In the month, Coronavirus has swept the United States. Naturally, estate planning has become a central focus for most people. It’s important to make sure your plan is up to date.
We have had clients call our office—concerned about their plans—concerned they aren’t properly prepared. We would like to share eight tips for your estate plan during these next few months:
- Make sure you know where your original documents are: It’s unbelievable how many people we come across who have lost or misplaced their original estate planning documents. Make sure you know where your original documents are—and make sure that your successors know where these documents are! Original documents. Not copies. At times like these, originals do not belong in a safe deposit box—they belong in your home. By your side.
- Don’t be idealistic. Be realistic: Many people get romantic about estate planning. This might sound silly, but when folks envision themselves at the end of their lives, they often picture perfection—their entire family be reasonable, dependable, and loving. Children who have never been dependable will step up to the plate. Friends who don’t like driving across town will suddenly pay your bills and get your mail. Children who haven’t got along in years will suddenly put their differences aside and work together in harmony to take care of their parents.
The vision people picture is often not reality. When you plan your succession strategy, plan realistically. Don’t count on relationships mending by the time you need your estate plan. Even though it may hurt, reflect on your actual situation and plan from there. - Don’t be Oprah: We get some clients who want to bequeath cash to nieces, nephews, and friends, even when they have kids. When you name someone as a beneficiary of your trust, they have a right to see your entire trust upon your death. At best, this becomes a hassle for your trustee—to issue notices to all these beneficiaries. In some cases, the beneficiary may even hire an attorney to “protect” their interest in your estate plan. Keep it simple. Focus on your immediate family.
- Make sure you’re up to date: Have there been any major life changes since you set up your estate plan? Have your children been married or divorced? Has one of them had a name change—particularly a successor trustee? Do you have any newly born grandchildren? Have you moved since you set up your estate plan? Have you acquired new assets since you set up your trust? These changes warrant and attorney review.
- You must fund your trust: Your real estate should be deeded to your trust. Your personal bank accounts and brokerage accounts must be titled to your trust. If they are not titled to your trust, your successor trustee will not be able to manage these accounts during incapacity. If these assets are not in your trust when you pass away, they will potentially go to probate. California doesn’t care how much thought you’ve put into your trust or how much money you’ve invested into your trust. If your assets are outside your trust, they are not a part of your trust. The most frustrated clients we have are those who cannot access their parents’ accounts during death or incapacity.
- Consider your incapacity: Naturally, when people think of estate planning, they think of death. Who gets my house when I die? Who gets my 401(k) when I die? But these days, for most people, their body outlives their mind. You must prepare for someone to take charge of your financial decisions if you cannot manage your finances yourself.
Maybe the child you have in mind to sell your house after you pass away wouldn’t be as good at managing your day to day life if you were incapacitated. It isn’t a great idea to name a child as successor trustee for incapacity purposes if that child can’t help you get your mail or pay your bills. Consider naming one trustee for incapacity and one for the event of death. - Do not neglect your retirement accounts: We’ve seen people who have ex-spouses on retirement accounts! You must make sure the beneficiaries on your retirement accounts are up to date. You should not name a trust as beneficiary of your retirement account unless you have specifically been instructed by your attorney to do so.
If your retirement accounts are among your largest assets, make an appointment to speak with an attorney. In December 2019, the SECURE Act changed the way people inherit retirement accounts. Make an appointment to discuss how this new law effects you and your beneficiaries. - Too many Amendments: This might be the biggest issue we see. When I say amendments, I’m talking about those two or three-page documents that act as a supplement to your trust—that change a specific part of your trust. I’ve had clients with three or four different amendments in place. It makes these estate plans extremely difficult to read and to examine. When you use amendments, attorneys have to put together the trust like a puzzle. This can make it difficult for your successor to show your trust to third parties likes banks and financial advisors—even attorneys. Not only are we reading a trust, we are examining the full history of your estate plan. This can increase the time and cost of administration. Most importantly, when you use amendments, any person who was once named as a beneficiary in your estate plan, even if you amended your plan to revoke or reduce their gift, must be noticed upon your death. They are even provided a copy of your entire estate plan! This can lead to litigation and disaster.
Keep it simple. One single amendment might be okay, but it’s much better to restate the trust and keep it in one single document.
There you have it. Eight pieces of advice on estate planning during this COVID-19 era. The Coronavirus outbreak has presented a great time to revisit these important issues.
Make sure your documents are current. CunninghamLegal offers video conferencing and telephone appointments to ensure that each person’s estate plan is up to date. As you know, we are busy during this time, but we are trying to meet with as many clients as possible.
We are even able to help people set up update estate plans without any face to face meeting.
Schedule a meeting with us at cunninghamlegal.com.
We wish you and your family the best during this time. Please pass this information on to anyone who you think can benefit.
