Transferring your legacy

Estate Planning Essentials During Times of Uncertainty

20 Minute Read

Whether you have an estate plan in place or have long intended to put things in order, this period of sheltering-in-place might be a good opportunity to take a closer look. Here we provide a guide to things you may want to consider about estate planning. When you are ready to move forward, we strongly recommend that you consult an estate attorney who is licensed to practice law in your state and a tax advisor to develop a formal plan that is right for you.

Like most people going through this pandemic, you are probably not overly concerned right now about estate taxes or who gets the family heirlooms, but about much more tangible fears like what happens in an emergency if you are unable to make your own health care or financial decisions. What happens if you are hospitalized for a long period of time? How will your family know the way you want your estate distributed? An estate plan answers these questions—for your own peace of mind as well as that of your heirs.

Estate planning encompasses a wide range of topics, from dividing up your assets upon your death, to naming guardians for your minor children and determining who will make decisions for you.

What is Estate Planning?

Estate planning encompasses a wide range of topics, from dividing up your assets upon your death, to naming guardians for your minor children and determining who will make decisions for you. One of the most important elements of estate planning is applicable for everyone, young and old, rich and poor, and that is incapacity planning—determining who will represent your interests if you are unable to do so.

At the very least, we recommend that every person over the age of 18 immediately review or put into place durable powers of attorney and an advance health care directive. We encourage you to also assist any family or friends whom you are, or would be, responsible for in an emergency, as well as your adult children.

Key Elements of an Estate Plan

Every estate plan includes a variety of documents, certain of which are listed below with general descriptions of what they mean, certain legal requirements they have about which your estate attorney can provide additional information, and specifically what elements we believe are most important to review at this time.

Last Will and Testament

Traditionally, the will is the primary planning document. However, many people now utilize a revocable living trust as their primary document and use a “pour-over” will to supplement their living trust. Whether a will or a living trust is used, these documents will name responsible fiduciaries to handle your estate, provide instructions on how to distribute your estate (such as establishing trusts for heirs for the future management of your assets and properly utilizing estate tax exemptions), and name guardians for any minor children.

Preparing a new will (or amending a previous will) is difficult to accomplish at this time, but not impossible. Ask your friends, family and trusted advisors for referrals to attorneys specializing in estate planning. Most attorneys are holding meetings over the phone or video conference and can prepare drafts of documents without ever having to meet in person. A properly valid will typically needs to be in writing and requires two “disinterested” witnesses to your signature. Since anyone who inherits from you, such as a spouse or child, is an interested party and cannot count as a witness to the in-person signing of the will, attorneys have come up with creative ways to meet both the legal and social distancing requirements.

Revocable Living Trust

A revocable living trust is used as an alternative to a will. The revocable living trust often requires slightly more work upfront but offers some significant benefits over a traditional will. One benefit of a revocable living trust is the ability to avoid probate, the court process of distributing a decedent’s estate. This benefit is often highlighted as a way to streamline the after-death aspects of handling your estate, saving your heirs time and money.

One benefit of a revocable living trust is the ability to avoid probate, the court process of distributing a decedent’s estate.

Another benefit that is just as important to discuss, especially right now, is the ability for a co-trustee or successor trustee to step into your shoes as “owner” of the assets of the trust if you were to become incapacitated. In this capacity, they would be able to write checks and pay bills or discuss your investments with your financial advisor. When you establish a revocable living trust, you name the co- or successor trustees and the general practice is to name someone as a successor to take over for you in case of incapacity or death. It might be worth considering whether establishing a “co-trustee” is more beneficial as that eliminates the need for a successor trustee to establish “incapacity” before assuming the power of trustee. This generally involves one or two doctors’ opinions, which has become more difficult due to sheltering-in-place and the desire to avoid hospitals as much as possible. While a spouse is generally the first choice for a co-trustee, you can also consider whether a professional, or corporate, trustee such as a bank or trust company can fulfill this role. This is an important decision to make as it has real consequences as to who has access to your assets. You should review the section on fiduciaries below and discuss your options with your estate planning attorney.

Establishing a revocable living trust requires drafting the trust agreement, executing the trust and then transferring assets from your individual name to the name of the trust. A qualified attorney should assist in designing and drafting the trust agreement. Execution of the trust requires the signature(s) of the trustor(s) (the one establishing the trust, which can generally be an individual or a married couple) and is almost always notarized. Some states (including Washington) allow remote online notarization while others (notably, California and Oregon) require the notarization to take place in the same physical space. Mobile notaries all around the country have developed techniques that provide a legal notarization while respecting social distancing rules.

Financial and Health Care Power of Attorney

A power of attorney is a legal document that gives someone else the authority to act on your behalf for either financial or health care decisions. This “Agent” can be given authority either immediately at the time of signing or only assume this authority at the time of your incapacity. As in the case of a trust, “incapacity” is almost always determined by medical professionals as the inability to manage one’s own affairs. You may wish to consider whether your health care power of attorney is identified as one that “springs” into action only under your incapacity, as that adds an additional step that your agent must take in order to make crucial medical decisions for you. Instead, you may wish to consider a health care power of attorney with an immediate grant of authority (called a “durable” power of attorney).

The health care power of attorney not only gives a designated agent authority over your medical decisions, but also instructions as to the type of care you would like to be provided. These instructions should correspond to your wishes as described in your advance health care directive (discussed below). Some states, including California, have essentially merged the two documents into one, so that your advance health care directive also serves as a health care power of attorney. The authority given to your agent must include a grant of power under HIPAA to access your medical information and discuss your prognosis and treatment with your medical providers.

A power of attorney is a legal document that gives someone else the authority to act on your behalf for either financial or health care decisions.

Most states require your signature on a power of attorney to be either witnessed by two persons (other than your named agent or any health care professional) or notarized. For a financial power of attorney, it is recommended that your signature be notarized if your agent might be required to conduct any transactions involving real property. As we have discussed above, both attorneys and mobile notaries have developed procedures to meet the legal requirements for executing a document while following social distancing and shelter-in-place rules.

Advance Health Care Directive/Living Will

An advance health care directive, or living will, establishes your personal wishes regarding “end of life” treatment. Typically, you will record your choices regarding treatment options in case you are in a permanent unconscious state with no realistic chance of recovery or diagnosed with a terminal condition. These documents historically have been used to prevent unnecessary prolonged treatment by instructing family members and physicians of your desires, thus relieving them of the burden of making these difficult decisions for you.

In the context of COVID-19 (or any other new illness with few or no proven treatments), these documents in their standard form are less helpful and you may wish to customize the language of your advance health care directive to authorize extreme and even experimental treatments (instead of withholding treatment). The use of intubation and ventilators and new, unproven drugs might be more appropriate for a COVID-19 patient who otherwise might desire to withhold life-sustaining treatment if in a terminal condition. All advance health care directives give you the ability to customize your treatment choices and should be viewed as a way to express your intent in a variety of circumstances to your loved ones.

Executing or amending an advance health care directive has the same requirements as a power of attorney: your signature must be notarized or witnessed by two people.

What to Consider in Estate Planning

Below is a summary of certain issues to consider when creating a new estate plan or reviewing an existing one.

Fiduciaries

“Fiduciary” is the legal term for someone acting on your behalf, whether while you are alive or for your estate. This includes the executor of your estate, the guardians of your minor children, your agent under a power of attorney and the successor and co-trustees of your revocable living trust. Often, fiduciary selection is not given the importance it deserves even though it is seen by many in the legal and financial world as the single most important decision you can make in the estate planning process.

It goes without saying that your fiduciaries should be competent, organized, able to make well-reasoned long-term decisions in your best interest, able to understand the legal requirements of their role and physically and mentally able to handle the responsibilities. You can choose a family member, a trusted friend or advisor, or a professional fiduciary. If you already have named fiduciaries, consider whether they are still the most able to handle the responsibilities, and inform them of your choice.

Additionally, at least for the short term, you may wish to consider whether having a local agent under a health care power of attorney makes more sense than a distant family member who would not be able to travel if need be. Also, we recommend explicitly stating in your powers of attorney and advance health care directives that your agent should be given the ability to communicate via telephone and video conference if in person communication is impossible due to shelter-in-place or hospital rules regarding visitors.

“Fiduciary” is the legal term for someone acting on your behalf, whether while you are alive or for your estate.

Finally, if your fiduciaries are only given authority to act upon your “incapacity,” you may wish to consider whether it might be more appropriate to give them the power immediately, either as a co-trustee of your revocable living trust, or under a “durable” power of attorney (and not a “springing” power of attorney). It may be more difficult during this crisis to require them to prove your “incapacity” in order to be given the power to act on your behalf. If you are uncomfortable giving someone power over your financial matters, consider naming a corporate fiduciary who is licensed, regulated and liable to you and your heirs for any breach of duty.

Health Care Power of Attorney/Advance Health Care Directive Specific Instructions

Review your instructions regarding your treatment choices and consider inserting specific language regarding your desired treatment if you are hospitalized for COVID-19 or similar symptoms. Also, make sure you have given your health care agent the authority under HIPAA rules to discuss your condition with your doctors.

While reviewing your will and trusts look at who you have named as your heirs and what they are to receive.

Finally, think about any family or friends you might be called upon to help in case of a medical emergency and assist them in creating the appropriate legal documents to give you power to help them. Make sure that any child or loved one over the age of 18 creates a health care power of attorney and/or advance health care directive.

Heirs and Beneficiaries

While reviewing your will and trusts look at who you have named as your heirs and what they are to receive. Also be sure to review the beneficiary designations you have on file for your financial accounts, including retirement accounts (401(k), IRAs, pensions), life insurance policies, and transfer-on-death bank and investment accounts. Are these still the same people you would choose to inherit your assets today? Births, deaths and divorces can make these choices out-of-date and you should update them as soon as possible. Most beneficiary designations on financial accounts can be done online or via mail.

Discussing Your Plan with Family

Some of us find it hard to discuss our finances, medical care wishes and estate plans with others, including family. However, the more your family knows about your concerns and desires, the better they will be able to fulfill your wishes in the case of an emergency. Determine what is most important for you to share and consider using this stay-at-home time to have these conversations.

Next Steps to Consider

  • Contact your Union Bank relationship manager to review your wealth plan, discuss your concerns and update your goals.
  • If you do not have an estate plan in place, seek referrals to qualified estate attorneys and tax advisors to establish one.
    • Ask about immediately executing powers of attorney and an advance health care directive.
  • If you have an existing plan, review the critical elements. If changes are necessary, discuss with your relationship manager, wealth strategist, attorney and other trusted advisors.
    • Keep your original documents safe and tell your family where they are for easy access.
    • Include a list of all your financial accounts (assets, insurance and liabilities) as well as online accounts and passwords.
  • Consider executing extra copies of your powers of attorney and advance health care directive (but not your will or trust) to keep in an easily accessible spot in case of emergency.
    • With these, keep lists of your emergency contacts (doctors, family, co-workers) and all your medications for your health care agent.

We’re Here to Help

Working in tandem with you, your estate attorney and your trusted advisors, our trust specialists can help you navigate and implement a trust and estate plan that both you and your family can feel confident about, especially in the face of the current pandemic. Contact your Union Bank relationship manager to get started today, and give yourself the benefit of greater peace of mind during this difficult time.

Teresa Tabel


Teresa Tabel, CFP®
Vice President and Wealth Strategist
949-553-2581
teresa.tabel@unionbank.com
 

Ryan Velo-Simpson


Ryan Velo-Simpson
Vice President and Wealth Strategist
206-587-4767
ryan.velo-simpson@unionbank.com  

The general information provided in this publication is not intended to be nor should it be treated as tax, legal, investment, accounting, or other professional advice. Before making any decision or taking any action, you should consult a qualified professional advisor who has been provided with all pertinent facts relevant to your situation.

Subscribe to Perspectives

Get in touch with The Private Bank

Build a relationship to last a lifetime.

Connect with The Private Bank

Appendix

The following links provide more state specific information on Advance Health Care Directives and Estate Planning:

California:
California Attorney General (End of Life Care): https://oag.ca.gov/consumers/general/care

Washington:
Department of Social and Health Services (Legal Planning): https://www.dshs.wa.gov/altsa/home-and-community-services/legal-planning

Oregon:
Oregon Health Authority (Public Health Division): https://www.oregon.gov/oha/PH/ABOUT/Pages/AdvanceDirectiveAdoptionCommittee.aspx

Wills, trusts, foundations, and wealth-planning strategies have legal, tax, accounting, and other implications. Clients should consult a legal or tax advisor.

Certified Financial Planner Board of Standards Inc. owns the certification mark CFP® in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.