Three (3) Critical Actional Estate Planning Steps to take in light of the Coronavirus (COVID 19)
Critical Step One:
Review Your Existing Documents and Make the Necessary Modifications
Understand who you have chosen to take charge of your health care decisions and who you have entrusted to handle your financial affairs when you are no longer able to do so. Evaluating these key people may offer a unique opportunity to take a second bite of the apple. Are the appointed parties genuinely competent to handle these significant responsibilities? These decisions are crucial if you are at a vulnerable stage in your life. Please share your choices with your trusted advisors and your family (see Step Two below).
The 6 Essential Documents you will need are:
Healthcare advanced directives:
1) HIPAA release - authorizing medical professionals to speak openly to your chosen decision-makers
2) Health Care Surrogate Designation - If you are unable to give informed consent to health care decisions, who do you trust to make these difficult decisions
3) Living Will Declaration - If it is your time to pass peacefully, who will carry out your last wish regarding not prolonging the dying process.
1) Durable Power of Attorney - Authorizes your fiduciary (trusted party) to make all kinds of tough financial decisions, including paying your bills and transacting most financial business (be aware of the Florida “Special Powers”)
2) Revocable Trust - Allows your fiduciary to manage your assets during your life and after your death as well as outline your specific instructions on who you want to receive your assets, how and when
3) Last Will and Testament – This document simply appoints the Personal Representative who takes care of what had not been added into your Trust. This person will deal with your final wishes regarding tangible personal property, taxes, last expenses, and other administrative actions to wrap up your estate.
We are currently using phone conferences, Zoom, and other video communication to confirm that your plan is up to date and meets your current financial and personal circumstances.
Critical Step Two:
Share your thoughts and wisdom with your loved ones and your advisors
Establish or revamp your financial and estate planning team. Introduce your family to your advisors and re-introduce your advisors to one another. Making these critical connections allows you an opportunity to tighten up your team and truly have confidence that everyone will work well together.
While many of us have extra time, this is an ideal time to have a family meeting to share your thoughts and wisdom with your family. At a minimum, make sure they have an instruction sheet as to whom to contact in the case of a health care crisis. Many of our clients at the later stage of life prepare a road map for their children to explain what they should do after they become incapacitated or die.
Why not start that road map now?
It is very therapeutic and helpful to keep everything organized. Remember, your estate plan is a living and breathing document that should be updated annually.
While most clients are apprehensive about getting their advisors together in one room or (in today’s world) on a Zoom (or equivalent) conference call, this group discussion will be invaluable. Excellent ideas, as well as time and money-saving advice, always seem to come from these conversations. At some point in your life, you may wish to include family members in these group meetings.
Critical Step Three:
Stay Prepared and Stay Informed
Your estate and financial plan must be flexible! If we have learned one thing from this pandemic, we have learned that what we think is perfect under the current scenario can change in a moment’s notice. We advise avoiding plans that have large upfront cash gifts that can distort your estate plan if your financial situation changes dramatically. For example, large cash gifts upfront in your Will or Trust with the rest and remainder passing to your spouse can leave your spouse with very little if there is a substantial drop in the value of your estate.
Finally, there have been very significant changes to the tax and related Federal and State rules over the past three years, starting with The Tax Cuts and Jobs Act of 2017 followed by considerable changes to IRA distribution options under the recently passed SECURE Act. Culminating with the recently passed CARES Act designed to provide emergency relief from the financial devastation from COVID-19. The following is a brief list of the highlights of the CARES Act that impact your financial and estate plan:
* Tax Relief: Payments tied to your income threshold. With a maximum of $1,200 per taxpayer (who is not a dependent). Plus, additional money for dependents under 17. We will leave the math calculation to your CPA (high-income earners will not be receiving this benefit). In general, there is a phase-out after a certain threshold (complete phase out at $99,000 for an individual and $198,000 for a married couple filing jointly).
* No Required Distribution for 2020 from Qualified Retirement Accounts (including your IRA): This is an incredible opportunity to let your account rebound and continue to grow tax-free until 2021. This change offers a unique opportunity to make a Roth Conversion. If you have already taken your 2020 distribution, you have an opportunity to put the money back into your retirement account.
* Loan and Distribution Relief from Retirement Accounts: In general, you may be able to make loans and distributions without penalty with a much more extended period to put the money back into the plan if you so choose to do so in the future. Despite the availability, loan relief from your retirement accounts should be a last resort.
* Charitable Giving Relief: There are two noteworthy items
1) For non-itemizers (Taxpayers that use the IRS Standard Deductions instead of listing their specific deductible expenses) there is a $300 above the line deduction to encourage small contributions.
2) there is no limitation on cash charitable contributions (you can eliminate your income tax if you are in a position to donate 100 percent of your adjusted gross income (the 2017 Tax Act increased this limitation from 50% of AGI to 60% of AGA)).
Moreover, there are numerous benefits and relief for businesses spelled out in the CARES Act. Next, we will discuss "Silver Lining Action Steps" to take during a depressed market environment. As always, before making any major financial or legal action, please discuss these decisions with your trusted advisors.