Now that the height of the COVID-19 pandemic is behind us, we can look back and see how it has been a catalyst for the change of mindsets on a variety of topics. How many people had begged their bosses to allow them to work from home at least one day a week? Statistics from HR organizations show that this was one of the most requested “perks” from employees long before the pandemic. COVID made this business decision a moot point for many employers: it was either work at home or not work at all.
Other than the blanket remote work initiative, one of the most highly-affected areas was in the world of estate planning. Hardly anyone can say that they did not personally know someone who either had COVID or whose family was impacted by COVID. Many families were caught off guard when their healthiest relative was incapacitated by COVID or, even worse, succumbed to it.
Well before COVID, statistics showed that people avoid dealing with estate planning issues, even failing to make a simple will. It is understandable. Who wants to go sit in an attorney’s office for any reason, let alone to talk about your ultimate demise or the demise of loved ones with a stranger?
COVID killed rich and poor, female and male, young and old, healthy and infirm, some with very little notice. If there was not already an estate plan in place, chances are there was not an opportunity to deal with it in the throes of the pandemic. Law offices were closed. Courthouses were closed. If a loved one died without some form of estate planning, the estate went into probate as an intestate estate, which means that the state and county authorities took control of the disposition of your loved one’s assets. Even worse, that was happening in a courthouse that was operating at minimum capacity, most likely delaying any resolution of the estate.
Even before the pandemic, the term “estate planning” sounded daunting. Many people are intimidated by the word “estate” because it sounds like something that only rich people have. Your average middle-income family may live paycheck-to-paycheck, trying to stay current on payments on necessities like a home and a car. They honestly don’t believe that they have any estate to “plan.” So, for the sake of simplicity, let’s call it something else: “The Who Gets My Stuff As Easily As Possible When I’m Gone” Plan.
But even that simplistic title perpetuates a misconception. Some parts of estate planning involve documents that you should have in place to control important decisions you would make if you could while you are still alive. But you may not always be in a position to make a decision, like when you are incapacitated from an injury or illness. Some of the most important of these documents came into play for many unfortunate families during the pandemic while a loved one was struggling to breathe on a ventilator.
Health care directive, or advance directive, is a fancy legal term for documents that express your wishes about your medical decisions if you are unable to make them for yourself. While these are often needed to make difficult “end-of-life” decisions, they are also important in a less dire situation. For example, you are coming down the stairs in your home and your cat runs through your legs, sending you tumbling to the landing below. You are unconscious and may have a broken leg that requires surgery and possibly other injuries. When you are rushed to the hospital still unconscious, who will make decisions for you?
These documents are known by a variety of names: Health Care Power of Attorney, HIPAA Release, Living Will, Health Care Surrogate Designation, Donor Authorization, and others. The names used for the documents will even change from state to state, so it is important to make sure that the documents you have comply with the requirements of your state of residence.
Even if you are a lifelong resident of your state, it is crucial to have a legal professional review your estate plan, no matter how basic, on a regular basis. There are at least two reasons for this: (1) the laws in your state may change without you being aware of it or understanding the impact it may have on your estate and (2) your situation may change when a birth, death, marriage, divorce, or other significant life event occurs that changes your family structure.
If you have recently moved to a new state of residence, it is critical to have a legal professional licensed in that state review your current plan to determine whether it complies with the law in your new location. This is especially important if you continue to own property in your previous state of residence or even if those designated in your estate plan as heirs or conferred with powers of attorney still reside in that state. Estates with assets and/or individuals with interests in the estate that are located in more than one state can create complex issues that must be anticipated for prior to any triggering events.
How Does My Estate Legally Transfer to Others?
While the documents included in your advance directive package can be important even before death, other documents must be created legally under state law to make sure that any assets you have transfer according to your wishes. This is the purpose of the probate process, to make sure that assets from houses to bank accounts become the legal property of the person you want to have them.
Without this process of legal transfer, some of the worst scenarios can deplete the estate of the deceased, leaving no assets for a spouse or child. For example, something as simple as a vehicle owned by the deceased legally becomes an asset in the estate. One surviving child is just graduating from high school and needs transportation, so he just grabs the keys to a car sitting in the driveway that belonged to his recently deceased grandmother and starts driving it.
The second time he drives the car, he is texting his friends about where they can meet, excited that he even has a way to get there. In his excitement, distracted by his friends’ responses, he drives straight through an intersection with a stop sign and hits a car with the right-of-way proceeding in front of him. One of the passengers in the car he hits is a teenager who is seriously injured and will likely be in a wheelchair for the rest of his life.
The car was still owned by the estate. Just the medical bills for the injury to the other teenager are far more than the assets of the estate of the grandmother. The vehicle, which at the time of the accident is legally owned by her estate because title has not been legally transferred to anyone, is an asset of the estate which will be liable for paying the award to the injured teenager. Had the car been legally transferred to the person driving it, or to anyone else, the assets of the estate could have been protected from the court’s judgment for the injured party after the accident.
What Documents Should I Have in My Estate Plan?
Even though there may be an emphasis on the documents that you can use while you are still alive, we can’t forget the uncertainty that we learned from COVID. You can never be sure when you need the documents that your loved ones need after you are gone.
In addition, it is called an estate “plan” for a reason. All of your documents should be done at the same time and work cohesively with each other to avoid any conflicts that could cause what you are trying to avoid, such as a need for court intervention to resolve issues that arise. If your documents are done without a plan in mind, such as when an advance directive form is shoved under your nose when you are in the hospital about to undergo surgery, it can create unnecessary problems.
Your estate planning package should include at least the following documents:
- Will
- Health care directive
- Power of attorney
- Beneficiary forms
A will puts you in control of your estate. The alternative is to let your state legislature distribute your assets according to the intestate plan it has made law. Your will must be in writing, either handwritten or typed, but not oral, and must be signed by two witnesses who have no interest in your estate.
As noted previously, your health care directives provide instructions to medical professionals if you require care and are unable to communicate with them. These documents must be witnessed by two people. They can literally be a matter of life and death as they may include a “DNR” (“do not resuscitate”) instruction if your condition is terminal.
A power of attorney gives someone the ability to handle your financial and legal affairs if you are unable to do so. This could be a temporary power when you are going to be under anesthesia for surgery, or can be a power that is legally active until you revoke it.
Change of beneficiary forms can be one of the most important documents in your estate plan package. Many people do not realize that the beneficiary of an insurance policy or a retirement plan does not automatically change in the event of a change in status like a divorce. If you do not proactively change the beneficiary of most legal documents, the proceeds could go to an ex-spouse who already received all the assets to which he or she was entitled in a divorce settlement or perhaps a child who has developed a drug addiction or gambling problem and will quickly run through the money without the benefit you intended.
Updating Your Estate Plan
You should have a regularly scheduled appointment with the attorney who drafted your estate planning documents at least every 3-5 years. However, when there is a major change in your family structure or among others who are named in your estate planning documents, you should make an immediate appointment with your estate planning attorney to review what these changes could mean to the plan you intended to implement. If possible, you should make the appointment as soon as you are aware of any possible changes. For example, your ex-wife is named in your advance directives to make healthcare decisions for you.
As you should understand after reading this information, you should get your estate planning documents in order, not just for those who survive you, but for your own benefit when you need someone to make health care, financial and legal decisions for you when you cannot. It is in your best interest to do so with the help and expertise of a licensed estate planning attorney. While many lawyers can create an estate plan for you, it is advisable to find a lawyer whose practice is devoted to estate planning, with a better chance that your attorney is up-to-date on any recent changes in the law and has had some experience with whatever unique attention your plan may require.
