Old estate planning challenges have been exacerbated by the pandemic. New estate planning challenges have emerged. My approach to estate planning will forever be changed. Here is some of what I have learned.
1. Your heirs will need to have patience. Probate is a document intensive process to pass assets from your name to the name of your heirs. Petitions filed at the Court with the Register of Wills used to be handled expeditiously. Now we can wait weeks or months for action on all such filings.
2. Put your assets in a revocable trust. Assets owned in a trust are not subject to the probate process. If you create a revocable trust, you can easily change the title to the assets you own. Brokerage accounts, bank accounts, and other investments are easily moved from your individual name to the name of your trust while you are alive. And if you are the trustee of your own revocable trust, you will hardly notice the difference.
3. Double check all your beneficiary designations. When you have properly appointed beneficiaries, your assets pass more quickly to those legatees or heirs. You can designate beneficiaries for assets like IRAs, 401ks, life insurance, annuities, and more. Be certain that you have completed beneficiary designation forms AND named alternate beneficiaries if your first choice for beneficiary/beneficiaries does/do not survive you. Often these forms can be found online at the websites of the insurance companies and brokerage firms. They are designed by and for each company. If you do not know who you designated as a beneficiary or even if you have designated a beneficiary, just download, and complete the forms. There is no harm in refreshing your beneficiary designations. But do not forget to send them off by mail, email and fax if you can. They are not any good if they aren’t delivered. Because you designated a beneficiary or beneficiaries, these assets will NOT pass through probate and likely be delivered to the beneficiaries more quickly upon your death.
4. Double check how you own assets. You might have assets that allow you to name a beneficiary upon death – often called a “transfer on death” or “paid on death” designation. You might find that this is allowed on bank accounts, bonds, and other assets. Similarly, you can own real estate by holding the “life estate” but designating that the property passes to others upon your death. Consult with an attorney before doing this as it may impact your ability to sell the property or your Medicaid eligibility.
5. And your heirs will still have a tough time. Just because you have designated beneficiaries does not mean that your heirs will have an easy time of claiming your assets. The pandemic has challenged systems and slowed response times. With employees working remotely and delays in the mail, the process of claiming assets is more difficult. As always, staff at financial institutions are often confused as to what documents they need to allow them to distribute assets. They often ask for “letters of administration” from the Court. Letters of Administration or Testamentary Letters are only issued if there is a probate process. These financial institutions often ask for the letters even when there is no probate to be opened and no letters will be issued.
6. Do not be afraid of a little bit of probate. The probate process serves a purpose. Probate will give your administrator/executor letters of administration to cope with financial institutional bureaucracy. Also, probate cuts off the claims of creditors. If you owe money at the time of your death, creditors of your estate are required to file a claim. Without filing a claim before the end of the claims period, creditors cannot be guaranteed payment. To be certain that your estate goes through a probate process, leave some assets in your sole name such as your car and a small checking account.
7. While you are alive, reconsider the agents named in a power of attorney. When travel is difficult or prohibited, your agents might have trouble gaining access to assets. You created a power of attorney so that your agents could pay your bills and manage your investments when you are ill. The power of attorney is a simple form to give an agent that power. However, financial institutions are traditionally suspicious of powers of attorney. The banks and brokerage houses sometimes require personal visits to accomplish transactions including claiming assets or sending funds by wire. Therefore, it may be best to name an agent near to your home OR put those assets into a revocable trust.
8. Reconsider who is to make health care decisions for you. You may have named one or more agents in a medical directive or health care power of attorney. You may have a perfectly good HIPAA release to permit access to your medical records. And yet, if your family or friends cannot get into the hospital, the management of your health when you are extremely ill is made more difficult. And if you named agents who do not live nearby, access to travel is not guaranteed. Select health care agents who are best able to manage these challenges, especially those who are good with technology so they can complete Zoom or Face Time calls with the doctors.
These are brief insights into what can be big problems. The first step might be to call your estate planning attorney!
Evan J. Krame
301 468 3360