The stock market has been in a free fall, and Americans are experiencing a type of fear that hasn’t been seen since the polio epidemic in the 1940s and 1950s.
During those decades, polio outbreaks in the U.S. crippled more than 35,000 people yearly, on average. Parents were afraid to let their children go outside, travel and commerce were restricted, and homes and towns where polio cases were found needed to be quarantined. Similar fears are resurfacing for many people now, and estate planning attorneys are being asked many questions.
“Suddenly business owners — from mom and pop shops to CEOs of large corporations — are meeting with estate planning lawyers like no other time than I can recall,” says Bakersfield, California, estate lawyer Patrick Jennison. “Appointment books are getting filled.”
Especially since COVID-19 can be so dangerous for people over 60 — a part of the population that includes many business owners and CEOs of major companies — it is important to address the “What if I get it?” question now and not put it off, says Jennison. “If you are a business owner, do you have a succession plan in place for the operation of your business in the event of your incapacity and the management and ownership of your business if you die?”
Establish a Power of Attorney
It’s important for people to be able to answer – What if key decision makers as well as heads of household fall ill, become temporarily incapacitated and are not able to pay bills, taxes or take care of family and business-related financial obligations? You need a Durable Power of Attorney.
If you become ill and your mental ability to manage affairs is impaired, having a durable power of attorney in place allows a trusted friend, family member, or business associate to do these things for you – things such as taking money out of your bank account, paying your bills, or even making a court appearance for you.
Have an Advance Health Care Directive in Place
An advance health care directive is a document explaining how you want medical decisions about you to be made if you are unable to make these decisions yourself. This gives your health care team and loved ones the knowledge of what kind of care you want as well as who should make decisions for you when you are unable to do so.
“In this age when more and more people are living together without being married, having an advance health care directive can prove incredibly important, depending upon which state you reside in and if you have established a domestic partnership,” Jennison points out. “If not, and you are not married, then the well partner could be viewed as a ‘stranger’ and have no rights to be informed about your health or treatment. Also, that person would have no input into important health decisions.
He also adds, “You do not want to be in a situation where your financially incompetent son or daughter has this power to end your care — to end your life — looking for an easy way to grab Mom or Dad’s money.”
Where is Everything?
For many of us, our financial lives are online and we might not receive bills in the mail. If you need to spend time in the hospital, possibly on a respirator and unable to communicate, will someone else have knowledge of or access to your banking passwords, internet provider, and other bills?
Angela Petrusha, an estate attorney from Eureka, California, asks the following: “Do all appropriate family members have essential information in the event of your incapacity or death, including the location of important estate, business and financial documents, names and contact information of accountants, attorneys, investment advisers, and related business professionals?
“Create a journal listing all these people, the bills you pay monthly, insurance, tax, and so on, to lessen the burden on family members from scrambling to re-construct your financial life. It is difficult for most people to imagine the challenge of working through both grief and the financial realities following death or incapacity. So, consider the people whom you love, who love you and lessen their burden. Taking the time to do this will give you (and them) great peace of mind.”
Tom Hjerpe, another estate attorney from Eureka, California, stresses that it’s also important to know who your current bank account, life insurance, IRA, or pension beneficiaries are.
“These things are outside of an estate plan and are governed by contract law. So often a couple divorces, but changing the designation of a pension beneficiary is overlooked and remains the same for decades. Then the divorced spouse remarries, he or she dies, but pension benefits go to the former spouse listed as beneficiary! It is a very sad situation, and completely avoidable. Be sure you know who are listed as beneficiaries on bank or investment accounts with a pay upon death clause. Have a contingent beneficiary in the event the first person pre-deceases you.”
‘I’ll Put My Son’s Name as a Co-Owner of My House – That’s How I Avoid Probate!’
Jennison cautions against putting assets in joint names, at least not without of the approval of your CPA and attorney. “We hear that often, and it is so dangerous! Consider the possibility that your son causes an auto accident? You could be forced to sell your home if he is sued! Also, by making him an owner now, upon your death he loses the ‘stepped up tax basis,’ which could cost him thousands of dollars in lost inheritance capital gains tax.”
Have a Family Meeting Now
Now is the time to meet with your adult children to plan the future transition of management and wealth within the family so that it can be handled as smoothly as possible. The effects of the COVID-19 pandemic are causing many of us to reflect on our personal health and wealth. Many Americans have never created a living trust or other important estate planning documents, and those who have prepared such documents may not have reviewed them in several years. It is important to address these issues for the sake of you and your loved one’s mental wellbeing and to reduce as much stress as possible.
One Final Step, Just in Case
Finally, although it is unlikely that it will need to be used, Jennison, Petrusha, and Hjerpe all agreed that Americans – especially business owners – should get a remote contingent beneficiary.
“Your estate plan would contain a paragraph essentially stating, ‘If all else fails — if the people I have named to receive money or property have died — then, I would like my estate to pass as follows.’ People will typically mention charitable organizations, or other specific beneficiaries so they still have control over what happens with their estate, rather than have the state in which they reside decide under the rules of intestate succession.”
For help creating or updating your estate plan, contact us at Wilson and Wilson Estate Planning and Elder Law, LLC, 708-482-7090 or wwilson@wilsonwilsonllc.com