Estate Planning

COVID-19 Estate Planning

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.

The estate plan:

  • Creates a roadmap for what should happen in the event of a client’s incapacity or death.
  • Creates a structured decision-making process that allows the family to stay focused on caring for each other’s emotional needs.
  • Reduces uncertainty at a time when the family is faced with adapting to a new reality – especially if the event happened suddenly.

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.

Health Care Power of Attorney, Living Will or Advanced Health Care Directive

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.

Clients should consider:

  • Who should be named attorney-in-fact? Married couples usually name their spouse. For those who live together but are unmarried, naming one’s domestic partner is especially important; otherwise, the domestic partner may not have rights under state statute to give input to health care decisions or even rights to be informed about treatment and status.
  • Who can be named as successors in the event the primary individual is unable to serve? Identifying one or more successor attorneys-in-fact is especially important for married couples who could both get ill at the same time.
  • Who determines a client is terminally ill or in a persistent vegetative state? If the advanced health care directive was drafted some years ago, it likely says a person is considered terminal or in a persistent vegetative state by the determination of an attending physician and one additional physician.” Most patients today are seen by hospitalists they and their family have never met.

Financial Power of Attorney

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.

Clients should consider:

  • Who should be named attorney-in-fact? Who can be named as successors if needed?
  • Should there be co attorneys-in-fact to provide cross checks and accountability?
  • Should different powers be provided to different attorneys-in-fact?
  • Should the attorney-in-fact be allowed to make personal and/​or charitable gifts, and if so, to whom and in what amounts?

The Will

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.

Clients should consider:

  • Who should be named executor (or personal representative), having responsibility of administering the terms of the will? Who can be named as successors if needed?
  • How should tangible personal property be divided among beneficiaries? Are there items of great sentimental value that should go to particular heirs? How will disputes among heirs resolved?
  • How should personal real estate be divided among the beneficiaries? How should legacy property” such as farmland or vacation homes be handled to avoid conflict among the heirs?
  • Who will act as guardian for minor children? Who will act as custodian/​trustee for assets of minor children?

Beneficiary Designations

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.

Clients should review the primary and contingent beneficiary designations of:

  • Life insurance policies and annuity contracts.
  • Jointly owned property.
  • Savings and checking accounts and CDs held at banks and credit unions.
  • Investment accounts.
  • Traditional IRAs and Roth IRAs.
  • Employer-sponsored qualified plans including 401(k)s, profit sharing plans, ESOPs, pensions, etc.
  • Employer-provided group life insurance.
  • Employer non-qualified deferred compensation plans.

Record of Accounts and Contacts

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.

Clients should consider:

  • Original copies of a client’s health care power of attorney, advance directive, and will are usually stored in secure safes at the attorney’s office. Copies may be given to the primary individual(s) named to act under each document, along with an explanation of the role they may have to play.
  • A listing of accounts and how to access them should maintained, and instructions on where to find the listing given to family or a trusted advisor. The listing should include:
    • Bank, credit union and investment accounts (qualified and non-qualified).
    • Life insurance and annuity contracts.
    • Employer non-qualified deferred compensation plans.
    • Online services and accounts including social media, cloud storage, virtual currency, online shopping, etc.

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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There’s no case too large or too complicated. From interpreting how legislative changes could impact your practice, to creating custom proposals for time-tested techniques, we’re your partners for the cases where you can’t afford to get it wrong.

After all, advanced means extraordinary. It means you need more – more ideas, more resources and more answers. You don’t stop at good enough. Neither do we.

Whatever the question, whatever the need. Palladium Group and our Advanced Markets team are here to help. That’s success, insured.