Important Estate Planning Documents
The markets have tanked. The kids are home. The bars and gyms are closed. Broadway has shuttered. How can you distract yourself from staring gloomily at your retirement account and your kids asking you when the germs will go away? This is a great time to consider the importance of estate planning and estate planning documents. For those of you, who, like me, have been nesting and making mental checklists, here are a few things for you and your family to consider while social distancing.
1. A Will or a Trust is an Important Estate Planning Document Must
A Will or a Trust is a must. At their basic level, either a Will or a Trust will serve as a manual for the timely and orderly disposition of your assets. However, a Will requires that it be probated before it can be given any force and effect. A Trust on the other hand, is effective immediately. It does not require probate and it also, often, does not require any Court intervention. This becomes increasingly important in the event of a quarantine or system and city-wide shutdown. With a Trust, the appointed Trustee simply takes over and can make distributions in accordance with the terms of the Trust without ever having to set foot outside or in the Courthouse.
2. Appropriate Fiduciary Designations
A fiduciary is a representative, or an agent, who will step in your shoes and act on your behalf when you are no longer able to do so. A fiduciary can act on your behalf when you are incapacitated or when you are dead. It is very important to choose the right fiduciary so that your estate can proceed in an orderly process.
As the Estate Planning Kickstart Group will confirm, you should make sure that all of your documents nominate fiduciaries who are still alive and able to act. Your 80 year old mother is probably not a good choice right now. For one thing, she may not want to, and should not be, leaving her home under present conditions. For another, she may find the process to cumbersome and difficult.
Chose individuals who you trust, who can get the job done, who know how to locate assets, preserve them, and distribute them in accordance with your governing document.
3. Appropriate Beneficiary Designations on your Assets
Once of the most basic principles of estate planning is that a beneficiary designation overrides the terms of your Will. Often I meet people who designate their minor child as the contingent beneficiary of their life insurance or retirement account. This is a huge mistake. If you designate your child as the beneficiary, that child is not going to be able to collect those assets without a guardian being formally appointed by the Court. The funds will be placed into an account jointly with the Clerk of the Court and, when the Courts are closed and you need access to the money, you will find yourself mired in both red tape and locked doors.
If you have minor children, then you need to create a trust for their benefit (either inside or outside of the Will). Your beneficiary designation should then be changed to reflect the Trust as the contingent beneficiary.
4. Advance Directives – Important Estate Planning Documents
The following documents are collectively known as “Advance Directives”: Power of Attorney, Health Care Proxy, Living Will, HIPAA, Appointment of Agent to Control Remains, Designation of Guardian for Adult, and Designation of Guardian for a Minor.
The purpose of these documents is to designate a person who can act on your behalf in the event that you become incapacitated. This becomes particularly important when you are sick. Power of Attorney is the document that allows another person to make decisions and have access to your finances. The other documents are for medical decisions making and access to your medical records.
It is important that you fill out these documents in the event that you get sick. If you do not have these documents and do become sick, then a guardianship proceeding may need to be commenced on your behalf. A guardianship proceeding involves the Courts and is about one hundred times more expensive than executing these documents. Do yourself a favor and get a set of advance directives to protect you and allow somebody to quickly step up to the plate to make decisions and access your money.
5. Intra Family Transfers For Those of us Bold Enough to Think Post Pandemic
Interest rates are about to be at historic lows. The federal reserve chairman is not only dropping rates but also trying to reassure people that the government will start buying bonds. These low rates are not only great for mortgages but are also an excellent time to transfer assets from one generation to the next. This is also a great time to engage in estate freezing transactions such as GRATS and CLATS. The reason that these estate planning techniques should be utilized right now is because they rely on the 7520 rate. As the 7520 rate drops, these tools become more popular. GRATS and CLATS can be complicated but please feel free to contact us and we will explain them to you in detail.
We can help you plan you create these important estate planning documents in the wake of this pandemic. The best part is that neither of us have to leave our homes to get most of it done. We can handle almost everything by phone or video conference. (Hopefully our quarantine will be over faster than you can say “I am ready to sign my drafts.”)
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