Many of my friends and clients have recently called in a panic because they realized they either didn’t have an estate plan or felt dizzy with the need to update their estate plan due to the worldwide whiplash of a pandemic. It’s only natural - with uncertainty comes the need for control. Can you relate? I surely can. An estate plan is one thing that can give you control, before a crisis hits. If you already have an estate plan - GOOD JOB! If you don't, let's get to work.
HINT: If you own anything, have a bank account, or a child...you need an estate plan.
Top reasons to review and/or update your current estate plan
A marriage, divorce, or birth/adoption of a child
Bought or sold a business or real estate property
Had a financial windfall (!) or meltdown (!)
Moved to a different state or country
Substantial change in health status or diagnosis of major medical issue
Or any other significant life change
The changes in our daily lives due to COVID-19 concerns may require a change in an existing plan. However, uncertainty in the world does not necessarily mean you need to update your estate plan. Nonetheless, you want to ensure your plan reflects your wishes and intentions and you have all the necessary elements of your estate plan in place.
Don't have an estate plan? Here are my top estate planning tips:
Estate Planning Basics
A basic estate plan will include the following:
Last will and testament and/or a revocable living trust – these determine the distribution of your assets upon your death. Your attorney can help you decide which one is best, or possibly both.
Power of attorney for financial decisions - who can make decisions regarding your money or property in the event you are incapacitated?
Power of attorney for health care decisions - who can make decisions regarding your health in the event you are incapacitated?
Living will –your wishes regarding life support and end of life care
It is important to have all these elements in place to ensure you are planning for both the distribution of your assets upon death, and appointing the best people to assist you in the event of an incapacity. Obviously, these are incredibly important decisions and would be left to chance and/or expensive court procedures without a formal estate plan.
Beneficiary Designations for Bank/Financial Accounts
One of the easiest and most important steps in estate planning is to designate your beneficiaries for your bank accounts and other financial assets, like retirement accounts, stocks, etc. If you have a bank or investment account, no matter how big or small, you can take this easy estate planning step and ensure the accounts will pass directly to your designated beneficiary, i.e. spouse, child, family member, non-profit, etc. Simply contact your bank or financial instruction directly and they will provide you with the necessary beneficiary designation forms. Fill them out and mark this task complete!
Incapacity and Long-Term Care Planning
Your financial and medical power of attorney will provide you significant peace of mind that the person you choose can make critical decisions rather than leaving it to state law. Along with this “incapacity planning,” you should also consider the costs associated with long-term care. Be forewarned, these can be quite staggering, and you will want to connect with a few long-term care insurance companies before making a decision. This type of insurance will provide varying levels of coverage for home care providers as well as long-term care facilities. While long-term care insurance may not be an option for everyone, these policies can provide significant benefits assisting with the cost of long-term care.
Planning for Minor Children
If your children are minors (under 18), you will need to decide on a guardian to care for your children if you are unable to do so yourself. If you have a spouse, this is typically transferred to them, however, in the unlikely event both of you are incapacitated or die, you will need to determine the best guardian to raise your children and honor your wishes. Heavy, yes. The appointment of a guardian is one of the most important estate planning decisions for parents of young children. Have this conversation with your spouse and other family members about who would raise your children in a manner most like you. Also, appoint an individual to manage the finances for your children if you are unable to do so yourself. This does not need to be the same person/s who would raise the children, and often is not and for good reason - raising children and managing money are far different things. For younger children, consider setting up a trust for their inheritance. With a trust, the trustee of your choosing will manage the funds for your children until they reach the age of majority (typically between 18-22). The trustee will distribute funds for their general care until they reach the age of majority, or until such age or life event that you deem appropriate.
Planning in Times of Uncertainty
My best advice, create an estate plan that fits your current situation and needs and try not to speculate about what could or could not happen in the future. Sometimes we become so concerned about a potential medical issue or a potential future debt that we become distracted from our overall estate planning goals.
What occurs in the world around us in the coming months is difficult to determine. With that mind, the best approach is to use the tax code provisions to your advantage while still planning for the coming years in a manner that is flexible, and accounts for changes in the world around us.
Take this time to visit with your professional advisors and family members to discuss your plans and to determine if it’s time to make some changes. It is important to honestly evaluate your family situation, assets, long-term care needs and personal preferences in creating an estate plan. By taking some time to discuss these issues now, you can create a plan that fits the unique concerns of you and your family and provides you with peace of mind for the future, even if the future involves uncertainty.
If you have additional questions regarding estate planning or incapacity planning contact, Kelly O’Brien at Measure Law, 406-752-6373.