sarah avilesBy Sarah Aviles

Aviles is a Senior Associate practicing out of Dunlap Bennett & Ludwig’s Tysons Corner, VA office.

 

Recent events surrounding the Coronavirus outbreak have resulted in a focus on emergency preparedness and steps to be taken by businesses, governments, and individuals to maintain your health and the health of others. The common steps people think about are washing their hands, stocking up on canned foods, and practicing social distancing.  Less common are thoughts about the legal side of your emergency plan – namely, your estate plan.

Many people equate estate planning with death.  However, estate planning is about more than just post-death property distribution. A full, comprehensive estate plan will help ensure that, not only are your loved ones provided for and protected after death but that you are provided for and cared for while you are alive. In essence, a well-crafted estate plan is a key part of your emergency preparedness kit.

#1 Take Care of You

Three documents often overlooked by clients when thinking about an estate plan are extremely important to that client’s care in the event of a medical emergency:

    1. a Financial Power of Attorney,
    2. an Advance Medical Directive, and
    3. a Living Will.

These documents answer the questions:

    • Who will manage my assets / pay my mortgage/ file my taxes if something happens to me?
    • Who will make my medical decisions / decide on my treatment / admit me to a hospital if I can’t do so?
    • How do I ensure that my wishes for my end-of-life care are fulfilled?
Financial Power of Attorney

A Financial Power of Attorney allows a named agent to manage your assets and your finances.  If you have assets in your individual name, generally, no one can manage those assets but you. If you become incapacitated, then those assets could only be managed by a court-appointed conservator – which involves a costly and time-consuming court process – or the named agent under a Financial Power of Attorney.  When you set up a Financial Power of Attorney, you are clarifying who will take care of your assets in the event of an emergency and specifying the limits of that agent’s power.

Advance Medical Directive

An Advance Medical Directive allows a named agent to manage your health care decisions in the event you become incapacitated.  Your mental and physical medical treatment involves personal, sensitive, and crucial decisions. You want to designate the person who will make those decisions for you in the event you cannot do so.

If you become incapacitated without an Advance Medical Directive, then it may be necessary to have a guardian appointed by the Court. This process, like that to appoint a conservator, can be costly, time-consuming, and may result in the appointment of a guardian you would not have chosen.  Many states, including Virginia, also have statutes that designate a hierarchy of individuals who can make emergency medical decisions for you in the event you become incapacitated without an Advance Medical Directive. However, these laws do not usually grant broad decision-making authority and a person you would not have chosen could end up making your personal medical decisions.

Living Will

A Living Will is often part of an Advance Medical Directive, although, it can be a separate document. The Living Will is your expression of your wishes as to your medical care: in particular, the removal of life support in the event of a terminal condition. This decision should be yours alone. Making this decision in advance through a Living Will can ease some of the burdens on your family members and give you control even when you are incapacitated.

These three documents are important to your emergency preparedness kit for your care and well-being.

 

#2 Take Care of Your Loved Ones

The usual documents that come to mind with the phrase “Estate Planning” are (1) a Last Will and Testament, or (2) a Revocable Living Trust. These documents provide for the distribution of your assets after you pass away.

If you do not have a Will or Trust, then it is likely that all assets that are in your individual name without a beneficiary designation will pass at your death by intestacy, i.e., in accordance with your state’s laws. In most states, assets that pass by intestacy go in a set hierarchy (usually, first to the surviving spouse, if any, then to children, then to parents, then siblings, etc.). Although this may seem to some like a good alternative, if you do not have a Will or Trust, then you have not designated an individual or organization to step up as executor or trustee to administer your estate, you have not designated the individuals who will care for your minor children, and you have not granted your administrator certain powers they may need – such as the power to sell your home. Furthermore, if you have a blended family, a child with special needs, or no close relatives, intestacy can result in serious issues. Relying on intestacy statutes is often an invitation for confusion, additional costs, and perhaps even fights among relatives over the administration of your estate or the care of minor children.

In addition to emotional turmoil, death causes confusion, paperwork, and unfamiliar financial obstacles to maneuver. Setting in place a solid plan – either by Will or by Trust – can help immensely to relieve some of these burdens.

 

#3 Plan for the Care of your Children

If you have minor children, you may be concerned about what will happen if you become temporarily incapacitated and unable to care for them.

Virginia Code § 16.1-352 permits parents to designate, in advance, a temporary – or “standby” – guardian who would serve as guardian of the person and property of your minor children for 30 days following a triggering event. The triggering event can be your death, incompetence, or debilitation. This document can help provide for your children’s care during a medical emergency, or for a short time after your death while your designated guardian undergoes the necessary appointment process.  If the designation needs to extend past that 30 day period, the standby guardian will need to file a petition for a longer guardianship. Other states have similar statutes in place to provide for similar emergency care.

As discussed in the prior section, you can (and should) designate a permanent guardian for your minor children in the event of your death in your Last Will and Testament. The process of appointing a guardian for a child after the death of a parent who left no Will or guardian designation can be costly, time-consuming, and, in certain situations, could result in your child temporarily entering foster care until the matter is sorted out. This messy process can be avoided through planning.

#4 Get Organized

Obtaining the above-referenced documents is only step one. Ask yourself the following questions:

  1. In the event of my death or incapacity, will anyone be able to find my estate planning documents?
  2. In the event of my death or incapacity, will anyone be able to easily determine what assets I own?
  3. In the event of my death or incapacity, will anyone know how to contact my financial planner / my doctor / my lawyer?
  4. In the event of my death or incapacity, will anyone be able to access those of the digital assets that I want to make available?
  5. In the event of my death, do I have beneficiaries named on my assets to designate my chosen recipients?

If the answer to any of these questions is “No,” then you need to get organized.

Your fiduciaries (e.g., your agents, trustees, or executors) need to know where your estate planning documents are kept and be able to access those documents in the event of an emergency. For example, an organized, fire-proof safe in your home is often a safe place to store these documents. It is not uncommon that an individual will take the time to execute a solid estate plan, and then misplace the estate planning documents or store them somewhere inaccessible. Your documents are only useful if your fiduciaries can find them.

If you are a parent, you probably have an emergency list that you leave for babysitters.  The process of planning for a more serious emergency is similar.  It can be extremely beneficial to have a list (or lists), kept in a secure location, that sets forth information that can be difficult to locate, such as:

    • Your assets and how they are held (e.g., jointly, individually, in trust), including the names of any designated beneficiaries. For retirement plans and life insurance, including the contact information for the plan manager.
    • The names and contact information for your medical professionals, your financial planner, and your lawyer.
    • The usernames and passwords for any digital assets that you want your fiduciaries to be able to access. (Please note: Some websites and digital assets have restrictions on who may access an account.)

Keep these lists secure and, ideally, close to your estate planning documents.

Finally, take steps to designate beneficiaries on your assets. You can place a beneficiary designation on nearly every intangible asset. This includes bank accounts, IRAs, 401(k)s, business interests, life insurance, annuities, and even real property.

Your Emergency Kit

Your level of preparedness is entirely up to you. While you are ensuring that you are prepared in terms of food and supplies for these recent, unusual circumstances, remember to take some time to consider whether you have fulfilled the legal aspect of your emergency preparedness plan.

 

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Posted in: Estate Planning