Estate Planning Considerations During COVID-19
***Information and guidance in client updates was up to date at time of publication. During the pandemic, information and guidance has been changing rapidly. If you have any questions about the information contained in a client update, please contact the author(s) or your Miller Johnson attorney.***
In only a few weeks, the coronavirus disease 2019 (COVID-19) outbreak has changed the world in completely unprecedented ways. Staying home when possible, practicing social distancing, and taking all safety and health precautions recommended by the Center for Disease Control (CDC) and World Health Organization (WHO) are all part and parcel to helping flatten the curve and allow the health care system to adequately treat this novel disease.
The most frightening part of COVID-19 is the feeling that so much is beyond our control. But there are plenty of things we can control. We have made a list of the important estate planning tasks that can protect you and your family in the event of an unexpected illness or death. Our estate planning team is generally working remotely, and we stand ready to assist you. Here is a list of things you can do (from an estate planning perspective) that may help you feel a little more in control in these uncertain times.
- Review or Create Your Patient Advocate Designation:A Patient Advocate Designation (PA) is a legal document and is also known as an “Advance Directive,” “Health Care Power of Attorney,” or “Health Care Directive.” With a PA, you can appoint someone you trust to make health care decisions and advocate for you when you cannot do so for yourself. You can include directions regarding end of life decisions, as well as other decisions about your care and treatment. In Michigan, medical providers frequently consult with the spouse and adult children (if any) about medical care, but even your closest family members don’t have legal authority to act unless you name them in a written document. Make sure every adult in your family has a PA in place. If you have adult children, talk to them about signing their own PA. Once a child turns 18, they are legally an adult and parents no longer have rights to make medical decisions for those children. Most importantly, talk to your loved ones about your wishes regarding your medical care.
- Look for Your HIPAA Authorization: A PA should also include a HIPAA Authorization. This document follows the requirements Health Insurance Portability and Accountability Act (HIPAA) to authorize your designated patient advocate to receive information about your health condition and status. Without one in place, a hospital, medical office, or third-party medical provider may not be able to release medical records or other medical information to your designated patient advocate.
- Update or Create A Durable Power of Attorney: A Durable Power of Attorney for Finances (DPA) is a legal document where you designate an Agent to access your assets and make financial decisions on your behalf. A DPA’s scope can be as broad or as narrow you wish. The broader the scope, the more flexibility the Agent has to properly deal with your assets, make financial, legal, or tax decisions, and handle unanticipated circumstances. A DPA can be either a “springing” power or one that is effectively immediately upon signing. With a springing power, you must be incapacitated before your designated Agent can act on your behalf. Some of the more common powers an Agent may need in emergency situations include handling financial transactions, dealing with bank accounts, transferring funds, paying bills, filing taxes, funding a trust, updating beneficiary designations, and addressing insurance claims.
- Review your Wills or Trusts: While your PA and DPA govern situations during your lifetime, a Last Will & Testament and Revocable Living Trust Agreement address how you want your estate to be handled upon your passing. It is important to review your existing estate plan if your intentions or family or financial situation has changed since you last had your estate plan prepared. If you do not have a basic Will or Revocable Living Trust Agreement in place, now is a good time to begin the estate planning process.
- Check Your Guardian Designations. If you have minor children, then having guardians designated in your estate plan is critical. Generally, a guardian is designated in your Will; however, Michigan law allows you to sign a separate document to designate a successor guardian even if you don’t sign a formal Will. The document must have two witnesses but doesn’t need a notary.
- Delegation of Parental Authority. During unprecedented times like these, parents may not be living with their minor children due to travel restrictions currently in place, self-quarantine protocol, or other circumstances triggered by the pandemic. In these situations, consider delegating parental authority to another responsible adult who is near and can care for a minor child until the parent returns. A Delegation of Parental Authority is a temporary measure and does not take the place of nominating a guardian (who would act only if both parents are deceased, incapacitated or otherwise unable to act). A parent can delegate parental duties for up to 6 months at a time. The parents remain the ultimate decision makers and can revoke the designation at any time.
- Check Beneficiary Designations and Asset Titling. Life insurance, annuities and retirement plans pass according to their beneficiary designations, regardless of what your Will or Trust provides. It is important to coordinate the beneficiary designations with the rest of your estate plan. Make a list of your assets. Do your accounts show a joint owner? If you have a trust, does the account statement show the trust name? Check the beneficiary designations for life insurance and retirement plans. If these need to be updated, you may be able to contact your financial advisor to send change of beneficiary forms. If you have an estate plan, chances are that your attorney gave you some instructions on how to fund your plan properly. Read it over and check to see if anything was missed. Common assets that need to be properly coordinated with an estate plan include real estate, bank accounts, brokerage and investment accounts, HSAs, business interests, retirement plan accounts (IRAs, 401k plans, profit sharing plans, 457 plans, 403(b) plans, pensions), and insurance policies. If you can’t find your instructions, of if you have questions, email or call your attorney. Often, you can get a digital copy of the instructions to review.
- Update List of Passwords and Digital Information. As we practice social distancing during the COVID-19 pandemic, we are living in a digital age now more than ever. Accordingly, this is a good time to create an inventory of your online accounts and digital files, along with your login IDs, passwords, the answers to any security questions and what type of two-factor authentication, if any, is in use. A good place to start this task is to identify all of your devices — smartphones, tablets, smart speakers (Alexa, Amazon Echo, etc.), laptops, desktop computers — and their passwords, along with the passwords for any important apps. Then inventory the other electronic records you use, own or control.
- Assess Family Financial Needs. The economy has been drastically impacted by the COVID-19 pandemic. Families are currently hurting financially. If you want to help a loved one, there are several avenues to pursue. If you have sufficient resources, you can make gifts or loans to family members. The annual gift tax exclusion amount is currently $15,000 per person. You can give tax-free gifts up to this amount in 2020, without filing a federal gift tax return. If you are married, each spouse can give $15,000 to each recipient. Even larger gifts can be made on a tax-free basis in many circumstances. If you want to help family members with low interest loans, the IRS requires that you charge the Applicable Federal Rate (“AFR”) based on the length of the loan. We recommend that you carefully documents gifts and loans to avoid misunderstanding and confusion in the future. Note that family gifts and loans may affect eligibility for Medicaid and other governmental benefits.
You Are Not Alone. The COVID-19 pandemic does not discriminate—everyone is at risk and is experiencing it in different ways. We are in the battle to heal and flatten the curve together. As we do this, we are inundated daily with an overwhelming amount of news, articles, medical updates, state and federal government orders, and relief bills. Don’t try to process all of this information on your own. Your professional advisors are trained to sift through what is important and applicable to your situation. There is rarely a “one-stop” source for providing you with the most needed advice right now, which includes investments, banking, legal, tax, and insurance. Each advisor should bring advanced knowledge and experience in his or her specific discipline and add value to the planning process. Check in with each member of your advisor team now and ask for advice. We are here to help.