I know we’re all living through difficult times right now, and estate planning is something that you may be thinking about doing. It may have already been on your to-do list, or perhaps it’s something you’ve done in the past but you need to revisit. But I would certainly say that in times of uncertainty like what we are living through at the moment, it’s more important than ever that we have a plan in place.
I wanted to talk a little bit about what estate planning should look like right now. The most basic issues surrounding estate planning haven’t changed – they remain true whether we’re living through a pandemic or it was as it was a few months ago, where life was sort of humming along as usual.
But as we add COVID-19 to our issues and our day-to-day life, there are some complexities that come along with the estate planning process that we have to be aware of:
One of those issues is the fact that our courts are slowed down dramatically right now. Depending on what state you are living in, your courts may or may not be either fully operational, operating minimally, or perhaps not operating at all.
Here in New Hampshire, our courts are still open in the sense that we can still file probate matters that would pertain to estate planning. We don’t have access to go into the court, but we can file electronically. Fortunately, New Hampshire did adopt that process in recent years, which makes things a little easier in terms of being able to continue carrying out business. But also we need the probate court for if something were to happen to you and we needed to apply for guardianships. So that becomes an issue as well, when we’re dealing with courts that are likely to be potentially slowed due to staffing issues and issues related to the virus.
The other issue that comes to light during this difficult time is the fact that if medical emergencies should arise, we want to make sure we have somebody in place who can make medical decisions on your behalf quickly and swiftly.
We do, in New Hampshire, have a surrogacy law, which is essentially a law in place that allows someone in a certain order as outlined by statute, to make medical decisions on your behalf if you do not have an advanced directive in place. However, we don’t want to rely on the surrogacy law. There’s a variety of reasons for that, but one of them is it’s very temporary. So it does not replace the need for an advanced directive.
What happens is the hospital will allow for you to have someone make a decision under the surrogacy law, but then will essentially immediately instruct the family to move forward with a guardianship proceeding if an advanced directive was not in place because they can’t continue to rely on the surrogate in that case to continue making decisions indefinitely.
And then the third thing that becomes really important in this crisis, of course, is to make sure that your wishes are in line and well-known by your loved ones. So we want to have your affairs in order, we want to make sure that if something should happen, that the right people can step in and take the necessary actions as quickly and easily as we can.
There are certain basic documents that we rely upon for anyone 18 or older when it comes to estate planning to address an emergency that should arise while we’re alive. And certainly with the virus, it shines a light on the unexpected.
So this document is where you name someone who you’ll often hear referred to as an “Agent” or an “Attorney in fact” – but the point is you’re naming someone who can make decisions for you, who can take actions for you with regard to your legal, financial, personal affairs. So, for example, if you are unexpectedly ill and can no longer manage your own affairs, you still have bills to pay, you probably still need to have access to funds, maybe you have a family to support, maybe you have a business that you’re trying to run. We need a POA in place to allow someone to be able to quickly and easily step in and fill that role if you can’t take those actions for yourself.
With a POA, these instruments are typically written so they are effective the day they are signed. So what that means is we’re not relying on a doctor or any third party speaking to whether you have capacity or not. Let’s say you’re sick and your spouse goes down to access a bank account that’s only in your name. When they present a durable POA, there’s no question as to whether there’s been an incapacity or any other requirement that has to be met before the bank is going to honor the use of that document. So POAs become very important in an emergency situation, and we recommend, as I mentioned previously, anyone over 18 should have a POA in place.
Now you certainly want to use precaution as to who you’re naming on the Durable POA because of the fact that you’re giving them a significant amount of power over your affairs and your assets. So you want to think about whether the person, of course, is trustworthy, reasonably responsible, responsive – those are qualities to have in a POA.
If you are able to and you have another person who you feel equally as comfortable with, I do recommend that you go ahead and name a back-up, as well – especially as we’re living through a global pandemic. If you become sick, it is reasonable to be concerned that whoever you name as your agent could become sick, as well. So naming a backup becomes all the more important.
If you live in another state you may have heard this referred to as a “Health Care Proxy,” which is essentially the same thing, but it is a document where you are naming someone (again, an Agent) who can make decisions on your behalf with regard to your medical care.
Now, unlike the POA, the Health Care Proxy is only triggered if you have been deemed incapacitated by your doctor. The purpose of the Advanced Directive is to put an agent in charge to become your decision-maker. That’s why it’s so important that you’re having these sometimes difficult conversations with your loved ones, but specifically about what kind of care you would want in an end-of-life situation. It’s really important that they’re aware, and that’s why having these really difficult conversations is so important.
Within the Advanced Directive itself in New Hampshire, there are certain questions that we proactively initial our choices next to relating to that care. Our job is to walk you through those questions. But certainly you can also call upon your healthcare provider if you questions there, as well, and there’s literature that we can provide, too. Other states – Massachusetts being one of them – have more of a broad document, where it simply has you appoint an agent to make decisions for you and it doesn’t have as many choices within the document itself.
But it’s important, with regard to the Health Care Proxy, that your wishes be known, whether it be in writing in the document itself or verbally communicating with your loved one who’s going to be your agent – or ideally both.
It’s important that those wishes be known for two reasons:
It can also go a long way to preserving the relationship between your agent under the Health Care Proxy and your other family members. So that is one of our concerns when we’re engaging in some type of estate planning – wanting to be sure we’re doing what we can to protect and preserve the relationships of the ones that you love when you’re not here.
This is a separate document that states anyone listed in that document has access to your medical information and can speak with your doctors. If a medical care provider is meeting with the agent under the Advanced Directive, trying to make a difficult decision when you are unable to make that decision yourself, the parties listed on that HIPAA Release can be privy to the conversation. So that can go a long way to making other family members and loved ones feel included and involved in this difficult decision process. When some family members feel shut out from the process, that can breed that kind of discord amongst your family members that we are trying to avoid.
The other reason for a HIPAA Release, which can be very valuable, is you may not be deemed medically incapacitated – meaning a doctor would state that you can still communicate your wishes. However, with something like the coronavirus or another illness, you may be extremely ill. So it may be very useful to have a HIPAA Release in place, which allows a loved one, a child, a parent to be able to pick up the phone, call a doctor, get information about a prescription, report as to your condition. When we have this document in place, we eliminate the barriers to that kind of communication that can exist due to the HIPAA confidentiality rules.
So the HIPAA Release works alongside the Health Care Proxy and the Durable POA. Those three documents are designed to – in an emergency, as I said before – allow for someone to quickly, easily, and efficiently take over, manage your affairs, help you until you are better and able to manage your own affairs again.
It’s important with regard to those specific three documents to keep those current. So you want to refresh those documents if not every year, then every couple of years. They don’t expire, per say, by their terms, but the older those documents are, the increased likelihood that we meet some resistance – either from a lender, a bank, a hospital, a medical care provider. And the reason they might push back is out of concern that perhaps you had executed a newer one at some point, and they frankly have no way of knowing if that’s the case. Keeping them current helps to ensure these documents will work when we need them to, and also ensures that your wishes are met.
A common question that we receive from people is “How do I set up my estate plan so that if something happens to me and I were to pass away, things proceed as easily as possible and as efficiently as possible for my inheritance?”
Oftentimes clients come to us because they’ve been through this process before with a loved themselves, perhaps they went through a difficult probate proceeding, perhaps they didn’t know where the assets were, what the assets were – and it can become a lot of work and a lot of strain on your loved ones during a time when they’re grieving.
So what happens if you were to pass away and you do not have anything in place or you didn’t have anything in place beyond those basic documents that we talked about before? If you have nothing in place and you had assets that were in your name alone, we are looking at a probate proceeding.
The probate process is a system where the probate court oversees the transfer of ownership of an asset from someone who has died to its new owner – the beneficiary or the heir. But along the way there are a lot of hoops we have to jump through and steps we have to take before the court will ultimately at the end allow for the transfer of that asset to the new owner. And part of that process is putting creditors on notice to be able to come forward and make claims or other parties who may claim to be an heir of the estate or beneficiaries.
Probate can take a long time – we tell people to expect a year. In New Hampshire, in some cases, you may be able to close it out earlier (in 6 months), but in general, you should expect at least a year. We certainly have probates that go a lot longer. It depends on a lot of factors, including what assets we’re dealing with, and the specific issues relating to your situation.
The other issue is that probate is expensive. If your loved ones have to hire a lawyer, of course they’re going to pay legal fees, but there’s also court fees that come along with the process, and additional costs that will come up.
But the nice part of all of this is to know that probate can be avoided. We just have to know what to do ahead of time to avoid all of that.
If you own an asset jointly, with someone else, then there are survivorship rights. So for example – a husband and wife own a home together. If the husband dies, assuming they were joint tenants with rights for survivorship on the property, the wife is going to take that property and we won’t need a probate in order to transfer that asset to her.
Some people will say “Well why don’t I just add my child or loved one or friend to my deed or my bank account as a way of avoiding probate?” Generally that’s not a good idea because that asset now becomes an asset of the person you added to your deed or to your bank account. So if that person is involved in a lawsuit of any kind, goes through a divorce or bankruptcy proceeding, gets behind on taxes, the asset is reachable – and so you’ve now exposed it. There are also tax consequences depending on the type of asset when you simply add someone to your deed or bank account. So relying on joint ownership as a means to avoid probate is usually not the best choice.
Certain types of assets will allow you to name upfront who you want to have that asset if something should happen to you. A good example of this would be a life insurance policy, 401K, etc. If you have any of these assets, you probably recall when setting them up filling out a form to name your beneficiary. As long as that beneficiary designation is up to date and has been completed fully, if something should happen to you that asset will happen to pass without requiring probate to your beneficiary. I always remind people whenever they’re sitting down and having this conversation about estate planning, double-check those beneficiary designations – it’s possible that it’s not reflecting your situation the way it should be.
However, beneficiary designations are not completely appropriate in every case. So if you have a person who you want to receive that asset but they are either too young or perhaps would not do a good job of managing that asset, then in that case you may not want to name that individual as a beneficiary directly, and you may instead want to consider #3.
An asset that’s held in trust while you are alive is going to avoid the need for probate proceeding. If you have an estate plan and you’ve included within that plan a revocable trust and you pass away, if your home was in that revocable trust, there’s no need to go through the entire probate proceeding for the ability to sell or transfer title to that house. When the asset’s in trust, right away your loved one can be running and administering the trust.
A trust in almost all cases is much quicker, it’s much more efficient, and less expensive than a probate process – and it’s frankly easier on your loved ones when your assets are held in trust. In this time where we’re dealing with the coronavirus situation, that becomes all the more important.
You may want a trust if you have minors who are beneficiaries, as well. I would even say that 21 or even 25 is very young to receive these assets, but of course it depends on the person you’re leaving these assets to. Using a trust is a great way to leave your assets for the benefit of your loved one but without giving them full control. You appoint a trustee to be in charge of the funds who’s making the decision about when and how distributions take place, as opposed to your loved one who you may be uncomfortable with in terms of their decision-making abilities.
A trust is a great way to have a little more control over what happens to your assets, particularly in comparison to a will. We didn’t touch upon wills in our basic documents, but if you don’t have a trust, a will is important because that is the document that will say:
A will is only effective once it’s been sent to the probate court, the probate court reviews and accepts it, and then ultimately appoints someone as executor. So by its very nature a will uses a probate proceeding. However, if you’re using a trust, you still want to have a will because a will acts as a catch-all in case there’s an asset that was in your name that was not put into your trust while you’re alive. If you didn’t put it into the trust, the will grabs it and puts it into the trust for you.
In terms of a trust, there’s really two main types of trusts – revocable and irrevocable. In a situation like the one we all find ourselves in right now, it’s really the revocable trust that we’re focused on right now.
A revocable trust is easy to use because it can be amended or revoked at any time, and there’s no tax consequences in the sense that there’s no separate tax ID number that needs to be obtained for that trust and no separate tax filing. The trust really sits very quietly in the background while you are alive, and at some point down the road should something happen to you (you become incapacitated or you pass away) at that point, we make use of the trust.
But while you’re alive and well, you’re the trustee of your own trust – maintaining full control. You can move assets inside and outside of that trust as you see fit and amend the trust as things change in your life. Once you’ve passed away or become incapacitated, we’d have a successor trustee named in the trust document itself that would then take over. At that point it’s just a matter of the successor trustee signing their acceptance – a one-page document saying they are now the trustee of the trust – and then they can manage the assets of that trust.
Setting up a revocable trust now so that you can ensure your affairs are in order if something were to happen to you, you have everything in one place, your loved ones will have a much easier time than if they had to go through probate.
1. We are comfortable offering signings in our office as of right now. At that point, we have done 95% of the work in regards to the plan, and you’re coming in just for the signing.Our precautions include:
– We have a separate entrance and exit for clients only.
– We only have two staff members in the office at a time.
– We sanitize after every meeting and signing appointment.
– We practice appropriate distancing so that the witnesses are in the room but are as far away from you as possible.
– And we use gloves when moving documents back and forth.
So we’re really doing everything we can to minimize any risk of exposure for our clients and for our staff, as well. And ideally the process would be short because we will have done everything else electronically.
2. If you’re not comfortable or not well, or not able to come in, what we can do is execute most of the documents electronically due to the Executive Order.
And what that would mean is focusing on a trust instead of a will if there’s any concern about probate avoidance. So you would put together a trust, which under New Hampshire law does not require two witnesses, and we could notarize it for you electronically. Then, once virus concerns subside, we can have you come in and sign that back-up will (which, as I said before, is really just there as a safety net).
So the good news is that we are still permitted right now to operate as an essential business, which is good because we do have clients who are very concerned because of the virus and want to make sure their affairs are in order. So we want to be able to provide that service, and we feel comfortable now that we have the appropriate procedures in place that we can do this safely.
So the good news is that we are still permitted right now to operate as an essential business, which is good because we do have clients who are very concerned because of the virus and want to make sure their affairs are in order. So we want to be able to provide that service, and we feel comfortable now that we have the appropriate procedures in place that we can do this safely.
Our normal process with regard to estate planning typically involves an in-person meeting first, where we go into a lot of detail with you about what your goals are, what your assets are, and what’s the best strategy to accomplish those goals for you. Given the concerns about the virus, we’ve had to adapt that process a bit.
In terms of what can be done now, the good news is, we can still do this. You haven’t missed the boat if you haven’t done this ahead of time. We can do almost everything virtually up until the signing appointment. So that means a consultation can be done via Zoom conference call to keep everyone safe.
The next step is document-drafting, which of course can be done remotely. We normally then schedule a meeting where you come in and we walk through those documents together in our office. Again, due to the concerns over the virus, what we are doing is sending those drafts electronically via a safe client portal, and then via videoconference, we would go through each of those documents in great detail for you.
Once we reach the point that you’re comfortable with the documents and there are no further changes that you want, we can then schedule your signing. Signings, as of right now, will have to be in person because of a witness requirement and a notary requirement. Our governor in New Hampshire (and I’m told that Massachusetts is on the same path) has issued an Executive Order allowing temporary electronic notarizations. There’s still some details to be worked out, but essentially we could notarize a document through some type of call, we would witness it, notarize it, and you would transmit the document to us and we would stamp it.
However, some estate planning documents, like a will for example, require two witnesses, and under current case law, those witnesses need to be physically in the room with you at the time of signing.