Q: Since COVID-19 started, I have been concerned that I have no estate planning documents in place. What documents should I have? What factors do I need to consider?
A: If COVID-19 has taught us anything, it is that life can change in an instant. As the country strives to re-open and create a new normal, there are many lessons to be taken away. One of these lessons is the importance of ensuring your estate planning documents are in place when you are young and healthy.
When New York began its quarantine, law offices were shut down, residents were required to stay at home, and the State imposed a complete lockdown on all nursing homes. This has made it extremely difficult for some people to execute estate planning documents necessary to ensure that their affairs are in order.
At a minimum, all adults should have a health care proxy, living will and a power of attorney. A health care proxy will appoint an agent to make your medical decisions if you are unable to communicate with your doctor. A living will sets forth end of life decisions, such as your right to refuse or allow life prolonging measures if you are in a vegetative state with no hope of recovery. New York’s durable power of attorney names an agent to make financial decisions on your behalf if you are incapacitated or otherwise unable to do so. These documents allow your trusted agent, amongst other things, to communicate with your doctor, even on lockdown; have access to your accounts to pay bills; and apply for Medicaid benefits to cover the cost of long-term care.
In addition to the aforementioned documents, you should have a document that directs the distribution of your assets after death. A last will and testament is one type of estate planning tool that can accomplish this goal. If one dies with assets in their sole name, their will must go through the court process known as probate in order to effectuate the will. A similar proceeding –called an Administration—is necessary when there is no will and assets are distributed according to the statutory scheme set out in Estates, Powers and Trusts Law (EPTL) § 4-1.1.
Because courts were also shut down during the pandemic, no new probate or administration matters were accepted, making it difficult for family members to handle their loved one’s estate.
To avoid the court process, assets can be placed in a trust. There are many different types of trusts that serve various purposes, such as tax planning or asset protection, but all assets held in a trust avoid probate. A trust can also set forth guidelines on how your assets are to be handled if you become incapacitated. Alternatively, you can name a joint owner or beneficiary on all of your accounts to avoid the probate process. However, tread carefully when attempting this latter method on your own, given the possibility of triggering unforeseen tax consequences. A trust may be your best option when a seamless transition is needed, such as in business succession, rental income property, or in other situations that require immediate action after one’s death.
It is best to seek professional advice from an estate planning attorney who can review your assets and goals to tailor a plan for you and ensure your needs are met through the proper drafting and execution of your estate planning documents.
- Michal Lipshitz, Esq. and Nancy Burner, Esq.