The COVID-19 pandemic has forced many people to think pragmatically about the possibility that they or their loved ones might fall ill. Having an estate plan in place can ensure that your wishes are honored and your loved ones are taken care of in the event of your incapacity or death.
Essential planning for potential incapacity
Particularly in this period of uncertainty, it is important to plan for potential incapacity, however temporary. It can be catastrophic if an individual has not granted specific authority to another to act on their behalf.
Durable powers of attorney allow you to designate a trusted family member or friend, who you believe to be qualified, to act in your stead. You can create a durable power of attorney for financial matters, under which you name an agent to handle your finances in the event you are unable to do so. If you establish a revocable trust, then the successor trustee can manage your assets for your support in the event of your incapacity as well as provide for your spouse and any minor or disabled children. With a medical directive (sometimes called a living will), you communicate your wishes with respect to medical care should you be terminally ill or in a persistent vegetative state. A durable power of attorney for health care decisions designates an agent to make medical decisions on your behalf in keeping with the medical directive if you are incapacitated.
If these documents are not in place, and you become incapacitated, then a court proceeding will be required to name a guardian and conservator to manage your assets and make decisions on your behalf. Not only will you have no say in who is selected to act on your behalf, but your family may disagree as to who should have the rights and responsibilities to manage your affairs. With proper estate planning documents in place, these issues can be avoided.
Proactive planning for end of life
An estate plan also provides assurance that your wishes are to be followed at your death and that your loved ones will be taken care of in the manner you desire. Every family is different, but every family will benefit when an estate plan is in place.
The circumstances of some families require more attention to an estate plan than others. You may be concerned about a conflict between your spouse and children from a prior marriage; you may have a loved one who cannot manage his or her affairs or is suffering from an addiction; or you may wish to leave assets to a charity. With the proper planning, you can direct who will benefit, and under what terms, from the assets you have accumulated over your lifetime. It also names the individuals who will wind up your affairs. Lastly, depending on the value of your estate, you may need to engage in tax planning to avoid unnecessary taxes.
Having a proper estate plan in place can prevent your affairs from becoming public at your death. If you own assets in your individual name without proper beneficiary designations in place, then, at your death, those assets will need to go through probate. Without proper documents in place, state law will dictate who will benefit from your estate. If minors or disabled loved ones inherit your assets without a will in place, continued court involvement will be required without proper planning. Likewise, a probate can complicate the ability to sell hard-to-value assets, such as real estate and closely held businesses. If, however, your assets have been transferred into a revocable trust and you have the proper beneficiary designations in place, a probate will be avoided, and your affairs kept private. A revocable trust can avoid the delay and hardship of a probate.
The COVID-19 pandemic has understandably prompted widespread worry and stress. Life as we know it has changed, leaving many of us unsettled and without certainty as to what the future holds. Thus, planning for incapacity or death is a kind thing to do for a person’s loved ones. By having executed estate planning documents in place, you have simplified a potentially complicated process. In doing so, you reduce the time needed to finalize your estate and therefore ease the stress on those left behind. This can be a true gift during an emotional and challenging time, giving your loved ones peace of mind.