May 27, 2020

Estate Planning in the Time of Great Uncertainty

In Estate Planning, Wealth Strategy

May 27, 2020

I have been in Wealth Management for more than 30 years, and, in my opinion, there has never been a greater urgency for estate planning than what we are seeing at this moment in history.  The current health crisis, compounded with working from home and spending more time around loved ones, compels one to put life into perspective, which often can include thinking about one’s own mortality.

Updating or drafting a solid estate plan now could prove to be one of the most valuable short-term projects, delivering peace of mind over the long-term.  With the statistical models changing daily and the death toll at numbers unforeseen, the possibility of contracting this nasty virus is a very real, and very unsettling, danger.  We now know all too well how awful this virus is – those of us in the Pacific Northwest witnessed the heartbreaking loss of life at several local assisted living facilities at the start of this outbreak.

I can speak very personally about how estate planning has offered some relief for us as a family during this time of insecurity.  I currently have a 21-year-old daughter attending college at Washington State University.  She was home from Pullman for spring break in March when Covid-19 changed all of our lives.  After one week of sheltering in place, my daughter decided to go back to WSU and complete her semester online, on-campus from her dorm.  My wife and I had shared concern regarding her being away from the family, and living on her own, and our thoughts around this were so unsettling.  What if she were to contract this vicious virus?  One thing we didn’t need to worry about was what her health and estate wishes were.  Three years ago, just before my daughter started college, we had a great talk.  I advised her then, and amazingly she listened, to execute a Power of Attorney (POA) for financial and healthcare decisions.  It brings us comfort knowing that if anything were to happen to her, my wife and I will be able to make confident decisions on her behalf, in line with her explicit instruction and choices.

Since we began this new way of pandemic living, with sheltering in place and social distancing, in early March, the news media has filled our minds with the shock and awe reality of the virus, as well as its impact on the global financial system.  Given that the COVID-19 virus is new, extremely contagious, invisible, indiscriminate, and there are limited number of proven treatments and no proven vaccines, I think it prudent to invoke the adage “plan for the worst, hope for the best” as we move forward.  For me, much of this planning is around estate planning – living wills, power of attorney, estate planning, and other contingency plans going forward.

I recommend starting this process by taking a critical look at your current estate plan, if you have one.  When was the last time it was reviewed with scrutiny?  Has anything changed?  Is the plan itself still in alignment with your current wishes, as well as being compliant with current federal and state codes?  Are there current or anticipated estate tax complexities or challenges not accounted for in the documents?  Does the estate plan handle these complexities in the most tax-efficient or advantageous way?

With the current health crisis, you also will want to take under assessment contingency plans in case you are incapacitated.  There are myriad ‘what if’ scenarios entering our current situation; some are COVID-19 specific.  What if you’re placed on a ventilator and your family cannot be at the hospital with you?  What if you’re in a debilitating car accident (there are plenty of drivers taking advantage of less traffic to exercise their gas pedals!), or what if you start a slow (or fast) decline?  Are there plans in place to help guide decisions that will need to be executed, in the unfortunate instance where you are not able to speak for yourself?

Then there are questions around what to do if you pass away during this lockdown.  Even if you’re young, robust and healthy, unforeseeable accidents, now including this virus, tend to not discriminate based on age or health status.  Are your wishes up to date?  Are your children and spouse protected, from themselves and others, with your estate plan?  Have you added children, gotten married or divorced, or had any other significant life changes that need to be taken under advisement?  Is there a future inheritance you may receive, and if so, what are your wishes with that?  Have your children reached the age of majority (18), gotten married, or divorced?

With all these questions to consider and choices to be made, the planning of your estate and end of life wishes may seem almost as daunting as the virus itself.  It doesn’t need to be.  I’ve put together a quick reference list that you can download here to help guide the decision-making process and a Frequently Asked Questions.  Once you are able to crystalize the who/how/when questions, a call to your wealth manager or estate attorney will start the process of getting paperwork amended, corrected, or drafted with your correct information.

With proper planning and consistent updates to the planning, we can feel confident that we are legally prepared to address whatever hand we are dealt – even when we find ourselves in times like today.  It may not be the way things were prior to this virus but putting your health and estate plan into place can offer some short-term peace of mind, with the assurance that no matter what happens, you and your loved ones are taken care of over the long-term.

Stay healthy and be prepared!

Article written by: Joe Cervantes | Team Lead & Wealth Manager

Disclaimer: To ensure compliance with requirements imposed by the IRS, we inform you that any federal tax advice contained in this communication (including attachments) is not intended or written to be used and cannot be used for (1) avoiding penalties imposed under the Internal Revenue Code or (2) promoting, marketing or recommending to another party any transaction or matter addressed herein unless the communication contains explicit language that it is a tax opinion in compliance with IRS requirements.  Please contact your tax advisor for guidance on your individual situation.

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