Although COVID-19 related restrictions have begun to ease, many people continue to help slow the spread by staying home and self-isolating. There are still unknowns related to the pandemic and how it will play out, undoubtedly keeping us all on edge. Over the past few months, many of us have been forced to face fears of falling ill, losing a job, or spending time alone. With these anxieties weighing on your mind, it may feel as though there's a sudden need to get your affairs in order, just in case. Thinking about falling ill or not being able to make decisions for yourself can be frightening, but having an estate plan in place can help ease your concerns. Many people are taking this time at home to update their estate plans, and if you don't have one in place, there's no better time to put it together.
Estate Plan Documents That Should Be Reviewed & Updated If Necessary
You may be surprised to learn that wills and trusts aren't the only documents to prioritize. A strong estate plan can include several important documents, such as a living trust, financial powers of attorney, health care powers of attorney or proxies, and advance health care directives.
We are reminded by the current pandemic that two of the most important documents to have up to date are your medical and financial powers of attorney. If you are self-isolated in your home, admitted to the hospital, or become incapacitated, you may need someone to handle your finances or make medical decisions on your behalf. With those in place, it's a good idea to continue organizing a comprehensive estate plan that includes the following documents:
- Power of Attorney and Health Care Proxy
A financial power of attorney grants authority to carry on a person's financial affairs and protect their property by acting on their behalf. This includes the ability to write checks, pay bills, make deposits, buy or sell assets, or sign any tax returns.
Similarly, a health care power of attorney, also known as a health care proxy, grants the authority to make health care decisions on your behalf should you become incompetent or incapacitated. If you are over the age of 18 and do not have a health care power of attorney in place, your family members will need to request that the court appoint a guardian to take on these responsibilities.
Ensuring that you have named trustworthy and reliable individuals as your powers of attorney is critical as you update your estate plan. If your current documents are outdated, implementing new ones should be on the top of your list.
- Your Will
A last will and testament is a legal document that allows you to distribute your property at the time of your death. A will also allows you to appoint an executor who oversees the distribution of your assets. This person will attend to your affairs after you pass, probate your will if necessary, and file income and estate tax returns on your behalf. If you have children who are minors, you should also name a guardian for them in the will.
Nearly everyone has assets that must transfer after a person's death, and without a will, you don’t get to choose how and to whom those assets will pass. The state will handle the distribution of your assets, and the courts will decide on the best person to oversee the administration. This is similar to an appointed guardian in that if you don't appoint one, a court will decide on the best person to fulfill this role.
- Living Trust
In general, a living trust benefits you while you are alive and may also be beneficial to others, such as your spouse or children. Identifying who will receive assets upon your death may be a detail that needs updating based on your lifestyle and changes that have taken place. Additionally, you'll want to outline whether your beneficiaries receive your assets outright, or perhaps you'll want to provide them with an income stream instead. If your beneficiaries are younger, you may want to consider holding assets for them in a trust until they are older and responsible enough to handle finances themselves.
Appointing a trustee will identify who will step in to manage your affairs without the court's involvement, avoiding extra time and money associated with probate. A trust also affords you privacy regarding the details of your estate since it can take many of your assets out of probate, which is a public process.
Another important update you should make to your estate plan is to review beneficiary designations on your life insurance policies and retirement accounts. Keep in mind that if you have a joint asset such as a bank or brokerage account, that will pass to the surviving joint owner. Be sure to name someone you trust to act in your best interest should the time come for them to be responsible for your assets.
Due to stay-at-home orders and social distancing practices, it may be more challenging to meet with your attorney or notary to prepare or update your documents. While some documents can be finalized virtually, wills need to be signed in front of witnesses, which means this step to finalizing your documents may need to be done in person. Our team may be able to help you with the notary process, should you encounter the need for that.
While you have the time, you should start reviewing your estate plan and making any adjustments with the appropriate professionals as needed. Making necessary and important changes now will likely benefit you and your family in the future. Due to the complex legal implications of estate planning and updating, we strongly suggest that you consult your estate attorney or legal professional to decide what works best for you. As your financial quarterback, we are more than happy to facilitate this conversation and coordinate with your other trusted professionals to help you achieve peace of mind during this unsettling time.