Is Your Estate Plan Ready for the Unexpected?

The COVID-19 pandemic has a lot of people on edge. With the topics of sickness and death saturating the media, it’s no wonder people are feeling anxious about their health and their mortality.

If there is a silver lining to a crisis like this, it is that it reminds people to prepare for the unexpected. Unfortunately, most Americans are not well-prepared for severe illness, incapacity, or their sudden demise.  Research indicates that 60% of U.S. adults do not have a will, and 70% of U.S. adults do not have an overall estate plan.

Here are some questions you should have good answers to in order to know your estate plan is ready:

Medical decisions

If I became ill and were incapacitated, who has the power to make medical decisions for me?

This is where having an advance directive is important. An Advance Healthcare Directive, also called a Durable Power of Attorney for Health Care, is a legal document that names an agent to make medical decisions for you at times when you are unable to do so. This means that he or she will be able to decide as you would when treatment decisions need to be made.  Another important document is a HIPAA authorization. This allows healthcare providers to share information with your decision makers.

Your agent will need a copy of your advance directive in order to act on your behalf. You should make sure your agent has a copy or knows how to get it quickly.

Financial decisions

If I was ill or quarantined, who can do banking transactions, pay bills, and make any financial decisions that need to be made?

A Power of Attorney (POA) is a legal document that gives a person you name the legal authority to act on your behalf. POAs can give broad authority to do many things, or they can be very specific. They can be effective immediately or they can be designed to require proof of your incapacity.

In addition to having legal power to act for you, your agent will also need access to your accounts and the ability to pay bills. However, you may not be ready to give anyone all that access and ability right now. This gets into an area I call, “Continuity planning.” Your financial advisor can help you work out your continuity plan.

IRAs, 401(k)s, and the SECURE Act

Are my IRA and 401K beneficiaries up-to-date, and have I reviewed them in light of the SECURE Act changes?

The SECURE Act was passed in January, just before the whole COVID pandemic took off. It makes changes that can affect the timing of distributions from your 401(k) plans and Traditional IRAs to your beneficiary upon your death. The SECURE Act rules can have a big effect on the timing of distributions to your heirs and the taxes due on those distributions. If you have a trust named as your retirement account beneficiary, we recommend you review this with your attorney.

The most important jobs

Are the people I’ve named in my documents the right people for the job?

Being the executor of a will, successor of a trust, or the agent for healthcare and financial powers of attorney are very important jobs. Each job is a little different. For example, the agent you name in your healthcare directive will have the power to authorize treatments and make end-of life decisions, so they should be familiar with your values and wishes. The person you name as the agent in your financial power of attorney may have to deal with financial or tax issues which requires some business acumen. Your executor or successor trustee will be a point person for beneficiaries and family members and should be a good fit for that position.

Final instructions

If I were to pass away unexpectedly, would my family be prepared to continue without me?

Leaving clear final instructions is an important step in assuring this.

Trusts and wills are the documents that take precedence if you or a loved one dies. They can give specific instructions and can also cover many “what-if” scenarios. A will is the basic document that lays out your wishes, names a guardian for your minor children, distributes your assets, and names your executor. A revocable living trust does some of the same things but has additional advantages: it can allow for a more efficient distribution of assets and can also preserve assets for your beneficiaries.  A trust can also provide for the care of minor children and special needs beneficiaries.

Planning for the unexpected

Times like these are a reminder that we never know what tomorrow has in store for us. It’s important to plan for the unexpected, and make sure that your family will be able to take care of you and take care of each other if the unthinkable happens.

Estate planning is important, but it is only one part of the comprehensive financial planning everyone needs to do. At Blankinship & Foster, we help you plan for all the different areas of your finances, including estate and tax planning. To learn more about how we can help you, contact us.

About Jon Beyrer

Jon Beyrer, EA, CFP® is a partner of Blankinship & Foster LLC and is the firm’s Chief Compliance Officer. As a lead advisor, he focuses on helping families achieve their goals with sound wealth planning. In the community, Jon serves on several boards and is co-founder of the Professional Alliance for Children, a legal/financial charity for families of ill children. He has been quoted in The Wall Street Journal, The New York Times, and the Journal of Financial Planning. Jon lives in San Diego with his family.

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