How Does COVID-19 Affect my Estate Plan?
How does COVID-19 affect my estate plan?
Since the COVID-19 outbreak began earlier this year, many people have been lying awake at night wondering what the future will hold. With official reports changing daily, we’re all left wondering “what if” when it comes to our jobs, our families and our property. These “what if” moments are often the reasons that push a person to put an estate plan together. As our daily lives continue to effected, people who already have estate planning documents may find themselves questioning whether their plan needs to be updated due to the increased chance of a medical emergency.
Estate planning is the process of putting together a set of legal documents that memorialize your wishes and protect your loved ones, by helping to save them time and money in the event of death or incapacitation. Certain documents, such as the living trust, allow you to save your family time and money by avoiding Probate Court supervision when transferring property. Without a trust, your loved ones will have to pay a filing fee to start the process of inheriting your property in the probate court, and a percentage of your estate will be to pay for an attorney, depending on the fair market value of your assets on the day you pass away. These fees, which are laid out in Probate Code § 10810, can range from $4,000 to $188,000 for estates worth less than $25 Million. For estates over $25 Million, probate attorney fees are determined by the court on a case-by-case basis.
An estate plan also allows for end-of-life care decisions to be made ahead of time. Without documents such as a will, trust, medical directive or power of attorney, decisions regarding your home, end-of-life care, and guardians for your children will be made either by the government or the Courts. The State of California makes hundreds of millions of dollars each year from the Unclaimed Property Fund, which consists of billions of dollars left behind by residents without an estate plan. Estate planning documents give you the power to plan out your wishes regarding your body, family and property. If you don’t use that power to assert control over your family and property, it will be left up to the courts and government to decide.
Once an estate plan has been created, it is important to review periodically for any necessary changes. Many of those who previously made the effort to put an estate plan in place are now wondering whether they need to update their plan to meet COVID-19-related changes. While it is good practice to update an estate plan every 3-5 years, updates should also be made immediately after any life-changing events, such as a marriage or divorce, welcoming a child or grandchild, or when purchasing a home. As COVID-19 continues to effect daily life around the world, it has now similarly become a life-changing event, prompting many people with estate plans to review their designated agents, along with previously-made financial and medical decisions.
#1. Update Agents
When putting together an estate plan, agents are appointed to step into your shoes if you have a medical emergency, such as an illness and accident, and are not able to make decisions for yourself. Agents are also appointed to wrap-up your estate following the instructions laid out in your trust or will. If you have a trust or will-based estate plan in place, now is a good time to review your designated agents and ask yourself the following questions:
- Are my agents close enough to help in a medical emergency?
- Are my agents currently ill or susceptible to illness?
- Have any agents passed away since the plan was created?
- Would it be too burdensome on my agents to help in case of an emergency?
- Do I still trust my listed agents to carry out my wishes and handle my finances?
- Do I need to appoint guardians for the long-term care of my minor children?
- Do I need to appoint short-term guardians to care for my minor children if I suddenly fall ill?
If any of the questions above apply to your situation, then you will want to update your designated agents. The purpose of appointing agents in an estate plan is to have people you trust, who can carry out your wishes once you are no longer able to. If you no longer trust the agents listed, or if they aren’t up to the task, due to their own life circumstances, you need to make sure they are promptly removed and replaced with individuals who would able to assist you during this crisis, if needed. If you fail to update your agents, you risk your loved ones being unprepared and unprotected if you were to fall ill or pass away suddenly. Don’t wait until it is too late; any necessary changes should be made now, while you are still alive and healthy.
#2. Update Financial Decisions
Wills and trusts always have a clause stating who will inherit property or money upon termination of the estate. Those people who inherit under your estate plan are your beneficiaries. It is important to keep beneficiaries up-to-date, especially if the person(s) listed have predeceased you, or are no longer part of your life.
It is also important to make sure that your plan includes the power to control digital assets. A “Digital Assets” clause allows you to determine who will be able to access and manage your online accounts in the event you become incapacitated or pass away. Without this clause, loved ones may find themselves locked out of accounts due to privacy laws that ban password sharing. Attempting to access digital accounts without a legal right of access can be considered account impersonation, which is a punishable offense. If your estate plan does not contain a clause providing access to digital assets, important personal property, such as photos, records, and other digital assets could be lost forever.
Those with a trust-based estate plan will have to go through an additional process known as trust funding, which means re-titling property and putting in the name of your trust. If a trust is not properly funded, the assets will ultimately end up in probate court, rather than being inherited through the trust. A family member will then have to file a court case asking a judge to have the property transferred into the trust so that it can be inherited according to the terms of your estate plan. These court proceedings can take months and have significant costs associated, so it is imperative that any property not funded to your trust is re-titled and placed into your trust as soon as possible. With healthy people falling ill and passing away suddenly due to the COVID-19 virus, any new property should be funded into your trust immediately upon purchase.
#3. Update Medical Decisions
During this pandemic, medical planning has become more important than ever. Most estate plans include documents, such as the Advance Healthcare Directive and HIPAA waiver, that allow a person to decide how they will be treated medically and how their body will be handled after they pass away. These end of life clauses can include decisions for pain relief, organ donation, and the use of medical machinery to prolong life. Those who already have estate plans should review these clauses carefully to make sure that they still reflect current wishes. As the COVID-19 pandemic continues, many people are rethinking their plans for medical care and courses of treatment. If you have recently changed your mind regarding medical care, make sure your plan is update to reflect your current wishes, or else your doctor may be legally bound to follow your previous estate plan.
The continued uncertainty regarding COVID-19 has led many people to update their estate plans in preparation for whatever emergency situation may come next. As the virus spreads, it continues to affect a diverse population, claiming both young and old, sick and healthy. Those who have managed to avoid the virus have nonetheless begun to reevaluate their own mortality in light of the current public health crisis. An estate plan created at an earlier time may no longer provide the protection that they are currently looking for and may not reflect current wishes for medical treatment.
Because so much uncertainty remains, it is important to re-evaluate and update designated agents, as well as financial and medical decisions to ensure your estate plan meets your current goals. In the end, a properly drafted estate plan can at least provide the peace of mind of knowing that you, your family, and your assets are protected, no matter what the future may bring.
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