The current coronavirus pandemic is a harsh reminder that life is unpredictable. Certainly, none of us would have predicted the current state of the world only a month ago. And yet, here we are. The threats imposed on our lives – on our physical, mental and financial wellbeing—by this pandemic are significant and their consequences are hard to quantify. With all these changes to our lives, and with all this isolation, it is a great time to reflect. Specifically, now is a great time to reflect on your estate plan (i.e., your wills, health care directives, powers of attorney). For those of you who already have your legal documents in place, great, you’re ahead of the game. Still, life is an evolution and things are always changing. Now is a perfect time to get out your documents and read them. Do they still reflect your wishes? Do they still say what you want them to say? And, for those of you who do not have your affairs in order, what are you waiting for? Now is a perfect time to take your time and enter into a thoughtful and comprehensive plan.
Unfortunately, this global health crisis is significantly affecting all of us, and all of our loved ones. It is imperative that your legal documents are in place. Here’s what every one of us should have in place:
Last Will and Testament
A Will is a legal document that sets forth who gets what and who’s in charge when you die. Specifically, in your Will, you specify the persons and/or entities that will receive your assets (and upon what terms) upon your death. A Will also designates an executor, who is the person charged with administering your estate, gathering your assets, paying expenses and distributing your assets to your designated beneficiaries. If you have a minor or disabled child, you can also appoint a guardian for such a child in your Will. If you pass away without a valid Will, the intestacy laws of the state in which you reside when you pass away will determine how and to whom your assets are ultimately distributed, which may not be the result you would have wanted. You cannot take for granted that things will just “work out” when you are gone. The frustration and discord that often results when someone passes away without a Will is not the legacy you want to leave your loved ones. We all need a Will.
Maybe a Trust
There are many reasons we set up trusts as part of an estate plan. For some, a trust might be important to hold and control assets for a disabled or minor beneficiary. Trusts can also help to preserve government benefits for a disabled beneficiary. For others, it might be important to keep your assets in your bloodline and protect your assets from potential creditors or other adverse economic events of your beneficiaries. Sometimes, we use a trust to help protect assets from future long-term care costs. And, sometimes, we use trusts to avoid probate and to save taxes. No two trusts are alike. In any case, a significant benefit of a trust is that its terms, which are set by you, will govern the administration and distribution of the assets in the trust for your beneficiaries. A Trust may or may not be a critical part of your estate plan, but they certainly offer a lot to think about.
Health Care Directive
This is a biggie. If you cannot make your own medical decisions, who do you want to make them for you? You cannot take for granted that your spouse can make those decisions for you, or that your children will. What if they disagree? It is imperative that every adult person over the age of eighteen (18) years have this document in place. In a properly drafted Health Care Power of Attorney and Advance Directive, you can: (1) state your wishes about end of life decisions should you be in a state of no recovery; (2) appoint someone to interpret your stated wishes, and (3) authorize someone to make medical decisions on your behalf that stop short of the end of life decisions. A well-drafted Health Care Directive will also include a HIPPA Release. In the absence of a Health Care Power of Attorney, we are leaving it all to chance. We need to not only have this document in place, but we also must make sure that the person(s) we are designating as our Agent both understand our wishes and can carry them out. You need this.
Powers of Attorney
With a financial power of attorney, you appoint someone to step into your shoes and make financial decisions on your behalf. These documents can either be effective immediately or they can become effective upon your future incapacity. The key here is that your Agent is someone selected by YOU. You get to say who you want to help manage your affairs. If you don’t have a durable power of attorney and you become unable to make decisions for yourself, no one can represent your interests. Just because you may be married, your spouse cannot simply step in and start managing your finances without the legal authority to do so. Thus, your loved ones may have no choice other than to go to court and ask that a guardian be appointed to handle your affairs. This court process takes time, costs money and the judge may not choose the person you would prefer. Take control. Make sure you have thoughtfully selected someone that you want to be in charge of.
Beneficiary Designations and Jointly Owned Assets
In addition, now is a perfect time to make sure that the beneficiary designations for your life insurance, retirement accounts (IRAs, Roth IRAs, 401(k)s, etc.), and annuities are all up to date. What many people do not realize is that your Will does not control assets that pass by beneficiary designation. Just because you may have a Will, your Will does not control who gets your beneficiary designated assets. Beneficiary designations trump your will. Finally, you should review the titling of all joint assets, including your real estate. It is important to understand that any asset you own jointly with another person, with rights of survivorship, will automatically vest in the surviving owner(s), upon one owner’s death, regardless of that person’s estate plan. You may have added a child as a joint owner to your checking account for convenience, but if you pass away, that account may pass to that child by operation of law. That could significantly, and adversely, affect your overall estate plan. A comprehensive estate plan will consider these issues and plan for them.
During these trying times, looking at your estate planning documents may not be your highest priority, but it should be. We encourage you to take advantage of some of the time you may now have on your hands and give your plan some consideration and attention. We are here to help. If you would like to take advantage of this time to review, update, or create an estate plan suited to you and your family, please call us at (856) 489-8388, contact us today.