical decisions on the patient’s behalf. An advanced health care directive, sometimes called a living will, articulates a person’s wishes about certain actions to be taken or not taken if terminal or in a persistent vegetative state.
Financial powers of attorney allow an individual to appoint an attorney-in-fact to handle financial and legal matters. A durable power of attorney takes effect immediately and remains in effect as the individual becomes disabled. A springing power of attorney only takes effect upon the incapacity of the individual which makes having a clear and workable definition of incapacity critical so that the attorney-in-fact can step in quickly when needed.
A will allows an individual to specify how his or her assets will be distributed in the event of death. The will also specifies who should serve as guardian for minor children, and even who will serve as custodian of assets held for the benefit of minor children. Note that the guardian, who will have physical custody of the children, need not be the same person as the custodian of the children’s assets.
Several important types of assets pass to heirs by operation of contract according to a beneficiary designation independent of the terms of a client’s will. Such designations are often made when setting up an account but never revisited even when circumstances change.
Even with a thoughtfully and carefully crafted will, the surviving family may still be faced with chaos if the client has failed to keep clear records in a format that is available to the right people when needed.
Note – use of a password manager such as LastPass or 1Password can make the task of maintaining and sharing such a listing much easier.
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