Client Alert – Now is the Time to Prepare or Modify an Estate PlanJun 17, 2020
- FisherBroyles News
There is no better time for clients to review their existing estate plans or to create an estate plan than by working with one of the attorneys in FisherBroyles’ Private Client Services practice. Most recently, the COVID-19 pandemic impact on both personal and business assets have caused many people to take stock of their estate by preparing or modifying an estate plan at this crucial time.
Regardless of an estate’s size, everyone should have the following three documents: (1) a Will—a document in which a person makes a disposition of his or her real and personal property; (2) a financial power of attorney; and (3) a living will/designation of health care agent. Additionally, in many instances, the creation of a Trust—a private legal arrangement created by a grantor for the benefit of designated beneficiaries to transfer real and personal property—may also be advisable depending on the goals of the client.
A Will allows someone to clearly dictate to whom (individuals and/or charities) his or her assets will pass at death. A Will designates an executor or a personal representative to handle the administration of such Will. One may also designate guardians for minor children in a Will. Assets administered in a Will are considered probate assets, because they fall under the jurisdiction of a probate court. As it relates to non-probate assets, one often overlooked issue is the impact of certain non-probate assets such as retirement accounts (IRAs, 401Ks, annuities, etc.) and life insurance. These types of assets usually do not pass as directed in someone’s Will but, rather, as dictated in the executed beneficiary designation form that the account holder submitted to the institution that manages the retirement account or life insurance company. Many clients fill out beneficiary designations when they first acquire a retirement account or life insurance policy, but often these beneficiary designations are not updated when circumstances change. For example, often times a client wants to make sure that if she or he passes away that her or his assets will be held in trust until a child reaches a certain age, and while the client specifies as much in her or his Will, they forget to make a corresponding change to the retirement account and life insurance beneficiary designations. If the child is listed as a personal beneficiary instead of the trust and the client dies, the client’s retirement account and life insurance will pass directly to the child and will not be protected by the trust that was written into the client’s Will. In this situation, the creation of a trust under a Will would protect minor and/or spendthrift beneficiaries from squandering a sizeable inheritance, which is distributed at once.
Another type of non-probate asset is a jointly titled account, such as a home or bank account. Many clients are under the misconception that adding a child’s name to the deed to the house and/or to a bank account is done only for convenience and for no other legal reason. To the contrary, in many states, if a parent adds one child’s name to an account or to a deed and the parent passes away, the child whose name was previously added to the deed/account will own 100% of the house/account, to the exclusion of all other children/beneficiaries, and that child who receives the house/account is under no legal obligation to give to her or his siblings any portion of the house or account proceeds.
An issue related to the preparation of a Will is the use of a revocable trust (also referred to as a ‘living trust’) as the preferred method of distributing a client’s assets at death. Many clients opt to have a revocable trust primarily because the proper implementation of a revocable trust allows the client’s family to administer the client’s estate at death much more quickly and with little or no court intervention, as opposed to using just a Will. Additionally, a properly funded revocable trust may allow a client’s family to avoid a court-supervised guardianship proceeding if the client were to become incapacitated during lifetime.
A financial power of attorney allows a client to name an “attorney in fact” to make financial decisions for the client during his or her lifetime upon delivery of the financial power of attorney to the designated attorney in fact. A client should name a first-choice attorney in fact as well as an alternate or successor attorney in fact. While not always the case, a financial power of attorney is ‘durable’ in that it will remain valid if the client subsequently becomes incapacitated. Another issue to consider in creating a financial power of attorney is whether the authority granted to the attorney in fact is ‘immediate’ or requires a ‘trigger’ such as future incapacity as determined by two physicians. An added benefit of a properly drafted financial power of attorney is the possibility of avoiding a guardianship proceeding if the client subsequently becomes incapacitated (similar to one of the benefits mentioned above with respect to the proper implementation of a revocable trust).
A living will/designation of health care agent allows a client to make a specific, clear statement now, while competent, about which types of treatments she or he wants if, for example, the client eventually is in a terminal condition with no expectation of recovery. The client should decide, among other things, whether she or he wants ‘heroic’ life sustaining measures performed if she or he is in such a condition; whether she or he wants artificial nutrition and/or hydration; and if she or he wishes to receive medication to alleviate pain and suffering. This document also allows a client to name a ‘health care agent’ to make health care/medical decisions for the client if she or her is unable to make those decisions for her/himself. Again, as with the financial power of attorney, the client should name not only a first choice health care agent but an alternate/successor health care agent to make health care decisions for the client if the client’s first choice health care agent is unavailable (e.g., deceased). An added benefit of a properly drafted living will/designation of health care agent is the possibility of avoiding a conservatorship proceeding if the client subsequently becomes incapacitated.
Finally, the execution of estate planning documents has become a challenge in recent times, especially during the continuing pandemic. Many states have issued executive orders allowing for ‘remote notarization’ of estate planning documents. That means, for example, that in some states, a Will may be executed remotely, so that the client, notary and witnesses are ‘meeting’ via an online medium (e.g., Zoom). Alternatively, for clients willing to do so, some notaries will travel to a client’s home and will notarize documents at the client’s home so long as all the parties comply with certain advisable protocols to reduce the risk of compromising the health of the individuals in attendance.
To discuss modifying or creating an estate plan or for additional information, please contact any of the following FisherBroyles partners:
Gal N. Kaufman, Partner [email protected] or
Joseph M. Saponaro, Partner [email protected].
About FisherBroyles, LLP
Founded in 2002, FisherBroyles, LLP is the first and world’s largest distributed law firm partnership. The Next Generation Law Firm® has grown to hundreds of partners practicing in 23 markets globally. The FisherBroyles’ efficient and cost-effective Law Firm 2.0® model leverages talent and technology instead of unnecessary overhead that does not add value to our clients, all without sacrificing BigLaw quality. Visit our website at www.fisherbroyles.com to learn more about our firm’s unique approach and how we can best meet your legal needs.
These materials have been prepared for informational purposes only, are not legal advice, and under rules applicable to the professional conduct of attorneys in various jurisdictions may be considered advertising materials. This information is not intended to create an attorney-client or similar relationship. Whether you need legal services and which lawyer you select are important decisions that should not be based on these materials alone.
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