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Estate Planning in a Time of Crisis—Just Begin

For many people, estate planning has long felt like “something I ought to do some time.” With the spread of the COVID-19 pandemic, now is the prudent time to get your estate planning documents in order.

There are many facets to estate planning, and it can seem overwhelming, especially when our lives are so disrupted. As much as we’d like to see you perfect your estate plan, it may help just to take a step in the right direction. Choose just one item to update and get going on it right now. If it’s something that requires a lawyer’s help, don’t worry. You can work with them by phone or web-conference, and your lawyer can guide you on issues like proper document signing.

Update health care advance directives

Depending on the state you live in, advance directives may require more than one document, like a Living Will, a separate Health Care Power of Attorney, and a HIPPA authorization. Other times these instructions are included in a single document.

Really think through whether you do or do not want outside interventions. You may want to ask your doctor how instructions like do-not-resuscitate or do-not-intubate orders really work, and whether or not there are particular considerations for you.

Check your beneficiary designations, even if you just did.

Beneficiary designations appear on lots of different kinds of documents and accounts:

  • IRAs
  • Retirement accounts like 401(k)s
  • Pensions
  • Home titles (which may have transfer-on-death designations)
  • Bank accounts (joint ownership or pay-on-death designations)
  • Vehicle titles (in states where you can have a transfer-on-death beneficiary)
  • Investment accounts (joint ownership or transfer-on-death designations)

It’s surprising how often beneficiaries aren’t set up the way the account owner thinks they are. And they’re crucial, because a change in your Will doesn’t affect your beneficiary designations, so check on these to make sure there are no surprises.

Frequently, brokerage firms will allow account holders to designate what would happen if one or more beneficiaries happen to die before the account holder does. This can be as simple as naming a contingent beneficiary (one or more people who will inherit the account should all the primary beneficiaries predecease the account holder). Or, it could indicate whether a deceased primary beneficiary’s children should inherit their portion if the other primary beneficiaries outlive the account holder. While contingent beneficiaries can usually be named when opening an account, the election to pass one beneficiary’s share to their children frequently requires a separate form. If you are interested in this election, you may want to double-check to make sure that your beneficiaries are listed as per stirpes or per capita by generation, as you may prefer.

Get at least one of your estate planning documents done

If you don’t have a Will, your state’s intestate succession law determines how your property would be distributed at your passing. There is a good chance that the law doesn’t do what you think it does, or what you want it to do. (You can see an overview of most of Ohio’s rules here, or see the actual intestacy statute). That means you need a Will (which allows you to control more than just where your property goes, like who you name as guardian for your minor child, and who you would like to be your executor and whether they have to post a bond).

For some people, it may be more important right now for you to have a Durable Power of Attorney, so someone can administer your financial transactions if you’re not able to. If you have the time and can afford to do both, you probably should. But if you only have the time or money for one, just pick one and do it—it’s better than nothing.

If you’re not sure which document to prepare first, you might want to start with your Will. We believe every adult needs one, but it should be a high priority for you if:

  • You have minor children (to provide for their guardianship)
  • You are estranged from anyone in your family (to make sure your assets go only to those you intend)
  • Your family situation makes it unclear where you would want your assets to go (because you’re single, or have no children, or are part of a blended family)
  • You want some of your property to go to anyone other than immediate family members (such as charities)
  • You’ve been divorced
  • You are dissatisfied with your state’s intestate succession law

Whatever you do, don’t try to do these without legal guidance. We’ve seen “estate planning” documents that are completely unenforceable, despite their clear intent, because someone didn’t want to take the time or spend the money to do it right. You need a lawyer’s expertise for these documents for the same reason you don’t want to do your own dentistry—if you think you know what you’re doing, and you’re mistaken, it’s often painful and expensive to correct (if it can be fixed at all).

Don’t rely just on your documents

Some estate planning issues require tough decisions, like who would be willing to make medical decisions or carry out your end-of-life wishes for you. It’s best to discuss your preferences with the people you want to name to handle these tasks, and these can be hard conversations. But our clients have told us they’re glad they’ve had these discussions because it gives them a chance to make their wishes clear to the people who are important to them.

Creating estate planning documents can require difficult decisions, and it’s easy to put off the unpleasantness, or the effort. Even with the uncertainties of the world right now, these decisions can feel overwhelming and can cause decision paralysis. Still, it’s important to have adequate documents in place. They don’t have to be perfect—documents that come close to what you want may be better than no documents at all. Then, after we’ re all out of crisis mode, you can refine your estate plan to better describe your wishes.

This content is developed from sources believed to be providing accurate information and is provided by Practical Financial Planning, Inc. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security. Original content of Practical Financial Planning, Inc. only is copyright © 2020 by Practical Financial Planning, Inc.