What Should My Estate Plan Include?
Estate Plan, Living Will, and Healthcare Power of Attorney documents

What Should My Estate Plan Include?

In the COVID-19 pandemic, the two most critical documents to have are medical and financial powers of attorney. You should name someone to do your banking or make your medical decisions, if you are quarantined in your home, admitted to the hospital, or become incapacitated. When you have those in place, you need to create a comprehensive estate plan.

The Huffington Post’s recent article entitled “A Guide To Estate Planning During The Coronavirus Pandemic” says that almost everyone should have an estate plan—even if there’s no major health threat. If you don’t have one, right now is a great time to put it together. Let’s look at the documents you should have and what they mean.

  1. A Financial Power of Attorney. This is a legal document that gives your agent authority to take care of your financial affairs and protect your assets by acting on your behalf. For example, your agent can pay bills, write checks, make deposits, sell or purchase assets, or file your tax returns. Without an FPOA, there’s no one who can act on your behalf. Family members will have to petition the probate court to appoint a guardian to have these powers, and this can be a time-consuming and expensive process.
  2. A Health Care Power of Attorney. Like a financial power of attorney, this legal document gives an agent the power to make health care decisions on your behalf, if you become incompetent or incapacitated. If you’re over the age of 18 and don’t have an HCPOA, your family members will have to ask the probate court to again appoint a guardian with these powers.
  3. A Living Will (Advance Health Care Directive). This allows you to legally determine the type of end-of-life treatment you want to receive, in the event you become terminally ill or permanently unconscious and cannot survive without life support. Without a living will, the decision to remove life support is thrust upon your health care agent or family members, and it can be an extremely stressful decision. If you draft a living will, you detail your wishes and take that decision out of their hands.
  4. A HIPAA Waiver. An advance health care directive will likely contain language that allows your agent to access your medical records, but frequently hospitals will refuse access to medical information without a separate HIPAA waiver. This lets your agents and family members access your medical data so they can speak freely with your physicians, if there is a medical emergency or you become incapacitated.
  5. A Will. A last will and testament is a legal document through which you direct how you want your assets disbursed when you pass away. It also allows you to name an executor to oversee the distribution of your assets. Without a will, the distribution of your assets will be dictated by state law, and the court will name someone to oversee the administration of your estate. A will also lets you name a guardian to take care of your minor children.
  6. A Living Trust. A revocable living trust is a legal tool whereby you create an entity to hold title to your assets. You can change your trust at any time, and you can set it up to outlive you. In the event you become incapacitated or are unable to manage your estate, your trust will bypass a court-appointed conservatorship. A trust also gives you privacy concerning the details of your estate, because it avoids probate, which is a public process. A living trust can also help provide for the care, support, and education of your children, by releasing funds or assets to them at an age you set. A living trust can also leave your assets to your children in a way that will lessen the ability of their creditors or ex-spouses to take your children’s inheritance from them.

Speak with your estate planning attorney to get these documents put in place before it is too late. To learn more about this and other estate planning blogs click here.

Reference: The Huffington Post (April 7, 2020) “A Guide To Estate Planning During The Coronavirus Pandemic”

Estate Planning Basics for Difficult Times

Most people who contract COVID-19 experience mild symptoms, but it does not hurt to be prepared just in case you need to be hospitalized, explains the article “A Guide to Estate Planning During the Coronavirus Pandemic” from HuffPost.com. It is scary to think about being so sick that you aren’t able to make decisions for yourself. However, that’s the point of an estate plan: to ease your fears. You’ll feel better knowing you’ve made health and financial decisions in advance and your loved ones won’t have to guess about your wishes.

Even without a global pandemic, everyone should have an estate plan. If you don’t have one, now is the time to get it done, even if you are single and have limited wealth. An estate plan includes documents like a revocable trust, financial powers of attorney (FPOA), health care powers of attorney (HCPOA) and more.

Right now, the medical and financial powers of attorney are on everyone’s mind. These two documents allow a person you name to do your banking, pay your bills and make medical decisions, if you are quarantined at home, admitted to the hospital, or become incapacitated. If you don’t have a financial power of attorney, a family member will need to request the probate court to appoint a guardian. This will be expensive and time-consuming. The same goes for the health care power of attorney. If a decision needs to be made in an emergency situation, the family will not have the ability to enforce your wishes.

A living will, known in some states as an advance health care directive, lets you be specific about what end-of-life treatment you do or do not want to receive, if you become terminally ill or permanently unconscious. Without a living will, the decision to remove life support must be made by loved ones, without knowing what you want.

A HIPAA waiver permits your loved ones to access medical information. Even when there is a health care power of attorney, there are some institutions that will refuse access to medical information without a standalone HIPAA waiver.

The last will and testament is the legal document that is used to direct distribution of property at the time of death, appoint an executor who will oversee the distribution of assets, and, if you have minor children, name a guardian for them. Without a last will, the court will rely on state laws to determine who inherits your property and who will raise your children.

A living trust is a legal contract that creates an entity to hold your assets. If it is a revocable trust, you control it and you can make changes to it anytime you wish. If you become incapacitated or unable to manage your estate, the living trust avoids the need for a court-appointed conservatorship. When you create the living trust, you appoint a successor trustee who will step in when you are unable to manage your affairs. The living trust creates privacy, since the assets in the trust do not go through probate, which is a public process.

Once you have an estate plan, make sure that the documents are safe and the right people can access them. Some estate planning attorneys store documents for their clients. Copies of relevant documents should be given to your treating physician, financial advisor, family members and any trustees or agents. Keep high quality scanned copies on your computer, and label them, so that they can be identified. Don’t name them “Scan1” and “Scan2.” Label them accurately and include the date the documents were signed.

Speak with your estate planning attorney to ensure that you have all of the necessary documents to protect yourself, your loved ones and your property.

Reference: HuffPost.com (April 7, 2020) “A Guide to Estate Planning During the Coronavirus Pandemic”

Is Your Estate Really as Set as You Think?

Next Avenue’s recent article entitled “Is Your Estate as Planned As You Think?” explains that when you pass away your executor will have many tasks to perform when settling your estate.

It’s helpful to add clarity and lessen the burden of that person’s work in advance. Look at this list of things to make sure your estate is as planned as you think it is:

Is your will current? If you’ve written your will, how long has it been since you drafted it? Have there been any major changes in your life since that time? If so, it’s likely time to update it. Review your will to make certain that it’s an accurate representation of your assets and your wishes now.

Is your will detailed? Yes, you’ve addressed the big stuff, but what about smaller items with sentimental value? You should list who gets what, to avoid fighting.

Have you set out your wishes, so they’re legally binding? Each state has different rules as to what is required for a valid will. Work with an experienced estate planning attorney to make sure your will is valid.

Are your financial affairs organized? Your executor will need to know if you have any recurring payments, as well as your account number, and online passwords. Create a list of regular monthly bills, along with your account numbers and access codes to simplify your executor’s job.

You will also need to let the executor know about any automatic deductions or charges on your credit card, internet-based subscriptions, club memberships, recurring charitable donations and automatic utility payments.

Do you have a way to distribute your personal items? You should determine how your family will divide up the possessions not explicitly listed in your will, such as the lawnmower, dishes and photographs. All of it will need to be either distributed to one of your beneficiaries, donated, or sold.

Conducting comprehensive planning of your estate with an attorney can help ensure that there’s less stress and an easy distribution of your assets.

While speaking with your estate planning attorney, ask about appointing a guardian for your minor children in your will, a healthcare directive, a living will, a HIPAA waiver and whether you should have a trust.

Reference: Next Avenue (Feb. 25, 2020) “Is Your Estate as Planned As You Think?”

You Can Complete Your Estate Plan During the Coronavirus Quarantine

The coronavirus lockdown is happening in many states, following the lead of California, Illinois, Florida and New York. Kiplinger’s recent article entitled “How to Get Your Estate Plan Done While Under Coronavirus Quarantine” says that these isolation orders create unique issues with your ability to effectively establish or modify your estate plan.

The core documents for an estate plan are intended to oversee the management and distribution of your assets, after you pass or in the event you are incapacitated. Each document has requirements that must be met to be legally effective. Let’s look at some of these documents. Note that there’s proposed federal legislation that would permit remote online notarization, and Illinois and New York have passed orders to allow notarization utilizing audio visual technology.

Will. Every state has its own legal requirements for a will to be valid, and most require disinterested witnesses. Some states, like California, permit a will, otherwise requiring the signature of witnesses, to be valid with clear and convincing evidence of your intent for the will to be valid. An affidavit indicating that the will was signed as a result of the emergency conditions caused by the COVID-19 virus should satisfy this requirement.

Power of Attorney. This document designates an individual to make financial decisions regarding your assets and financial responsibilities, if you’re unable to do so. This can include issues regarding retirement benefits, life and medical insurance and the ability to continue payments to persons financially dependent on you. The durable general power of attorney is typically notarized.

Advance Health Care Directive. This document states whether you want your life extended by life support systems and if you want extraordinary measures to be taken. It may state that you wish to have a DNR (Do Not resuscitate) in place.

HIPAA Authorization. Some states have their own medical privacy laws with separate requirements, and most powers of attorney provide that the designated persons can act, if you’re unable to do so. Financial institutions typically require confirming letters from your doctor that you’re unable to act on your own behalf. To be certain that this agent can act on your behalf if needed, they should be given written access to see your medical information.

With the pandemic, these requirements can be fluid and may change quickly. Be sure to work with an experienced estate planning attorney. Our firm has implemented safety measures and are prepared to help you with your estate planning needs safely and quickly. If you have not updated your estate plan recently or do not have one, sign up for a tele-consultation today.

Reference: Kiplinger (March 30, 2020) “How to Get Your Estate Plan Done While Under Coronavirus Quarantine”

How Do I Cash in My Life Insurance Policy?

There are some drawbacks to using life insurance to meet immediate cash needs, especially if you’re compromising your long-term goals or your family’s financial future. Investopedia’s recent article “Cashing in Your Life Insurance Policy” says that if other options are not available, life insurance—especially cash-value life insurance—can be a source of needed income.

Cash-value life insurance, like whole life and universal life, builds reserves through excess premiums plus earnings. These deposits are held in a cash-accumulation account within the policy. You can access cash accumulations within the policy through withdrawals, policy loans, or partial or full surrender of the policy. Another alternative is selling your policy for cash, known as a life settlement. Note that although cash from the policy might be useful during stressful financial times, you could face unwanted consequences, depending on the method you use to access the funds.

You can usually withdraw limited cash from a life insurance policy, based on the type of policy you own and the insurance company. The big advantage is that the withdrawals aren’t taxable up to your policy basis, as long as your policy isn’t classified as a modified endowment contract (MEC). However, these can have unexpected or unrealized consequences. Withdrawals that decrease your cash value, could cause a reduction in your death benefits. This is a potential source of funds you or your family might need for income replacement, business purposes or wealth preservation. Cash-value withdrawals also aren’t always tax-free. If you take a withdrawal during the first 15 years of the policy, and the withdrawal causes a reduction in the policy’s death benefit, some or all of the withdrawn cash could be subject to tax. Withdrawals are treated as taxable, to the extent that they exceed your basis in the policy.

Withdrawals that reduce your cash surrender value could mean higher premiums to maintain the same death benefit, or the policy could lapse.

If your policy is determined to be an MEC, withdrawals are taxed, according to the rules applicable to annuities–cash disbursements are considered to be made from interest first and are subject to income tax and possibly a 10% early-withdrawal penalty, if you’re under age 59½ at the time of the withdrawal. Policy loans are treated as distributions, so the amount of the loan up to the earnings in the policy will be taxable and could also be subject to the pre-59½ early-withdrawal penalty.

Surrendering the policy can provide the cash you need, but you’re relinquishing the right to the death-benefit protection. You can sell your life insurance policy to a life settlement company in exchange for cash. The new owner will keep the policy in force (by paying the premiums) and get a return on the investment, by receiving the death benefit when you die.

To qualify for a life settlement, the insured must be at least 65 years old, have a life expectancy of 10 to 15 years or less, and usually have a policy death benefit of at least $100,000. However, the taxation of life settlements is complicated. The gain in excess of your basis in the policy is taxed to you as ordinary income. In addition to the tax liability, life settlements usually include up to a 30% in commissions and fees, which reduces the net amount you receive.

If you are interested in learning more about tax planning or how your life insurance policy can affect your estate plan, speak with your local estate planning or elder law attorney.

Reference: Investopedia (January 9, 2019) “Cashing in Your Life Insurance Policy”