The stock market has recently been in a free fall. America has not experienced this level of fear since the days of the polio epidemic in the 1940s and 1950s.
SEE ALSO: 10 Common Estate Planning Mistakes (and How to Avoid Them)
During those decades, polio outbreaks in the U.S. crippled an average of more than 35,000 people yearly. Parents were frightened to let their children go outside. Travel and commerce between affected cities were restricted. Public health officials imposed quarantines on homes and towns where polio cases were found.
Now, with the coronavirus, some of those same fears are resurfacing in many ways, from health and safety to the economy, the stock market and personal finances. For many, the current crisis is serving as a wake-up call to get their estate plans in order.
The Coronavirus – Estate Planning Attorneys Kept Busy
“Suddenly business owners — from mom and pop shops to CEOs of large corporations — are meeting with estate planning lawyers like no other time than I can recall,” says Bakersfield, Calif., estate lawyer Patrick Jennison. “Appointment books are getting filled.”
Jennison’s experience is validated by estate attorneys I spoke with across the country, including Tom Hjerpe and Angela Petrusha, from Eureka, Calif. Their paralegals told me, “We are getting calls from folks who have put off establishing an estate plan and can’t wait to see us.”
Petrusha observes, “People are afraid of their entire family getting wiped out. Business owners want to be sure that a plan is in place which will assure the continuity of daily business operations.”
Over 60? You Especially Need to Plan
As this virus has a special ability of wreaking havoc on people over 60 — a segment of the population that includes many business owners and CEOs of major companies — it is critical to address the “What if I get it?” question now and not put this off, Jennison observes, asking:
“If you are a business owner, do you have a succession plan in place for the operation of your business in the event of your incapacity and the management and ownership of your business if you die?”
Establish a Power of Attorney
Another key area where people need to take action is to have a ready answer to this question: What if key decision makers as well as heads of household fall ill, become temporarily incapacitated and are not able to pay bills, taxes or take care of family and business-related financial obligations? Then what?
Hjerpe, Jennison and Petrusha each provided an identical answer: “You need a Durable Power of Attorney.”
Let’s say the virus has landed you in a hospital, or you are bottled up at home and can’t get out to take care of business and/or your ability — your mental capacity — to manage your affairs is impaired because of illness. Having a durable power of attorney in place allows a trusted friend, family member or perhaps business associate to take money out of your bank account, pay your bills, even make a court appearance for you.
“That person becomes your agent — your feet on the ground — and can legally act for you, so be careful who you select,” Hjerpe stressed, adding, “Giving that power to the wrong person is an invitation to be taken to the cleaners!”
Have an Advance Health Care Directive in Place
An advance health care directive is a document that explains how you want medical decisions about you to be made if you are unable to make these decisions yourself. It allows your health care team and loved ones to know what kind of care you want, and who should make decisions for you when you can’t.
“In this age when more and more people are living together without being married, having an advance health care directive can prove incredibly important, depending upon which state you reside in and if you have established a domestic partnership,” Jennison points out.
“If not, and you are not married, then the well partner could be viewed as a ‘stranger’ and have no rights to be informed about your health or treatment. Also, that person would have no input into important health decisions.
“You do not want to be in a situation where your financially incompetent son or daughter has this power to end your care — to end your life — looking for an easy way to grab Mom or Dad’s money,” he underscores.
Where is Everything?
For many of us, our financial lives are online. Lots of people do not receive bills in the mail. Now, assume that you wind up in the hospital, on a respirator, unable to communicate. Bills are piling up, but no one knows your banking passwords, internet provider, Netflix, other bills and on it goes. Or, you have a safe-deposit box, but only you can get in.
How do we address those issues? Petrusha asks these questions:
“Do all appropriate family members have essential information in the event of your incapacity or death, including the location of important estate, business and financial documents, names and contact information of accountants, attorneys, investment advisers and related business professionals?
“Create a journal listing all these people, the bills you pay monthly, insurance, tax and so on, to lessen the burden on family members from scrambling to re-construct your financial life. It is difficult for most people to imagine the challenge of working through both grief and the financial realities following death or incapacity. So, consider the people whom you love, who love you and lessen their burden. Taking the time to do this will give you (and them) great peace of mind.”
Hjerpe stresses the importance of knowing who your current bank account, life insurance, IRA or pension beneficiaries are.
“These things are outside of an estate plan and are governed by contract law. So often a couple divorces, but changing the designation of a pension beneficiary is overlooked and remains the same for decades. Then the divorced spouse remarries, he or she dies, but pension benefits go to the former spouse listed as beneficiary! It is a very sad situation, and completely avoidable.
See Also: Beneficiary Designations – The Overlooked Minefield of Estate Planning
“Be sure you know who are listed as beneficiaries on bank or investment accounts with a pay upon death clause. Have a contingent beneficiary in the event the first person pre-deceases you.”
‘I’ll Put My Son’s Name as a Co-Owner of My House – That’s How I Avoid Probate!’
“We hear that often, and it is so dangerous! Consider the possibility that your son causes an auto accident? You could be forced to sell your home if he is sued! Also, by making him an owner now, upon your death he loses the ‘stepped up tax basis,’ which could cost him thousands of dollars in lost inheritance capital gains tax. Don’t do it! Without the approval of your CPA and attorney, do not put assets in joint names,” Jennison cautions.
Have a Family Meeting Now
The three California lawyers I interviewed for this story, as well as every lawyer I spoke with, coast to coast, had this compassionate advice, which I paraphrase:
- This is the time for a family meeting with — hopefully — your mature, financially competent adult children so the transition of management and wealth within the family can be effectively handled.
- The ongoing threat and reactions to the coronavirus are causing us to engage in deep reflection regarding our personal health and wealth, which is especially important to business owners and CEOs.
- A significant percentage of Americans have never had a living trust and the accompanying estate planning documents prepared by an attorney who specializes in this area.
- Many have had such a plan prepared, but it has not been reviewed in several years. Let us hope the virus will simply fade away, but until then, your own mental health will be so improved by addressing these issues now.
One Final Step, Just in Case
While no one expects the coronavirus to result in a total doomsday scenario, lawyers want everyone to have all their bases covered regardless. All the estate lawyers I spoke with were in complete agreement as what Americans — especially business owners — need to know and do now: Get a remote contingent beneficiary.
“Especially now, you need to have a ‘Plan C’ where everyone is wiped out, including your contingent beneficiaries, such as grandchildren. So, your estate plan would contain a paragraph essentially stating, ‘If all else fails — if the people I have named to receive money or property have died — then, I would like my estate to pass as follows.’
“People will typically mention charitable organizations, or other specific beneficiaries so they still have control over what happens with their estate, rather than have the state in which they reside decide under the rules of intestate succession.”
I asked, “What happens if in my will or trust documents I say, ‘Under no circumstances is any of my property to go to my good-for-nothing, miserly cheapskate sister-in-law,’ and she dies — the whole family dies — and I have not created a Plan C?”
“Then,” Petrusha answered, “Your property might easily pass to her surviving heirs under the state’s laws of interstate succession. So, you will have failed to keep your property out of their hands even if it’s not what you wanted. That’s why this Plan C is so important.”
See Also: SECURE Act: What to Do Now to Help Limit Heirs’ Taxes Later
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