Not too long ago, in what seems like a galaxy far, far away, life was normal before this pandemic. There are still plenty of questions on when the coronavirus really began, but it didn’t dominate our lives until sometime in March 2020, and no doubt the invisible enemy was already with us at that point. Remember winning the Super Bowl, Chiefs fans? Remember packed stadiums as LSU had its perfect march to the National Championship of college football? All that seems so long ago.
We continue to learn from the coronavirus. Sadly, we’ve learned that forecasting models created by medical experts can be significantly wrong with their predictions, but they can be very effective at getting our attention. We’ve learned that shutting down a robust economy can have a huge impact on our stock market as we now hope to safely restart that economic engine. We’ve added words like “social distancing” and “PPE” to our vocabulary. We’ve learned that people wearing masks are really heroes and not villains like in old western movies. We’ve also learned some cold, hard realities with estate planning that will ring true for the future, and that’s what we want to focus on today.
3 Key Lessons Regarding Planning
As I reflect on the last few months, there are three important areas, with regards to planning, that I’d like to highlight:
- Powers of Attorney are crucially important.
- Death planning is a reality we can’t ignore.
- Aligning assets with estate planning is often overlooked.
1. Every adult needs their Powers of Attorney completed
The Power of Attorney document is one of the simplest documents used in the estate planning business, but when you need it, it’s quite impactful. A Power of Attorney defines WHO you want to make financial or health care decisions when you can’t make those decisions for yourself. Typically, the General Durable Power of Attorney is used to identify your Agent for financial decisions, and the separate Health Care Power of Attorney is used to identify an Agent for health care decisions.
For all the individuals who feel comfortable thinking, “it will never happen to me,” the coronavirus has been a grim reminder that yes it can happen to you. It is certainly true that the risk of something happening increases as you get older, and that’s true with coronavirus as well.
But the Health Care Power of Attorney can also be incredibly important to the parent of a college student whose child is in a far away emergency room, and the parents are unable to get medical information about their adult child. The simple Health Care Power of Attorney, and related HIPAA Authorization document, could make a significant difference in that family’s lives at a critical, unexpected moment. The coronavirus has been a good reminder that being prepared for the unexpected is always important.
2. Death planning is an unfortunate reality for all of us
Estate planning should always include planning for disability or mental incapacity during your lifetime, and it also includes planning for your eventual death.
Sorry, we can’t avoid this reality. One thing is for sure, Mother Nature always wins, so sooner or later we’ll all reach the end of our lifetime. As a positive person, I try not to dwell on this reality, and I try not to over-hype the fact that we are all going to die, but the coronavirus has teed up this reality right in the middle of our TV screens for the last few weeks. As a result, I think now is as good a time as ever to consider some of these unpleasant things we are so good at putting off thinking about.
We have a duty to our loved ones to plan for our eventual death. We have a duty to not leave a mess for them to clean up if we have an untimely death, and the coronavirus has provided us an uncomfortable reminder that we are all vulnerable in our lives to the unexpected. There are many ways for all of us to do death planning — from a simple combination of beneficiary designations on our accounts, to a more robust trust-based planning arrangement — and we are happy to discuss the pros and cons of these options with you.
One thing is for sure though, a lack of death planning is also a choice and an unfortunate way of planning for those left behind. A lack of planning is a disastrous mess for your family and loved ones to clean up once you are no longer around. There are no mulligans once you are deceased. We can’t text you to find out your wishes.
Unfortunately, no planning means your death plan will be left to the mercies of the probate courts and the applicable laws of your state of residence. We’ve done plenty of probate cases, and we’ve seen plenty of fortunes dwindle away with probate fees and attorney fees due to poor planning. One thing I can assure you is that the state’s death plans are not what you would want to see happen when you reach the end of this lifetime. Studies show that 60-70% of people have no estate planning in place, and the percentage is higher for those with outdated plans. Hopefully, the coronavirus can help us understand that proper death planning is a necessary reality.
3. Aligning financial assets with estate planning is vital
Closely following the previous two areas of importance is making sure whatever assets you own are properly aligned with your estate plans. If you have a nice estate plan created, but you have never aligned your financial assets with that estate plan, then there will be an expensive gap that creates problems upon your death or disability.
As a simple example, for the client with a trust-based estate plan that never takes the time to align their home ownership, and corresponding home equity, with their trust, this simple mistake will lead to problems upon their death or disability. In this simple example, the home will not be part of their estate plan as it was never properly funded, or connected, to the estate plan.
One of the biggest challenges can be the business owner who forgets to align their business (i.e. corporation shares, LLC Membership, etc.) with their personal estate plan.
It is critical for all advisors to work together with you to align your assets with your estate plan, and it is just as critical to keep this updated throughout your lifetime. This really isn’t complicated, but it does take a client to assume responsibility for making sure this happens. We can help, but we can’t do all of this for a client. Instead, it is a joint effort with the client. We will be glad to provide tools to make this happen, and we are always interested in having this discussion with clients on a periodic basis to recalibrate around any changes in assets that may occur.
We cannot emphasize enough the importance of taking the time to align your financial assets with your estate plan. This simple step will lead to the most effective plans.
Large-scale, unexpected events, like the coronavirus, are good reminders to us ALL that we need to plan for the unexpected.
We will always keep it positive in our business with our planning, but we also cannot bury our head in the sand and think these cold realities will just skip us. Personally, I hope the reality of incapacity and death alludes your family for many, many years to come. One thing I know for sure, though, is that you will have a much higher peace of mind when you know that your estate plan does provide for your incapacity; it does provide for what you want to happen upon your death; and your assets are properly aligned with your plan. So, when we say we are providing you peace of mind as we help pass your legacy to the next generation, this is what we are striving to create with our clients.
We look forward to a chance to continue helping you get peace of mind during this year and into the future. If we can be of help in any way, feel free to call us at (913) 345-2323.