The COVID-19 pandemic has affected everyone’s lives. Prior to this pandemic, establishing an estate plan was probably not a high priority for many people. However, as COVID-19 cases continue to rise, we have been forced to face our fears of falling ill, incapacity, and death, and to learn the importance of getting your affairs in order.
To protect your loved ones from any unexpected tragedy, a comprehensive estate plan is highly recommended. At a minimum, your estate plan should include the following documents:
1. Revocable Trust
A trust is a fiduciary relationship with respect to property, subjecting the person by whom the title to the property is held to duties to deal with the property for the benefit of another person. To put it more simply, a revocable trust is a “fancy” will that allows you to direct distribution of your property at the time of your death, which you can change or revoke at any time during your lifetime.
A trust allows you to appoint someone you trust as a successor trustee who steps in and manages your assets, or pass your assets on to your beneficiaries, upon your death without going through probate. Probate proceedings are public court proceedings, and they are relatively slow as they can take more than a year to wrap up. This means a trust provides a quicker and more affordable process for your beneficiaries and affords you privacy with respect to your estate/assets.
2. Will
A will is an instrument that allows you to direct distribution of your property at the time of your death. Unlike a trust, a will takes effect upon your death. Also, upon your death, your assets will have to go through probate in order to be distributed in accordance with your wishes. If neither a will nor any other estate plan (e.g., trust) is in place, distribution of your assets upon your death would depend on the state law, and the court will oversee the administration of your estate.
3. Power of Attorney for Health Care and for Property
A power of attorney for health care is a document in which you, as the principal, grant to someone you trust, as the agent, the power to make health care decisions for you if you are incapable of making those decisions for yourself.
A power of attorney for property (also known as a financial power of attorney) is a document in which you, as the principal, grant to someone you trust, as the agent, the power to act on, in behalf of, or in place of you as to your property or items not held in trust. It also gives the agent the ability to pay bills, write checks, make deposits, sell or purchase assets or sign tax returns.
If you become incapacitated and no power of attorney is in place, there is no person to act on your behalf, and your loved ones will need to bring a court action in order to have a conservator appointed.
4. HIPAA Authorization
A HIPAA authorization allows your nominated agent(s) under your power of attorney for health care to receive medical information that would otherwise be restricted under privacy laws, so that they can speak freely with your health care providers in case of a medical emergency or your incapacity.
It is possible to create your estate plan without an attorney, as there are several websites/online tools that allow you to draft these documents for a low cost. However, estate planning is more complex than simply preparing relevant documents. Aside from preparing relevant documents, an estate planning attorney can help you understand both legal and tax consequences relevant to your estate plan, help you avoid making mistakes that can be costly, and help you complete your estate plan comprehensively (e.g., properly titling your assets).
If you have any questions about estate planning, please feel free to contact Justin Paik at jpaik@ferrisbritton.com.
Justin C. Paik is a transactional attorney at Ferris & Britton who specializes in Tax, Business, Estate Planning, and Probate.
