By Matthew Gaude & Shawn McGuire
Having clear directions and legal documents in place for when you pass is one of the most loving acts you can do for your family and loved ones. We get it, this is a topic most of us do not want to think about or take the time to set up, but if current events have shown us anything, it is that life has many uncertainties. Your wishes for who will receive your assets, your preferences on how you want medical situations carried out, who should have authority to implement those wishes—all this information should not be uncertainties at this time.
Get Your Documents In Order
Make sure your estate plan is up to date and reflects your current wishes. This would seem obvious, but is often neglected. Use these difficult times to draw attention to this need and get your documents in order. Ideally, you should have a designated place for filing all these original and signed documents physically and digitally. Physically, put your documents in a clearly labeled filing system and ensure your family knows where to find it. Digitally, scan and label these same documents into a folder you can share with your trusted advisors and/or family members to guarantee ease of access. Make sure passwords and logins are accessible by the right people.
Documents You Need
Essentially, everything you need is covered under an estate plan, which is simply a comprehensive list of documents that spell out what you want and give authority to those who need it. The following is a list of documents that will include the information needed for a smooth implementation of your requests.
- Everyone needs a durable power of attorney
An ordinary power of attorney allows a designated agent to make decisions on behalf of an individual. What you may not be aware of is that certain types of powers of attorney can be suspended if they become mentally incapacitated (powers of attorney sprint into effect upon disability.)
For a power of attorney to stay in affect if you become mentally incapacitated (such as being put in an induced coma to go on a ventilator while suffering from COVID-19), you will need a durable power of attorney. We typically recommend durable powers of attorney if you have someone in your life that you can trust, as a document is more flexible and will be available when you need it most.
A durable power of attorney is among the most powerful documents that can be created, as it will not only allow the name agent to do everything from paying the individual’s water bill to making gifts and filing and paying taxes. Different agents can be named for various roles and should be highly trusted individuals, though that does not have to be a family member. Whoever is named should be aware of the appointment and willing to take on the role. And there should be a long conversation between you and the agent about what should happen if the power of attorney is exercised.
- Consider a Revocable Trust
When most people think of an estate plan, they think of a last will and testament as a centerpiece. In reality, the linchpin in most people’s estate plans is actually a revocable living trust. Why? Primarily, if a trust exists, many of the assets will have been contributed to the trust and therefore the estate avoids going through probate. In addition, a living trust avoids probate, which is helpful if you own real estate in several states. Finally, a living trust is nice as it provides a seamless transition for your family, particularly if you are single or widowed.
Probate can be both expensive and time consuming. When an estate goes through probate, it risks getting tied up in the courts and distributions from the estate can take months, if not longer to actually transfer.
The trust works as a separate entity that holds all of an individual’s assets while the individual is alive. However, at death (or if mentally incapacitated), a named successor trustee steps into your shoes. This can be helpful in case of the unexpected. The trustee can be a child, friend or a professionally fiduciary.
- Have An Advanced Health Care Directive
An advanced healthcare directive describes, in very specific detail, what type of life-saving intervention the individual would like and in what situations it is to be used. These documents are usually concerned with treatment in a situation where there is no expectation of the patient’s recovery (severe brain damage, permanent unconsciousness, etc).
Sometimes an individual will opt for a healthcare power of attorney in addition to an advanced healthcare directive which means that these decisions will be made by an individual rather than solely in accordance with a written document. If you opt for this, you should select a single individual. This will allow doctors to communicate and take direction from one person. Sometimes, an attorney will draft both documents together,
and they are subject to state law so make sure you are familiar with your state laws and that you update these documents if you move to another state.
Any healthcare directive should also include a HIPPA authorization. HIPPA (Health Insurance Portability and Accountability act) is the law that protects your medical privacy. However, in the event of an emergency, you will want to authorize an individual to receive your medical information so they can stay apprised of the situation.
This issue arises often with college age kids. College students are almost all over the age of 18 which means that their medical information is protected by HIPPA. While this rule may protect privacy, it can also block parents from being able to help their children living hundreds of miles away when a medical emergency arises. Under this rule, if a student ends up in the hospital, their parents have no right to be informed of the condition of the student or even talk to the doctor.
To prevent this from happening, you should complete three documents as soon as his or her 18th birthday rolls around: a HIPPA authorization, medical power of attorney, and durable power of attorney. When your child enrolls in college, make sure you fill out these documents for the state in which they are attending school so any doctors or administrators who come in contact with the document will be familiar with it. Don’t forget to check if the college or university has its own form and fill that out too.
Even if your child has been sent home during the pandemic, if they get hospitalized, you may want to remind them that they are not invincible. You’ll be in the same boat as if they were on the other side of the country, and therefore these documents are now needed for everyone. Especially with overwhelmed and overcrowded healthcare systems, there will be few if any spare people to deal with an issue like this on a moment’s notice if it arises.
You can access the authorization form for any state here.
- Amid all of this chaos, do not forget to include and fund healthcare accounts
You may need access to cash flow to help pay for medical treatment and that money would likely come in two forms: health insurance and a health savings account.
Compile a list of health insurance policies and make it accessible to any individual who will need it in case you become incapacitated. Similarly, if you have a health savings account, make sure your family is familiar with it and can access it if they must.
If you have older parents, encourage them to review their Medicare and health insurance policies. If you have children over the age of majority but still on your healthcare plan, they should make sure their paperwork is in order. By reviewing these documents now, you will address any issues with healthcare coverage while things are still fine. Dealing with an insurance issue after someone is in the hospital is challenging and stressful during an already stressful time.
- Update your beneficiaries and include contingent beneficiaries
We bring this up to address any contradictions between documents. In the review of your documents, you should also review the beneficiaries of trust, 401(k) plans, IRAs, Roth accounts, pensions and life insurance. If there are any disagreements between these documents and the will or revocable trust, you may need to update the beneficiaries.
It is important to note that beneficiaries, as names on the documents and policies, will supersede any beneficiaries of these assets as outlined in a will or revocable trust. There may also be a good chance that no beneficiary has been named for some of these plans. A beneficiary should be named promptly if this issue was discovered and best practices require a contingent beneficiary, as well. This can come in handy as a beneficiary (say a wife) wants to disclaim the asset in favor of the children, particularly where it could save taxes under the SECURE act.
- Documents related to businesses
If this applies to you, it would include any business entity: partnership agreements, shareholder agreements, operating agreements, and buy/sell agreements. (1)
Documenting who is responsible for certain decisions and who you want receiving different funds just takes a little intentionality, and your loved ones will thank you.
What Still Needs To Be Done?
Once these documents are collected, create a grab and go package. This is an envelope that lives near the primary exit of your home and includes all of your estate planning documents as well as medication and allergy information, personal information, emergency contact, and your primary physician’s information.
Make sure you understand not only where your assets are going, but also to whom responsibilities are being delegated. If any of the above documents are missing, let’s make a plan to get them drafted and executed in a timely fashion.
We cannot stress enough that if you get sick and are hospitalized due to COVID-19, you will be immediately isolated during your treatment from any family making all of this planning even more important.
This is a lot of information to get in order. If you already have many of these documents in place, you’re off to a great start. If you’re feeling overwhelmed with everything you have not yet made official, start with one piece at a time and reach out to professionals and family as needed.
We at Live Oak Wealth Management are here to assist you with making sure you are financially ready for whatever unexpected circumstances come your way. Reach out to us by calling our office at 770-552-5968 or emailing firstname.lastname@example.org. Or, if you prefer, you can simply click here to schedule an appointment online.
Matthew Gaude is an *investment advisor representative and the co-founder of Live Oak Wealth Management, a financial services firm in Roswell, Georgia. He serves the planning and investment needs of corporate employees, those approaching or in retirement, and 401(k) plan sponsors. Working first as a commodity broker and then as a Business Development Manager for a national broker-dealer in previous jobs, he has the insight and experience to help clients understand the complexities of the market and implement strategies to minimize risk. To learn more about Matthew, connect with him on LinkedIn or visit www.liveoakwm.com.
Shawn McGuire is a financial advisor and the co-founder of Live Oak Wealth Management, a financial services firm in Roswell, Georgia. He serves the planning and investment needs of corporate employees, those approaching or in retirement, and 401(k) plan sponsors. He has worked in financial services since 2002 in positions ranging from financial advisor to stock broker and portfolio manager. As a CERTIFIED FINANCIAL PLANNER™ professional, he is trained to help clients with virtually all their financial needs. To learn more about Shawn, connect with him on LinkedIn or visit www.liveoakwm.com.
Securities offered through American Portfolios Financial Services, Inc., member FINRA/SIPC. Investment advisory services offered through *American Portfolio Advisors, Inc., a SEC Registered Investment Advisor. Live Oak Wealth Management, LLC is independently owned and not affiliated with APFS or APA.
Any opinions expressed in this forum are not the opinion or view of American Portfolios Financial Services, Inc. (APFS) or American Portfolios Advisors, Inc. (APA) and have not been reviewed by the firm for completeness or accuracy. These opinions are subject to change at any time without notice. Any comments or postings are provided for informational purposes only and do not constitute an offer or a recommendation to buy or sell securities or other financial instruments. Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk, and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors. Seek tax advice from a tax professional.