The coronavirus COVID-19 crisis serves as a tragic reminder of the importance of estate planning and the urgency of having a plan for unexpected events. Estate plans are important for many financial, practical and personal reasons.
The coronavirus pandemic kept many of us busy trying to make ends meet and staying safe. So, for some, it may not seem like working on a will, creating a trust, establishing a power of attorney, preparing a health care directive, or updating these already existing documents should take a high priority.
In reality, the uncertainty of the coronavirus pandemic, along with the speed in which it can spread, gave estate planning a greater importance than ever before.
As a result, the idea that “you can get to your estate plan later” is no longer applicable.
Now that you understand the urgency of creating an estate plan, let's discuss what advantages and benefits that could be lost if you or someone you love passes away without an estate plan.
Most people have special wishes and requests about what should happen if they become incapacitated or die. Or they desire to protect certain assets from taxes. Yet many people still have no estate plan.
According to a recent nationwide survey, only about one-third of Americans have an estate plan and the necessary legal documents. One of the most common misconceptions is the idea that you need to be rich to require an estate plan or will. This reasoning is directly correlated to a person's level of income, as shown by the following chart:
|Annual Income||Percentage Who Feel They Don't Have Enough Property to Leave to Anyone|
|More than $80,000||12.0%|
|$40,000 - $80,000||25.5%|
|Less than $40,000||49.6%|
|Prefer not to say||12.9%|
But you don't need significant assets to benefit from an estate plan or will. Besides the perceived lack of assets, other reasons many have for not creating a will include:
- Haven't had the chance to get one.
- It's too costly.
- Don't know how to get one.
Some of these reasons may be valid, but it's likely many of these are just excuses. Often, a significant life event is what's necessary to spark people to get their affairs in order and create an estate plan.
Sometimes it's a positive event, such as a marriage or having a child. Other times, it's a negative event, such as the death, serious illness of a loved one or a worldwide pandemic.
Initially, the coronavirus seemed like something that would only kill the very vulnerable, with most everyone else being just fine. But as the coronavirus spread around the world and the United States, people are realized that it could not only infect anyone, but it could also result in death or serious complications among those who are young and healthy.
Should this happen to you or someone close to you, will you have the proper documentation in place to ensure wishes and assets are protected? The coronavirus should be a reminder of how important having an estate plan is, even for those who don't consider themselves wealthy or don't believe they have enough assets to justify an estate plan.
Probate refers to the legal process where a court will determine how a person's assets should be distributed after they pass away. Avoiding probate can provide three major advantages:
- Protecting privacy
- Lower cost
The probate process is open to the general public. This means assets, debts and any messy family court battles will be open for all the world to see. Another potential problem with the lack of privacy is that it's easier for “long lost” family members to challenge the will or demand a portion of the estate of the person who has just died.
Probate takes time. Even without a will contest and everything moving smoothly, it will take time before assets make it to the rightful heirs and beneficiaries. And if there is a legal dispute over the validity of a will or asset, there can be a lengthy delay, adding months or even years to the probate process.
It takes money to send an estate through probate. Court costs and legal fees in even a “routine” probate process can potentially take tens of thousands of dollars away from a modest estate.
There are special legal strategies for avoiding inheritance and estate taxes when assets pass from one person to another following a death. For instance, there are trusts that can help avoid letting the state or federal government impose annoying or crippling tax bills.
Not all of us are lucky enough to have family relationships that are perfectly drama free, where everyone gets along. And one of the quickest ways to start a family fight is to involve money or a priceless piece of property that two or more family members feel entitled to.
There are often legal rules to decide who will get what, but it can result in expensive and drawn-out legal battles. Even if time or money wasn't an issue, there's the uncertainty of how a court will decide to resolve a disagreement. With an estate plan document, such as a will, many of these disagreements can be avoided.
Whether you believe in something that comes after death or not, we all want to be able to make decisions about our lives, especially close to death. It can be what kind of medical treatment we receive or what happens to our body when we pass. Either way, we have preferences and would like them honored.
But we can't have our preferences honored unless we let others know what those preferences are. An estate plan allows this to be possible in a way that leaves little doubt as to what our wishes are when we are no longer able to express them.
Even if you swear you don't care what happens to you when you die or you won't have any property worth distributing after your death, you still want an estate plan. That's because estate plans aren't always for situations where a person dies. They can apply when someone is unable to make certain legal decisions.
This could occur when someone becomes incapacitated from an accident or illness. Or maybe they're working overseas and aren't home to take care of things. An estate plan allows someone else to handle our affairs when we can't.
This can be as simple as allowing someone else to be able to talk to our utility company to pay an electric bill over the phone if we're on a ventilator in a hospital due to the coronavirus. Or as complex as your sibling using a power of attorney to sell your house on your behalf while you're on a multi-year trip sailing around the world.
There are thousands of reasons why you might want someone you trust to handle your legal affairs when you can't. But an estate plan is critical for the situations that neither you nor your attorney can anticipate.
Think back to February 2020 and how the coronavirus was affecting you. It's possible that some of you hadn't even heard of it. How quickly things can change.