4 Areas of Your Estate Plan to Review in Light of COVID-19
It never hurts to be prepared in the event of hospitalization. Thinking about falling ill or not being able to make decisions for yourself can be frightening, but having an estate plan in place can help ease your concerns.
Individuals over the age of 18 should have some level of estate planning in place. You may be surprised to learn that wills and trusts aren’t the only documents to prioritize.
1. Power of Attorney and Health Care ProxyA financial power of attorney grants authority to carry on a person’s financial affairs and protect their property by acting on their behalf. This includes the ability to write checks, pay bills, make deposits, purchase or sell assets or sign any tax returns.1
Similarly, a health care power of attorney grants the authority to make health care decisions on your behalf should you become incompetent or incapacitated. If you are over the age of 18 and do not have a health care power of attorney in place, your family members will need to request that the court appoint a guardian to take on these responsibilities. 1
2. Your WillA last will and testament is a legal document that allows you to direct distributions of your property at the time of your death. A will also allows you to appoint an executor who oversees the distribution of your assets. 2 This person will attend to your affairs after you pass, probate your will if necessary and file income and estate tax returns on your behalf. If you have children who are minors, you should also name a guardian for them in the will.
Everyone has assets that must transfer after a person’s death, and without a will, there is no direction as to how and to whom those assets will pass. The state will handle distribution of your assets, and the court will decide on the best person to oversee the administration. This is similar to an appointed guardian. If you don’t appoint one, a court will decide on the best person to fulfill this role. 2
3. Living TrustIn general, your trust benefits you while you are alive and may also be beneficial to others, such as your spouse or children. Identifying who will receive assets upon your death may be a detail that needs updating based on your lifestyle and changes that have taken place. Additionally, you’ll want to outline whether your beneficiaries receive your assets outright or through an income stream. If your beneficiaries are young, you may want to consider holding assets for them in a trust until they are old and responsible enough to handle finances themselves.
Appointing a trustee will identify who will step in to manage your affairs without the involvement of the court, avoiding extra time and money associated with probate. 3 A trust also affords you privacy regarding the details of your estate since it eliminates the need for probate, which is a public process.
4. BeneficiariesAnother important update you should make to your estate plan is to review beneficiary designations on your life insurance policies, retirement accounts, etc. 2 Keep in mind that if you have a joint asset such as a bank account, that will pass to the surviving joint owner. Be sure to name someone you trust to act in your best interest should the time come for them to be responsible for your assets.
Due to stay-at-home orders and social distancing practices, it may be more difficult to meet with your attorney or notary in person to prepare or update your documents. Legal websites offer templates to help you create documents, and some states have suspended various statutes to let people appear before a notary public via videoconference. 4 Wills, however, need to be signed in front of witnesses in person.
While you have the time, you should start reviewing your estate plan and making any adjustments with the appropriate professionals as needed. Making necessary and important changes now will likely benefit you and your family in the future.