Johnson County Estate Planning

Can You Make Heirs Behave from the Grave?

“There are many stories of strange conditions in wills and trusts over time. For example, the German poet Heinrich ‘Henry’ Heine died in 1856 and left his estate to his wife, Matilda, on the condition that she remarry, so that ‘there will be at least one man to regret my death’.”

Imposing strange or amusing conditions upon heirs may make for good novels. However, in the real world, terms and conditions are limited by the law. A last will or trust contains language specifying how you want assets to be distributed after your death. There are some conditions and terms included, but others should be left for fiction authors, according to a recent article titled “What Can You Force Your Heirs to Do To Get Your Wealth” from Forbes.

If something is illegal or against public policy, it is not acceptable in a last will. Defining public policy is not as easy as whether something is illegal, but it can be described effectively enough, or clarified by your estate planning lawyer. For example, making a gift of land to the town on the condition that an offensive statue be placed in the middle of the land would be against public policy. Requiring an individual to not marry a specific person or type of person before they can inherit is considered illegal in a last will. Beneficiaries are not to be prevented to live their lives freely through the force of a last will.

Whether a condition is valid also depends upon whether it is a precedent that existed at the date of your death or a condition that occurs after your death. For instance, a requirement for a beneficiary to live in a specific location at the time of your death might be considered valid by a court. However, a condition requiring a spouse to never remarry would not be valid.

Blatantly illegal terms of an inheritance are easy terminated. Leaving money to a known terrorist organization or requiring an heir to commit a crime is an easy no-go. However, sometimes things get murky. Restraints on getting married or selling or transferring property are two of the biggest problems, and often the stories behind the last wills are sad ones.

A condition of not marrying, divorcing, or remarrying is not legal. However, a condition that the beneficiary does not marry outside of the faith has been enforced as a valid last will condition. A complete prohibition of a second marriage by a surviving spouse has been deemed void. It should be noted that certain requests have been permitted, like having a surviving spouse lose payments from a trust when they remarry. As antiquated as it may sound, courts have affirmed the concept of the specific limitation to provide financial support only until the surviving spouse remarries and is, therefore, not void.

A probate court will not void a condition on a bequest automatically, even if it is clearly illegal. The beneficiary, or another interested party, must file with the probate court to have the condition voided. If you fail to do so, when the last will or trust is allowed, it is possible to lose your right to void the condition.

A better way to go: don’t try to control your heir’s behavior from the grave. It creates terrible ill will and may cloud a lifetime of happy memories. If you don’t want to give something to someone, your estate planning attorney will help you create an estate plan, and possibly a trust, to control how your assets are distributed.

Reference: Forbes July 21, 2021 “What Can You Force Your Heirs to Do To Get Your Wealth”

What are Typical Estate Planning Documents?

“If you want loved ones to remember you fondly, tackle your estate planning tasks. Your heirs will thank you for not leaving a legal mess to sort out.”

For many people, eight documents form the foundation of an estate plan. It’s not that difficult a project as it seems, explains the article “8 Documents That Are Essential to Planning Your Estate” from msn.com. When you’ve completed your estate plan, you’ll also gain the peace of mind of knowing that you’ve done what was needed to protect your family. It’s well worth the effort.

Last will and testament. This is the basic document that gives you the ability to tell your family what you want to happen with your assets. It is used to name an executor—a person who will be in charge of managing your estate. Your will is also where you name a guardian who will be in charge of raising minor children. You can use the will to convey funeral instructions, but you may want to do that in a separate document, in case your will isn’t found right away. Your estate planning attorney will help you figure out the best way to handle that.

What happens if you don’t have a will? In that case, a probate court will determine who will be your executor. It might be a spouse, a grown child, or someone you don’t know or would not want to handle your estate. It’s best to have a will and select your executor yourself. When your estate goes through probate, all of the information in your will becomes part of the public record, so don’t put anything in your will, like passwords or account numbers.

Revocable living trust. Trusts are used to pass assets and property without going through probate. Your estate planning attorney will help create the trust and you’ll decide who will be in charge of it upon your death. You can be the trustee while you are living, but then you lose any estate tax benefits. If you have substantial property or wealth, trusts are a good tool to control assets and save on estate taxes.

Beneficiary designations. Any time you purchase a new insurance policy or a retirement plan, you are asked to name a beneficiary. If your first job came with a retirement plan, you likely also named a beneficiary for that plan. These designations allow the assets to pass directly to the beneficiary upon your death. They aren’t included in your will and they don’t go through probate. The biggest problem with beneficiary designations? Neglecting to update them through the many changes in life. Review and update your beneficiary designations on a regular basis.

Durable power of attorney. This document allows you to name the person to act on your behalf, if you become incapacitated because of illness or injury. They can manage your legal and financial affairs. Here’s an important point: if you become incapacitated, you cannot assign this role to someone. It needs to be done when you are legally competent.

Health care power of attorney and living will. The health care power of attorney lets someone else make medical decisions on your behalf, if you are too sick to do so yourself. The living will gives you the opportunity to explain what kind of care you do or do not want if you are close to death. If the idea of staying alive on a heart machine makes you unhappy, for instance, you can document your wishes, so loved ones don’t have to wonder what you want. 

Digital assets. Much of our lives are lived online, and we have assets that won’t be found in a search of the attic or basement. Each online platform that you use may have a directive process, where you can clearly state who you want to have access to your digital assets and what you would like to have happen to them upon your death.

A letter of intent. Writing a letter of intent is a way to convey your wishes to loved ones for what you’d like to happen after you die. It may not be legally enforceable, like a will or a trust, but your loved ones will appreciate knowing what you want for funeral planning or a memorial service.

List of important documents. Sparing your family a post-mortem scavenger hunt is a gift to the living. Make a list of documents and make sure they know where important documents can be found. Include a list of routine bills, the professionals you rely on, including contact information and account numbers. Some families use a briefcase to store the important papers, but a fireproof and waterproof safe is more secure.

Reference: msn.com (June 19, 2021) “8 Documents That Are Essential to Planning Your Estate”

What Is the Required Minimum Distribution for 2021?

“Whether you need to take required minimum distributions to live or find them to be a nuisance, here are some tips to make the most of withdrawing these funds.”

There have been a number of changes to the requirements for RMDs—Required Minimum Distributions—from traditional retirement accounts, says a recent article titled “2 Essential Strategies for Taking Your RMDs” from Kiplinger. In 2019, the age for RMDs was raised from 70½ to 72. In 2020, they were waived altogether because of the pandemic. Now they’re back, and you want to know how to make good decisions about them.

Most people take the default approach, taking a lump sum of cash at the start or the end of the year. This is not the best approach. Investment markets and your own need for income are better indicators for how and when to take your RMD. If you can at all avoid it, never take an RMD from a declining market.

You can take your RMD anytime during the calendar year, from January 1 to December 31. If it’s the first time you’ve taken an RMD, you get a bonus: you can wait until April 1 of the year after your 72^nd birthday. The RMD is calculated, by dividing the account balance on December 31 of the preceding year by your life expectancy factor, based on your age. You can find it in the IRS’s Uniform Lifetime Table.

2021 distributions will be bigger, and not just because of the market’s 2020 performance. Instead, distributions will be bigger because of how the accounts are designed, with RMDs becoming a larger percentage over time. It starts as a small percentage and eventually becomes the entire account, which is then depleted. Remember, the sole purpose of the RMD is to force retirees to take money out of their retirement accounts and pay taxes on the money.

Many retirees take RMDs because they need the money to live on. Here’s where money management gets tricky. It’s far easier to take smaller amounts of money at regular intervals, kind of like a paycheck, than taking a big amount once a year. We’re creatures of habit and are used to receiving income and managing it that way.

Distributions on a regular basis also fosters a better sense of how much money you have to live on, encouraging you to create and adhere to a budget.

If you don’t need the income, taking money through regular installments also has an advantage. It’s like the opposite of dollar-cost averaging. Instead of putting money into the market in small increments over time to even out market ups and downs, you’re taking money out of the market at regular intervals. You’re not cashing out at the market’s lowest point, or at the highest. And if you’re reinvesting RMDs in a taxable account, this strategy works especially well.

Reference: Kiplinger (June 10, 2021) “2 Essential Strategies for Taking Your RMDs”

Can I Be Sure My Estate Plan Works?

“Your estate plan is much more likely to be successful, when you recognize and avoid the most common mistakes and take some key actions that often are overlooked.”

Most estate planning attorneys will tell you that the same mistakes recur with frequency whether the estate is worth a billion dollars, several hundred thousand dollars or anywhere in-between. Of course, the biggest mistake of all, reports the article “7 Steps To Ensure A Successful Estate Plan” from Forbes, is not having an estate plan at all. Having an outdated estate plan can be just as bad.

Everyone should have a complete estate plan and it should be reviewed every few years and revised as life and laws change. The estate plan should include a will, trusts, power of attorney, advance medical directives and other planning elements. However, there’s more to an estate plan success than documents.

Education and communication. If the next generation isn’t prepared for the contents of the estate plan, it’s going to be challenging for them to carry out your wishes. They may mismanage assets, or even lose them to scammers. At any age and stage, people who are not ready for an inheritance may easily go through their entire inheritance and find themselves at a loss for what happened.

One solution is to leave the estate in trusts and limit access. A better solution is to ensure your heirs are prepared and understand how to handle money. Children benefit from their parent’s teaching them about managing, accumulating and donating money.

Prepare for family conflict. Sometimes tensions are out in the open, but other times they hide below the surface until one or both parents die, or learning the details of the estate plan leads to family conflicts. Thinking the children will work things out on their own is asking for trouble. Siblings with very different economic situations or lifestyles respond differently to their parent’s estate plan. Don’t ignore these potential problems. Talk with your estate planning attorney. It’s likely that your estate planning attorney has seen just about every situation and will have good ideas for preserving family harmony.

Plan ahead for gifting. Gifting is often a large part of an estate plan. Gifts are a good way to get the next generation comfortable with inherited wealth. However, don’t just write checks. Create and execute a strategy. Know that cash gifts are definitely spent faster, while property gifts tend to be kept and held for the future.

Make sure you understand the plan. You’d be surprised how many smart and sophisticated people don’t actually understand their own estate plans. Meet with your estate planning attorney on a regular basis and ask questions – and keep asking until you understand everything. Take notes during your meeting, so you can go back and review to see if you have any other questions.

Get organized and prepare. The best estate plan in the world is at risk, if the executor doesn’t know where documents are located. Make sure the information is written down and the person you chose to serve as executor knows where things are. We should all be simplifying our lives and records as we age, both to make our lives easier as the inevitable cognitive decline occurs and to make the settlement process faster.

Create a business succession plan. Most business owners fail to do this. It makes it all but impossible for the next generation to keep the business going. The value of a small business declines rapidly and sometimes evaporates, when there is no plan for succession. If the intent is to sell or pass the business on, a succession plan needs to be prepared, long before it is needed.

Fund trusts. The most common mistake in estate planning is creating trusts and then failing to fund them. If the trust is created but assets are not retitled, the estate plan will fail. Real estate, vehicles, boats and financial accounts that are intended to be put into the trust need to be retitled.

Reference: Forbes (May 27, 2021) “7 Steps To Ensure A Successful Estate Plan”

 

Different Trusts for Different Estate Planning Purposes

“Trusts are legal entities that own assets, and all trusts are not alike. They are created by a written trust document with certain provisions that can vary from trust to trust.”

There are a few things all trusts have in common, explains the article “All trusts are not alike,” from the Times Herald-Record. They all have a “grantor,” the person who creates the trust, a “trustee,” the person who is in charge of the trust, and “beneficiaries,” the people who receive trust income or assets. After that, they are all different. Here’s an overview of the different types of trusts and how they are used in estate planning.

“Revocable Living Trust” is a trust created while the grantor is still alive, when assets are transferred into the trust. The trustee transfers assets to beneficiaries, when the grantor dies. The trustee does not have to be appointed by the court, so there’s no need for the assets in the trust to go through probate. Living trusts are used to save time and money, when settling estates and to avoid will contests.

A “Medicaid Asset Protection Trust” (MAPT) is an irrevocable trust created during the lifetime of the grantor. It is used to shield assets from the grantor’s nursing home costs but is only effective five years after assets have been placed in the trust. The assets are also shielded from home care costs after assets are in the trust for two and a half years. Assets in the MAPT trust do not go through probate.

The Supplemental or Special Needs Trust (SNT) is used to hold assets for a disabled person who receives means-tested government benefits, like Supplemental Security Income and Medicaid. The trustee is permitted to use the trust assets to benefit the individual but may not give trust assets directly to the individual. The SNT lets the beneficiary have access to assets, without jeopardizing their government benefits.

An “Inheritance Trust” is created by the grantor for a beneficiary and leaves the inheritance in trust for the beneficiary on the death of the trust’s creator. Assets do not go directly to the beneficiary. If the beneficiary dies, the remaining assets in the trust go to the beneficiary’s children, and not to the spouse. This is a means of keeping assets in the bloodline and protected from the beneficiary’s divorces, creditors and lawsuits.

An “Irrevocable Life Insurance Trust” (ILIT) owns life insurance to pay for the grantor’s estate taxes and keeps the value of the life insurance policy out of the grantor’s estate, minimizing estate taxes. As of this writing, the federal estate tax exemption is $11.58 million per person.

A “Pet Trust” holds assets to be used to care for the grantor’s surviving pets. There is a trustee who is charge of the assets, and usually a caretaker is tasked to care for the pets. There are instances where the same person serves as the trustee and the caretaker. When the pets die, remaining trust assets go to named contingent beneficiaries.

A “Testamentary Trust” is created by a will, and assets held in a Testamentary Trust do not avoid probate and do not help to minimize estate taxes.

An estate planning attorney in your area will know which of these trusts will best benefit your situation.

Reference: Times Herald-Record (August 1,2020) “All trusts are not alike”

Why Everyone Needs an Estate Plan

“If you think of estate planning as something only ultra-wealthy people need to do, you're not alone. That's a common misconception.”

Financial planners know that most people need to have estate plans, no matter how much or even how little money they have, as explained in this recent article “I’m a financial planner, and there are 3 reasons everyone needs an estate plan no matter how much money you have” from Business Insider. An estate plan includes healthcare directives and identifies guardians for minor children in the event you and your spouse die unexpectedly. It also can be created to avoid your family from having to go through probate court.

Skipping this part of your overall financial and legal life could put you, your assets and your family members at risk. Estate planning is done to protect you and your loved ones. That’s just one reason why everyone needs an estate plan. Having an estate plan protects you while you are living.

An estate plan is more than just a will or a trust. The two most common tools in an estate plan are a will and trust, but that’s just the beginning. A will, or last will and testament, is the document that provides the instructions for your heirs and beneficiaries to follow after you die. Trusts are used to protect assets and enforce your wishes, after you’re gone. However, a good estate plan should also include these documents:

• An advance healthcare directive or healthcare proxy. These documents stipulate how you want to be treated, if you are alive but so sick or injured that you can’t provide directions. You may want to have a Do Not Resuscitate Order (DNR).
• Powers of attorney. This legal document outlines who can represent you in legal, medical or financial matters, if you are not able to do so.

The right documents help avoid probate court. If you don’t have a will, any property or possessions must go through the probate system. Your documents and information about your assets become part of the public record and can be seen by anyone. Going through probate opens the door to litigation and disputes, which can further delay settling your estate. Having a will and the proper trusts gives clarity to heirs about what you want.

An estate plan protects your children. If you don’t have a will, a court names the guardian who will raise your children. Instead, decide who you would want. Make sure the person you want to care for your children will accept this responsibility. Trusts are a way to preserve assets for your children. The trust is managed by a trustee after you die and can stipulate specific rules and uses for the assets. For instance, you can provide a certain amount of money for the children, until they reach age 18. At that point, your trust could instruct the trustee to use the money for college expenses. You can be as specific as you wish.

Meet with an estate planning attorney familiar with the laws of your state. An estate planning attorney will know the estate and tax laws that apply to you and your family.

Reference: Business Insider (June 12, 2020) “I’m a financial planner, and there are 3 reasons everyone needs an estate plan no matter how much money you have”

Inherited IRAs Require Careful Handling

“One wrong decision can lead to expensive consequences, and good luck trying to persuade the IRS to give you a do-over.”

For those who inherit IRAs, the intersection of taxes, estate law and financial planning can be a tricky place. There are many choices, maybe too many, and making the wrong choice can be costly, according to the recent article “6 inherited IRA rules all beneficiaries must know” from Bankrate.

There are two categories of beneficiaries. Surviving spouses, minor children, chronically ill or disabled individuals, or someone who is not less than 10 years younger than the original owner are subject to one set of rules. Everyone else has another set of rules.

You’ll need to know if the original owner had taken any RMDs—required minimum distributions—before they passed.

Did you want to minimize taxes, or is it more important for you to maximize cash distribution?

These are just a few of the issues to be addressed. Already complicated, inherited IRAs got even more complicated because of the SECURE Act, which changed some longstanding practices. Some experts tell beneficiaries not to do anything, until they meet with an estate planning attorney. The worst thing someone could do is make a wrong step and lose half of the IRA to taxes.

Here are the six rules for inherited IRAs:

1–Spouses have the most flexibility. The surviving spouse may treat the IRA as her own, naming herself as the owner. She can also roll it over into another account, such as another IRA or a qualified employer plan (including 403(b) plans). She could also treat herself as the beneficiary of the plan. However, each choice leads to further choices and decisions. She might let the IRA grow in the account until she reaches age 72, the new age for RMDs. Or she can roll the IRA into an IRA of her own, which lets her then name her own beneficiary.

2—When do you want to take the money? If you fall into the category of surviving spouses, minor children, chronically ill or disabled individuals, or someone who is not less than ten years younger than the original owner, then you can take the distributions over your own life expectancy. That’s the “stretch” option. Otherwise, you need to take distributions from the account over ten years, according to the SECURE Act. Depending on the size of the IRA, that could be a nasty tax bill. You can take as little or as much as you want, but by year ten after the owner’s death, the account must be empty.

3—Know about year of death required distributions. If the owner of the IRA did not take his RMD in the year of his death, beneficiaries are required to do so. If a parent dies in early January, for example, it’s not likely he took his RMD. The IRS doesn’t care if you didn’t know—you’ll be liable for a penalty of 50% of the amount that wasn’t taken out. If someone dies close to the end of the year, it’s possible that heirs might not know about the accounts until after the deadline has passed. If the deceased was not yet 70½, there is no-year-of-death distribution.

4—Get all the breaks you can—tax breaks. For estates subject to the estate tax, IRA beneficiaries will get an income-tax deduction for estate taxes paid on the account. The taxable income earned but not received by the deceased is called “income in respect of a decedent.” When someone takes a distribution from an IRA, it’s treated as taxable income. However, the decedent’s estate is paying a federal estate tax, so beneficiaries get an income-tax deduction for estate taxes paid on the IRA. For a $1 million income in an inherited IRA, there could be a $350,000 deduction offset against that.

5—Beneficiary forms matter. An entire estate plan can be undone by a missing beneficiary form, or one that is not filled out correctly or is ambiguous. If there is no designated beneficiary form and the account goes to the estate, the beneficiary will need to take the distribution from the IRA in five years. Forms that aren’t updated, are missing, or don’t clearly identify the individuals create all kinds of expensive headaches.

6—Improperly drafted trusts are trouble. If they are done wrong, a trust can limit beneficiary options in a big way. If the provisions in the trust are not properly drafted, some custodians won’t be able to see through the trust to determine the qualified beneficiaries. Any ability to maximize the time to take money out of an IRA could be lost. An experienced estate planning attorney who knows the rules about IRAs and trusts is a must.

Reference: Bankrate (July 17, 2020) “6 inherited IRA rules all beneficiaries must know”

Take Advantage of Tax Laws Now

“If you like the way the laws are today, you need to take advantage of them now, before they are changed tomorrow. In other words, use it or lose it.”

The pundits are saying that the if Democrats win the White House and possibly Congress, expect changes to income, gift generation skipping transfer and estate taxes. This recent article from Forbes, “Use It Or Lose It: Locking In the $11.58 Million Unified Credit” says that the time to act is now.

Since 2000, the estate and gift tax exemption has taken a leap from $675,000 and a top marginal rate of 55% to an exemption of $11.58 million and a top marginal rate of 40%. However, it’s not permanent. If Congress does nothing, the tax laws go back in 2026 to a $5.6 million exemption and a top marginal rate of 55%. The expectation is that if Biden wins in November, and if Congress enacts the changes published in his tax plan, the exemption will fall to $3.5 million, and the top marginal rate will jump to 70%.

The current exemption and tax rate may be as good as it gets.

If you make a taxable gift today, you can effectively make the current tax laws permanent for you and your family. The gift will be reported in the year it is made, and the tax laws that are in effect when the gift is made will permanently applicable. Even if the tax laws change in the future, which is always a possibility, there have been proposed regulations published by the IRS that say the new tax laws will not be imposed on taxable gifts made in prior years.

Let’s say you make an outright taxable gift today of $11.58 million, or $23.16 million for a married couple. That gift amount, and any income and appreciation from the date of the gift to the date of death will not be taxed later in your estate. The higher $11.58 million exemption from the Generation Skipping Transfer Tax (GSTT) can also be applied to these gifts.

Of course, you’ll need to have enough assets to make a gift and still be financially secure. Don’t give a gift, if it means you won’t be able to support your spouse and family. To take advantage of the current exemption amount, you’ll need to make a gift that exceeds the reversionary exemption of $3.5 million. One way to do this is to have each spouse make a gift of the exemption amount to a Spousal Lifetime Access Trust (SLAT), a trust for the benefit of the other spouse for that spouse’s lifetime.

Be mindful that such a trust may draw attention from the IRS, because when two people make gifts to trusts for each other, which leaves each of them in the same economic position, the gifts are ignored and the assets in the trusts are included in their estate. The courts have ruled, however, that if the trusts are different from each other, based on the provisions in the trusts, state laws and even the timing of the creation and funding of the trusts may be acceptable.

These types of trusts need to be properly administered and aligned with the overall estate plan. Who will inherit the assets, and under what terms?

A word of caution: these are complex trusts and take time to create. Time may be running out. Speak with a skilled estate planning attorney with knowledge of tax law.

Reference: Forbes (July 17, 2020) “Use It Or Lose It: Locking In the $11.58 Million Unified Credit”

What are Fiduciary Duties in Estate Planning?

“As you plan how you will leave your estate, it is important to your family’s future that you leave a legacy with well-executed documents. It’s also essential that you understand all of the roles of the people involved in your estate, especially the person or organization who will manage your estate.”

One of the reasons people uses trusts in their estate planning, is that the person named as a trustee has a legal duty to put the trust’s interests first, rather than their own interests. This is called a “fiduciary duty,” and it becomes very important when planning for the future of your assets and family. It’s an enforceable legal obligation says the article “Fiduciary Duties in Trusts and Estate Planning” from yahoo! finance.

A trustee is the person appointed to be in charge of a trust. There are many different kinds of trusts, created to own assets, including money, life insurance policies and homes. The person named as trustee in the trust document makes decisions about the trust assets to benefit the beneficiary’s best interests.

Trusts created while a person is living are known, appropriately enough, as living trusts. There are people who choose to be their own trustees and manage their trusts for as long as they are able. Married couples may be co-trustees on their trusts. The trust documents should be prepared, so that upon the death of one spouse, the surviving spouse becomes the trustee and manages the account.

The person creating the trust should also name a successor trustee. This is the person who will manage the trust when the trustee or the co-trustees are no longer competent to manage the trust. That might be because they have died or because they have become incapacitated due to an injury or illness.

The fiduciary duties of a trustee are to act in the best interest of the beneficiaries. These are some guidelines:

• The assets a trustee manages do not belong to them, and the trustee must not mix personal assets with assets in the trust.
• A trustee may not use the trust’s assets for their benefit.
• The trustee must not favor one beneficiary over the other.
• The trustee must follow the directions in the trust document.
• The trustee must keep accurate records, file tax returns and report to beneficiaries, as directed in the trust.

There are three fiduciary duties when it comes to a trust: loyalty, care and full disclosure. The trustee(s) must act in the best interest of the trust and its beneficiaries. This is a high standard and why the decision on who to name as a trustee is so important.

The terms of every trust vary, depending on the type of trust and the needs of the estate plan. The trustee needs to be familiar with the trust and its directions, so they can perform correctly.

An estate planning attorney is needed to draft trusts, so they reflect the wishes of the person and their goals. Using a downloaded form or even a standard legal form is a big risk for families.

Reference: yahoo! finance (July 8, 2020) “Fiduciary Duties in Trusts and Estate Planning”

Still Procrastinating about Your Estate Plan?

“Without an estate plan in place, clients will be reliant on state laws and probate courts to appoint individuals who will be responsible for financial affairs and health-care decisions, in the case of illness and ultimately the transfer of assets upon death.”

The continuing escalation of the COVID-19 pandemic has forced many people to finalize estate planning documents, even as their estate planning attorneys are working from home. People are coming to terms with the stark reality: they could be struck by the disease and need to have a plan in place, reports the article “Estate Planning In The Age Of Covid” from Financial Advisor.

Everyone should review their estate planning documents, including their wills, trusts and gifting techniques, to ensure that they are in line with their goals and the numerous tax law changes that have occurred in the last six months. The review of these estate planning documents is especially critical during these unpredictable times.

Here are the documents that may need to be updated:

Power of Attorney—This legal document gives a person you name the authority to handle financial affairs and protect property by acting on your behalf, if you become incapacitated.  Some of the typical tasks of your “agent” are paying bills, writing checks, selling or purchasing assets or signing tax returns.

You may name any competent adult you like. However, be certain to choose someone trusted who will put your interests above theirs. This person should possess common sense, ethics and financial acumen. Someone who lives near you, will be able to handle matters more expeditiously. Someone who is far away, may not be as effective. You should also name a back-up or secondary agent.

With no power of attorney, no one will be authorized to act on your behalf and your family will need to have the court appoint a conservator, which will take time and money.

Health-Care Proxy—This legal document gives an agent authority to make health-care decisions on your behalf, if you are unable to do so. Without one, the family of anyone over the age of 18 will need to go to court and have a guardian appointed.

Last Will and Testament—Your last will is the legal document that gives directions to how you want your property to be distributed after you die. It is used to appoint an executor to oversee the distribution of your assets. For parents of minor children, this is the document used to name a guardian to raise your children. If you don’t have a last will, the court will choose who will raise your child, who will distribute your assets and who will oversee your estate. It is much better to handle this in advance, so you are in control of these important decisions.

Living Trust—A revocable trust is a legal contract that creates an entity to hold title to your assets. As the grantor or creator of the trust, you can change it at any time. You can also set it to outlive you. If you become incapacitated, a successor trustee then steps in and manages your affairs without any court intervention. A trust also gives you privacy, since it avoids the probate process.

There are many estate planning tools that may be used to pass wealth to the next generation, minimize taxe, and ensure that your legacy continues, even during these unprecedented times.

Reference: Financial Advisor (June 16, 2020) “Estate Planning In The Age Of Covid”