The coronavirus pandemic undoubtedly has you on edge. We’ve all been forced to face our fears in some way, whether it’s the fear of falling ill, losing a job or having to spend time alone. With all these anxieties and unknowns weighing on your mind, it might feel like there’s suddenly a pressing need to get your affairs in order ― just in case.
Though most people who contract COVID-19 experience mild symptoms, it doesn’t hurt to be prepared if you do need to be hospitalized. It can feel scary thinking about getting sick or not being able to make decisions for yourself, but an estate plan is meant to ease your fears. After all, wouldn’t you feel better knowing that the burden of making health and financial decisions will never fall on unprepared family members?
The truth is that just about everyone should have an estate plan, even if there is no looming health threat. So if you don’t have one, there’s no better time than now to put it together.
Documents Needed For An Estate Plan
Anyone over the age of 18 requires some level of estate planning, according to Eido Walny, founder of Walny Legal Group, LLC, an estate planning and asset protection law firm based in Milwaukee. And you might be surprised to know that wills and trusts aren’t always the most important documents to focus on first, especially if you’re single with no kids and limited wealth.
“You need someone who can do your banking or make your medical decisions if you are quarantined in your home, admitted to the hospital or become incapacitated.”
“Estate planning is more than just getting a will,” Walny said. A strong estate plan will also include several other important documents, such as a revocable trust (sometimes called a living trust), financial powers of attorney, health care powers of attorney, and more. “All of these documents are important and serve a role in the overall planning,” Walny said.
In light of the current situation, the two most important documents to have on hand are medical and financial powers of attorney, said Patrick Simakso, an elder law attorney and wealth preservation specialist at Simasko Law in Mount Clemens, Michigan. “You need someone who can do your banking or make your medical decisions if you are quarantined in your home, admitted to the hospital or become incapacitated,” he said.
Once you have those in place, it’s a good idea to work on putting together a comprehensive estate plan. Here’s a look at all the documents you should have and what they mean.
1. Financial Power of Attorney
A financial power of attorney document is a legal document that gives an agent the authority to carry on a person’s financial affairs and protect their property by acting on their behalf, according to David Bross, an Ohio-based attorney and certified specialist in estate planning, trust administration and probate, which is the legal process that unfolds when someone is incapacitated or dies. The FPOA gives the agent the ability to pay bills, write checks, make deposits, sell or purchase assets or sign any tax returns.
“Any competent adult can serve as your agent,” said Somita Basu, an estate planning and probate attorney based in the San Francisco Bay area. However, it should also be someone you trust to be honest, use common sense and be dependable. “Choose someone who is relatively nearby to manage the practical aspects of helping you with your finances,” she said. You should also choose a back-up agent in case your primary agent is unavailable.
Bross added that without an FPOA, there is no person with the ability to act on your behalf. “Family members will be required to request the probate court appoint a guardian to have these powers,” he said. “The court process can be time-consuming and expensive.”
2. Health Care Power of Attorney
Similar to a financial power of attorney, Bross explained that a health care power of attorney is a legal document that gives an agent the authority to make health care decisions on your behalf if you are incompetent or incapacitated. If you’re over the age of 18 and don’t have an HCPOA, your family members will have to request that the probate court appoint a guardian to have these powers.
3. Living Will (Advance Health Care Directive)
A living will ― also known as an advance health care directive ― allows you to specify what end-of-life treatment you do or don’t want to receive if you become terminally ill or permanently unconscious and won’t survive without the administration of life support, according to Bross.
“Without a living will, the decision to remove life support is left in the hands of your health care agent or family members,” Bross said. “This can be a very emotional decision for family members ― by creating a living will, you set forth your wishes and take that decision out of your family member’s hands.”
4. HIPAA Waiver
While your advance health care directive will likely contain language that allows your agents to access your medical records, Basu said it’s not uncommon for medical facilities to refuse access to medical information without a stand-alone HIPAA waiver. “As a back-up document, make sure you have a stand-alone HIPAA waiver to allow your nominated agents and family members to have access to your medical information so they can speak freely with your health care providers in case of a medical emergency or your incapacity,” she said.
5. Last Will And Testament
A last will and testament is a legal document that allows you to direct distribution of your property at the time of your death, Bross said. A will also allows you to appoint an executor, who oversees the distribution of your assets.
“Everyone has assets that must transfer after a person’s death,” he explained. “Without a will, there is no direction as to how those assets will pass.” If you don’t have a will in place, distribution of your assets will be handled by the state and the court will decide on the best person to oversee the administration of your estate.
A will also allows you to appoint a guardian to take care of minor children. Again, if you don’t have a will, a court will decide who is the best person to fulfill that role. “This limits a parent’s ability to have any say in the process,” Bross said.
6. Living Trust
Essentially, a revocable living trust is a legal contract that you make with yourself to create an entity to hold your assets, Basu explained. You can change your trust at any time (which is why it’s called “revocable”), and you can set it up to outlive you.
“If you become incapacitated or are unable to manage your estate, your living trust avoids the need for a court appointed conservatorship,” Basu said. You’ll appoint a successor trustee who steps in and manages your affairs without the involvement of the court, avoiding the extra time and money associated with probate. A trust also affords you privacy surrounding the details of your estate, since it avoids the need for probate, which is a public process.
Finally, Basu said that a living trust can help provide for the care, support and education of your children by turning over trust assets to them at an age chosen by you. For example, you could advise that your children receive their inheritance in graduated stages, like one-third of the principal at age 21, one-third at age 25 and one-third at age 30. “A living trust can leave your assets to your children in a manner that will reduce the ability of their creditors or ex-spouses to take your children’s inheritance from them,” Basu said.
“Since a good estate plan can save a lot of money, it is not a ripe area to pay as little as possible because mistakes can be costly.”
Is It Possible To Create A Will, Trust, Etc., Without A Lawyer?
Though there are several websites that make it possible to draft these documents for a low cost, it’s important to keep in mind that estate planning can be complex and it pays to have a professional review your plan. Aside from preparing documents and looking out for loose ends that need to be considered, a good estate planner will help with proper titling of assets such as real estate and vehicles, as well as designating beneficiaries for life insurance, retirement accounts and bank accounts.
“Since a good estate plan can save a lot of money, it is not a ripe area to pay as little as possible because mistakes can be costly,” Walny said.
If you aren’t sure where to find legal help, you can try searching the National Association of Estate Planners and Councils. Look for attorneys who have the estate planning law specialist (EPLS) designation, which means they’ve been highly vetted by the NAEPC. An accredited estate planner (AEP) designation is also helpful.
Of course, considering the staggering unemployment numbers we’re facing during the coronavirus pandemic, you may not have the money to hire a lawyer right now (it typically costs $1,000 to $2,000 to create an estate plan). That doesn’t mean you’re totally out of luck. Sites such as LegalZoom and Nolo can help you get basic documents in place for under $100 each. However, you should consider having a lawyer look at these items more closely down the road, especially if you have a large estate or are concerned someone might try to contest your will.
Another issue to keep in mind is that documents such as wills and powers of attorney have to be witnessed and notarized in order to be binding. The problem? During a pandemic, “it’s actually dangerous to one’s health to gather the necessary notary public and witnesses for the in-person execution of the documents,” said Ray Koenig III, an attorney and member of the litigation and tax and estate planning groups at law firm Clark Hill. In fact, many notary and attorney offices are closed due to shutdown orders.
Fortunately, many states such as Illinois and New York have recently enacted executive orders or statutes which allow for virtual notarization and witnessing of these documents. “That means that clients do not need to make a risky trek to their attorney’s office. Instead, with trained and skilled staff, an attorney can coordinate everything virtually,” Koenig said.
How To Organize And Store Your Documents
Once you have all your estate plan documents finalized, you need to be sure they’re kept safe but accessible to the right people.
Give the originals to your lawyer. Bross said he recommends allowing your attorney to store original estate planning documents to ensure proper safekeeping. Typically, attorneys store these documents in fireproof safes in locked rooms. “If any of the originals are needed, the distributed copies usually have a stamp that alerts everyone where the originals are stored,” he said.
Provide copies to the appropriate people. You should give copies of relevant documents to your financial adviser, treating physician, successor agents and any family members you want aware of your plans. Additionally, Bross said you should be sure anyone named in your documents to act on your behalf is aware. “Provide them with an explanation of the role they may play so they can be prepared,” he said.
Keep high-quality scanned copies. In addition to making physical copies of your legal documents, you should also have digital files saved. In fact, you should do this for all important financial and legal paperwork, including anything related to homeownership, custody, estate planning, guardianship and child support. “A high-quality scan will make printing and copying these documents much easier,” Basu said.
Label all your documents clearly. Don’t save your documents as “scan1,” “scan2,” and so on, as that will make organizing and finding them a nightmare. “Make sure everything is labeled accurately and includes dates the document was finalized or signed,” Basu said.
Save a list of your digital accounts and passwords. Along with estate planning documents, everyone should maintain a list of their digital assets and how to access them, said Katie Von Kohorn, a partner at Casner & Edwards who specializes in trusts and estates.
“In particular, if you access your financial accounts online ... it is vital that your loved ones know where these accounts are held,” she said. In addition, you should keep a list of your wishes regarding your other digital assets such as email, social media accounts, photographs in cloud storage, virtual currencies, credit card rewards, etc. Make sure that you share the passwords to these online accounts with someone so your family is able to retrieve and secure them should anything happen to you.