COVID-19: A Reminder of Why Estate Planning Is Important
I hope this update finds you and your loved ones doing well and staying safe. Coronavirus has been all over the news—and with good reason. For some people, it can turn into a serious illness if contracted. Thankfully, for the great majority of people who have contracted the disease, the symptoms appear to be relatively mild. Nevertheless, it is crucial for everyone, particularly those who are in good health, to continue to take all the steps necessary to protect those around us who are more vulnerable to becoming seriously ill if they are exposed to the coronavirus. We should all care for our neighbors and communities by washing our hands frequently, sanitizing frequently touched surfaces, and implementing any other steps recommended by the CDC and health experts.
Although reports are that most people are not likely to be in serious danger even if they come down with the coronavirus, it is a wake-up call to those who have been putting off creating or updating an estate plan. None of us knows what tomorrow will bring, so for your own peace of mind and the good of your loved ones, it is important to have our estate plan and advance directives in place sooner than later.
I am often asked what planning documents someone should have as a minimum and how each works in a time of need. Simply put, there are several key documents an estate plan should include to protect you and your family if you should suddenly become very ill or pass away:
Last Will and Testament and/or a Trust
A will enables you to specify the individuals you would like to receive your money and property. In addition, you can name a guardian(s) to care for your minor children if you are unable to do so. For many, however, a will alone is not the best solution, as it is only effective after you pass away and requires the intervention of the court system to validate the will and authorize the executor to act and carry out one's wishes Currently, this is causing added heartache for family members who are not able to administer their loved one's will in a timely fashion due to the significant delays in the court system resulting from the Covid-19 pandemic.
In a revocable living trust, you can name yourself as a trustee and continue to exercise control over the money and property you transfer to the trust. However, it also enables you to name a co-trustee or successor trustee who can manage your money and property for your benefit and the benefit of any other beneficiaries of the trust if you become too ill to do it yourself. In addition, your trust will specify when and how the funds should be distributed to your beneficiaries when you pass away – without the need for any court intervention.
If you have transferred property into the name of your trust, your loved ones will not have to go through the time-consuming probate process—which can be expensive, subject to serious delay and open to any member of the public. Additionally, with the court system essentially closed during the health crisis, trust based planning is proving to be far superior and easier to administer by surviving loved ones since no probate is required to carry out the wishes of a deceased family member.
For some, other types of trusts may be appropriate to achieve particular goals, for example, protecting assets from creditors and the costs of long-term care or providing for a child with special needs.
Note: If you do not create either a will or trust specifying who you would like to receive your money and property when you die, it will pass to the individuals specified in the state intestacy statute, who will receive the shares mandated by the statute. Obviously, this is not optimal, as the people and shares spelled out in the statute may be vastly different from what you would have specified in your estate planning. Moreover, probate is likely required for the administration of your estate if you die without a will or trust. In addition, a court will have to appoint a guardian to care for your children—and the person appointed may not be the individual you would have chosen.
Powers of Attorney
Using a power of attorney, you can name people you trust to make decisions on your behalf if you become ill and are unable to make them for yourself. Even if you are married, your spouse may not have the authority to make all of these types of decisions for you without the proper documentation.
A medical power of attorney also known as a health care proxy can be used to name a trusted person as your agent to make medical decisions on your behalf if you are unconscious or otherwise unable to communicate them to your health care provider. As your agent, the person you have named is required to act in accordance with your wishes to the extent that they are known to that individual, so it is important to communicate important information regarding your preferred providers, medical conditions, treatments you do not want, religious convictions, and other pertinent information.
A durable financial power of attorney will allow the person you have named as your agent to make financial decisions and conduct business on your behalf if you cannot handle these matters for yourself. It can be as broad or as limited as you choose: For example, you could authorize a trusted individual to run your business for you, or you could simply authorize another person to write checks and pay your bills on your behalf.
Note: If you do not name trusted individuals to act for you in medical and financial powers of attorney, your family members, including your spouse under some circumstances, will have to go to court to be appointed to this role. As in the situation in which you do not have a will or trust, you no longer have any control over who is named to act on your behalf. The person appointed by the court may not be the person you would have wanted to take on these important roles. Additionally, the courts are all but essentially closed, making any judicial relief extremely difficult to obtain in a timely manner.
Advance Directive/Living Will
Your advance directive, also known as a living will is a document that clearly spells out your wishes for the end of your life, for example, whether or not you want to be placed on life support if you are in a vegetative state or have a terminal condition. This important document allows your family and health care providers to understand your wishes even if you are no longer able to communicate them.
We are here to help
Certain situations can bring our own mortality to the forefront of our minds, even if they are unlikely to have a severe or direct effect on us. The coronavirus has still only affected a limited number of people in the United States so far, but it provides an important reminder of just how important it is, not only to us, but also to our family members and loved ones, to have an estate plan in place in case the unexpected happens. Our foremost goal is to help you have confidence that if you become ill, your own care and the needs of your family will be addressed.
