The COVID-19 pandemic has shined a light on our mortality, and those of us with dependents obviously worry what would happen to our loved ones if we were to be taken prematurely by the coronavirus.
As a result, there's been a growing interesting in estate planning to secure the futures of our loved ones should we pass.
COVID-19 brings opportunities and challenges when planning your estate, but you can do it successfully by following these tips:
1. Form a team
The first step towards estate planning should be assembling a team. This is very important because working with a team is very helpful in structuring and managing your plan. Your team members should consist of a trusted financial advisor (such as us), an estate planning lawyer and a tax professional. Your most trusted loved ones should also be part of the team.
This will help you in mapping out a fully fledged plan that is unique to your needs. The main goal is to make sure that your assets are distributed to the selected people or organizations without any confusion.
2. Frame down your wishes
Your estate plan should be able to signify what you want to have happen to your property and possessions after your death. You should include the following in your estate plan:
- Your living will
- Power of attorney (health care and financial)
- Last will and testament
3. Name a guardian
If you have young dependents, you should choose someone who would step in as their guardian if there is no surviving spouse.
Choosing a guardian ahead of time is a smart move, so that you can get their consent in advance. This is obviously better than surprising them with your decision should you become incapacitated or pass on.
However, make sure the guardian doesn't take control of the money you have left for your dependents.
4. Trusts are always a good idea
You can think of trusts as a special trunk that is designed to keep the money for your heirs. You have the proper control over the trust, from depositing the assets to deciding who gets what and how it will be distributed among the people you want.
5. Think about state, federal estate taxes
Generally, if your estate is laid open to federal or state estate taxes, they are to be paid in cash within nine months of death.
If your estate does not have enough cash, your loved ones may need to sell off the assets they inherit from you, such as your home, vehicle or collections.
Therefore, take advice from your tax professional, financial advisor and attorney regarding the estate tax planning strategies.
6. Avoid probate
Probate is the legal process of getting the verification of your will done through courts. This is a slow, lengthy and costly procedure. Also, it isn't a private matter.
One of the best ways to avoid probate is to have a living trust, which is a legal document that states who you want to manage and distribute your assets if you're unable to do so, and who receives them when you pass away.
There are other ways to avoid probate. Call us and we can discuss them with you.
7. Banking and finances
Most financial institutions will allow you to choose someone as the "Transfer on Death" (or "Pay on Death") beneficiary of your accounts. When you die, the person you chose will automatically receive the account without needing to administer your estate with a court.
8. Your online accounts
After your death, someone should be able to access your digital assets, such as social media handles, e-mail accounts and so on.
Therefore, make this clear in your financial power of attorney and provide user names and passwords for whomever would access them.
9. Don't forget your pets
Make sure you don't leave your pets out of your estate plan. Think about who will take care of them in the event of your death.
Select a suitable person and provide them with all the necessary details about your pets' health.
10. Plan for your funeral, burial/cremation
Finally, plan your funeral and burial or cremation arrangements. Write down your special wishes (at some other place than a will) and make sure someone can access your notes.
That's about it. This will be enough preparation to deal with your affairs should you pass on as a result of the pandemic. So, create your plan now and get it reviewed by a professional who can tell you about necessary changes if there are any errors. Give us a call if you have any questions.