A guide to Estate Planning During the Coronavirus Pandemic
The coronavirus pandemic has many on edge. We’ve all been forced to face fears in some way, whether it’s the fear of falling ill, losing a job, struggling to pay bills, or having to spend time alone. With all these anxieties and unknowns weighing on our minds, it might feel like there’s suddenly a pressing need to get your affairs in order ― just in case.
Though many people who contract COVID-19 experience only mild symptoms, it is prudent to be prepared in case you experience more severe symptoms and are hospitalized. It can feel scary thinking about getting sick or being unable to make decisions for yourself, but an estate plan is meant to ease your fears and provide you with peace of mind. After all, wouldn’t you feel better knowing that the burden of making health and financial decisions will never fall on unprepared family members?
The truth is that just about everyone should have an estate plan, even if there is no looming health threat. So if you don’t have one, there’s no better time than now to put it together.
What is Estate Planning?
Virtually everyone has an estate. Your house, your car, your bank accounts, investments, jewelry, furniture, possessions, etc. all comprise your estate. No matter how large or modest, everyone has an estate, and everyone will benefit from proper estate planning.
Basic estate planning involves making a plan in advance to name who will receive your assets after you die and who will be in charge of carrying out your wishes. Proper estate planning should also:
Provide values for your next of kin to uphold (e.g. graduating from college, holding full time employment, getting married, etc.).
Include instructions for your care if you become disabled or incapacitated before you die.
Name a guardian and an inheritance manager for minor children.
Provide for family members with special needs without disrupting public benefits.
Provide for loved ones who might be irresponsible with money or who may need future protection from creditors or divorce.
Provide for the transfer of your business at your retirement, disability, or death.
Minimize taxes, court costs, and unnecessary legal fees.
Be an ongoing process. You should revisit and update your plan after any major life events.
Documents Included in Estate Planning
1. Financial Power of Attorney
A financial power of attorney document is a legal document that gives an agent the authority to carry on your financial affairs and protect your property in the event you are incapacitated but still alive. The FPOA gives your agent the ability to pay bills, write checks, make deposits, sell or purchase assets or sign any tax returns. Any competent adult can serve as your agent, however it should also be someone you trust to be honest and dependable. Without a Financial Power of Attorney document in place, your family members will have to petition the probate court to appoint a conservator of your estate to have these same powers. This is a time consuming and costly process that can easily be avoided with proper estate planning.
2. Advance Health Care Directive/ Power of Attorney (Living Will) / HIPPA Waiver
Similar to a financial power of attorney, a health care directive/ power of attorney is a legal document that gives an agent the authority to make health care decisions on your behalf if you are incompetent or incapacitated. If you are over the age of 18 and do not have this document, your family members will again have to petition the probate court to appoint a conservator of your person.
This document also allows you to specify what end-of-life treatment you do or do not want to receive if you become terminally ill or permanently unconscious. Without instructions, this decision may be left to your health care agent or family members and can be a very emotional and burdensome process. With this document and proper estate planning, you set forth your wishes and take that decision out of your family member’s hands.
3. Last Will And Testament
A last will and testament is a legal document that allows you to direct distribution of your property at the time of your death. The will also allows you to appoint an executor - the person who oversees the distribution of your assets. A will also allows you to appoint a guardian to take care of minor children. Again, without a will, the probate court will decide who is the best person to fulfill that role without factoring in your wishes.
A will, however, does not bypass the probate court, and it is therefore just a part of the estate planning process. While you can express your wishes in your will, a will still has to be probated, and your estate is subject to the costs, fees, delays, and public record nature of the probate court.
4. Living Trust
A living trust is the recommended document to transfer your assets after your death. Essentially, a revocable living trust is a legal contract you make with yourself to create an entity to hold your assets. You can amend, revoke, or change your trust at any time (which is why it is called “revocable”), and you can set it up to outlive you.
You appoint a successor trustee (make sure it is someone you TRUST!) who steps in and manages your affairs without the involvement of the court, avoiding the extra costs and delays associated with the California probate court. A trust also provides privacy surrounding the details of your estate, unlike the probate process in which all documents filed with the court are public record. In addition, a living trust can help provide for the health, education, maintenance, and support of your children by turning over trust assets to them at an age chosen by you. For example, you could advise that your children receive their inheritance in graduated stages, like one-quarter of the trust assets at age 21, one-quarter at age 25 and the remainder at age 30 (or upon a life event such as graduation from university or after getting married or having a child).
The living trust is very flexible and can suit your specific wishes based on your own family and financial situation and any other major life events or considerations.
Questions? Give us a call for a free consultation.