As estate planning lawyers, one of the first questions we receive is “What can I do to best protect my family?” The onset and growth of COVID-19 has made that question increasingly relevant.
An estate plan is a set of legal documents that addresses who is in charge if you become incapacitated and what happens to your assets at your death. In the context of COVID-19, these documents have been increasingly relevant in case of hospitalization, quarantine, or lockdown.
An estate plan consists of a revocable trust, will, power of attorney, health care directive, and other ancillary documents. You may be familiar with a will and unsure whether you need a trust. In California, if you own a home or other real property, have young children, or own assets with a gross value of more than approximately $166,000, there are significant benefits to having a trust. If you fall within one of these categories at your death and you do not have a trust, your estate would be subject to Probate, which is the court-supervised process of administering a deceased person's estate. It is a long and costly process that can, in most cases, only be avoided with a trust.
Even with a valid trust, we always want to prepare a will as a safeguard in case any of your assets do not get properly retitled into the name of your trust. In addition, for clients with minor children (children under the age of 18), the will is where you would name a legal guardian.
Nominating a legal guardian for your minor children is an important part of estate planning, but can be very challenging. How can anyone possibly replace you? Of course, no one can, but if you don’t name a legal guardian, the court will. You might have multiple loved ones present themselves as possible guardians, each one believing he or she is the best option. Sometimes, individuals who you would not choose as your child’s legal guardian offer to fill the position. And sadly, there are situations where no one steps up, causing children to end up in foster care and siblings to be separated. When you name a guardian in your will, you take the guesswork out of the equation for family and friends, ensuring your kids have security and consistency. When travel is restricted, such as now, if the legal guardian nominated is out of state or out of the country, you may consider naming a temporary guardian so that your child does not end up in foster care and siblings can stay together.
While a trust and will mainly deal with what happens if you die, a comprehensive estate plan will always include incapacity documents. These documents may be the key to surviving some of the immediate effects of life with COVID-19, which can render you unable to make your own financial and healthcare decisions. A Durable Power of Attorney allows you to nominate an agent who will have authority over your bank accounts, retirement accounts, real estate, taxes, bills and other assets and liabilities. An Advanced Health Care Directive allows you to elect an agent who can make health care decisions and state some of your health care preferences. Finally, a HIPAA Authorization allows you to list individuals that you authorize to access your medical information. This will help them if they need to get second medical opinions or deem you incapacitated.
The COVID-19 pandemic has increased the importance of an up-to-date estate plan in a number of ways, both with regard to post-death planning (preparing a will or a trust) and incapacity planning (preparing a durable power of attorney, advance health care directive, and HIPAA authorization).
As of [the end of March], Dr. Fauci, the nation's leading infectious disease expert, predicted that anywhere from 100,000 to 200,000 people would die from this disease. Those people need to have an estate plan in place so that their wishes can be followed. This is especially true if any beneficiary has special needs, receives means-tested government benefits, or requires added protection for other reasons.
Pre-COVID-19, an estate administered through the Probate Court took an average of 1½ to 2 years to be completed. However, courts are currently closed, further delaying an already backlogged system. The expected increase in cases as a result of COVID-19 and the need to work through all of the cases delayed during the court closure will lead to a longer, more drawn out process for all probate matters. Loved ones, including minor children, could be left waiting years before receiving any funds from an estate. A properly executed trust will allow your family to avoid Probate Court altogether, ensuring your assets get to your intended beneficiaries more quickly and economically.
Traditionally, incapacity planning is triggered by a physical or mental inability to take certain actions or manage one’s affairs. Incapacity planning has taken on an even greater importance since the pandemic started, especially for healthy and young individuals. While their risk of death is lower, it can still lead to prolonged self-quarantine and ICU stays. Either of these situations may prevent those affected from taking care of their finances and making sure their bills are paid, ensuring they can return to their lives as normally as possible once the disease has passed. A Durable Power of Attorney will allow a spouse, relative, or friend to step in and take care of these items while the individual recovers.
Married couples are not immune from these concerns. Let us imagine a situation where a significant amount of a couple’s accessible assets are held in one spouse’s retirement account. That spouse gets ill and is admitted to the ICU. During that time, money may not be coming in, but bills may be accumulating. The other spouse will not be able to access anything held in the other spouse’s sole name, including these retirement savings, to pay the bills, the increasing medical costs, or any other urgent needs. This is also true for money held in a whole life insurance policy or any separate bank accounts.
So what does estate planning look like during this isolated time? Face-to-face meetings will be replaced with video or phone conferences, and all document transfers will be electronic. We will walk you through the process of executing the documents, taking into account the legal standards in place at the time of signing.
We know people are concerned and we want to help as best we can. We both currently offer free 15 minute consultations to answer any questions you may have about your estate planning.
This article was co-authored by Jenna Glassock and Bahar Geslin. They are both estate planning attorneys licensed in California and located in Los Angeles. They are both able to address the estate planning needs of any client in California. More information about them, including how to contact them to schedule a consultation, can be found at their websites: www.jennaglassock.com and www.geslinlaw.com.