I want to kick off our 1st episode of Death & Taxes with a discussion about how to plan through this current crisis we’re going through.
Before February or March 2020, when I had clients come in to do crisis planning, they were usually reacting to some sort of diagnosis, a sudden turn of health, or disability that needed to be planned around.
However, with this COVID-19 crisis, I’m getting a lot of questions from people I know asking me what I think they need to do to make sure they “have something in place” in case they get sick.
The punch line is that the most important estate planning documents have become all that more important because of this COVID-19 crisis.
Which documents are those?
Power of Attorney documents. There are two kinds of power of attorney documents one for healthcare and one for financial decisions.
The one that gets more attention during the pandemic is the health care power attorney, where yo Neame trusted loved ones to make health care decisions for you if you can’t make decisions for yourself.
Discussions about the health care power of attorney often come with questions about similar documents, such as living wills and the five wishes document.
These can all combine to make a robust declaration of what you want to happen if you can’t make healthcare decisions for yourself. One of the decisions to make on within these documents is related to a very prominent news item related to the treatment of COVID-19, at least in my world, which is the use of ventilators.
Your health care power attorney document needs to clearly say what your choices are when it comes to wanting a ventilator if you are not able to recover and live an enjoyable life after fighting something like COVID-19.
In my office I combine five wishes, a living will, and the health care power of attorney into one health care power of attorney document. The only thing that my health care power attorney document does is not incorporate one’s funeral and burial wishes. The reason I like to combine this into one document is very simple.
If you’re in the emergency room after being struck with COVID-19, you’re going to want your loved ones to have one document to bring to the doctor or to reference for themselves so that they can get the right choices made for you when your life is on the line.
The five wishes document does a very good job of detailing funeral and burial wishes so you can still have those things, but I just don’t want the two different documents to contradict each other.
Once you start having more than one document discussing the same or similar things, you can easily end up with either difference of opinion, or differences in articulations of the same opinion and either one can lead to some really tragic consequences in pressure situations.
Another part of planning through this pandemic is the financial power of attorney
which, although it’s not as an emotional kick in the rear end as the thought of end-of-life decision-making in the middle of a healthcare crisis, should not be underestimated. The financial power of attorney document allows you to name loved ones to make any financial decision that you can make for yourself.
Now I have an episode coming down the chute here dedicated specifically to the health care and financial power of attorneys, so I don’t want to fall completely down the rabbit hole here, but what you need to know when it comes to your financial power of attorney is that not all power attorney documents are the same.
Luckily, there is an easy way you can tell if your financial power of attorney has been thought through by the drafting attorney or by the person who put it together and that is by looking at paragraph three of the Illinois statutory durable power of attorney for property document.
Paragraph three of the financial power of attorney is where you can add powers to the list that you’ll see lettered A through O on the Illinois form of what your agent can do for you when you need help.
Adding powers to the standard set of authorizations is important is because courts, financial institutions, and government agencies that made decisions, saying, in effect, “Hey such and such a situation is not covered by the normal, just downloaded off the Internet, no thought put into it, but signed and witnessed power of attorney for a property that you are relying on.”
For example, paragraph three in the financial power of attorney I draft goes on for pages and pages, adding in detailed powers for my clients to have their loved ones be able to use when they are in a situation where they need help either making financial decisions or executing their financial decisions.
Let me give you an example and let’s remove the current emotional cattle-prod that is COVID-19. Let’s say you’re just trying to sell a house, back before this crisis hit, and the day before you’re supposed to go sign all the documents you break your leg.
With a properly thought out financial power of attorney, your trusted loved one could go sign all those documents for you no matter really how your properties are held, or what title company policies or lender policies come out of the woodwork to foul your deal up.
Because with a well thought out power attorney for the property you will have expressly expanded powers beyond the simple “Real estate transactions” authority to have your husband, for example, sign away your entire interest in a property, or for your agent to sign a specific document that the title company or lender is requiring to close.
It’s very important to know that your power of attorney is going to be there for you when you are unable to act for yourself. The best thing you can plan during this pandemic is to put thought into health care decisions and expanded financial powers so that you can actually have your loved ones use your power of attorney in key moments while you’re alive but need help.
Another issue that you want to think about during COVID is you want to name guardians for your kids
if you have young or vulnerable kids, and in Illinois, you do that through your will. An interesting facet of this is you can actually divide the guardianship nomination between the person who’s going to be managing money for that child and the person who would have custody of that child.
For example, let’s say you know your parents are very good with money but you just don’t want your child to grow up with their grandparents. You want your children to have more socialization opportunities around kids their own age than your parent’s neighborhood would allow.
So you say, Mom and Dad, I’m going to nominate you as the financial guardians, guardians of the estate is what that’s called in Illinois, and I’m nominating my sister as the person who will have custody.”
You can see how this will allow you to secure your child’s future a bit if something were to happen to you. One non-legal, but still very important related issue is to put a tie and thought into preserving your legacy with your young child should something happen to you.
I recommend that my clients with young children create letters, audio recordings, or videos for life’s big moments so that a parent who tragically leaves behind young kids can be present at a high school graduation, when that child wants to drop out of school, or when the surviving spouse wants to start dating again.
It can be key for every relationship in those scenarios for a deceased parent to still have a voice in those conversations.
Now in a pre-COVID, and possibly post-COVID, situation
crisis planning has been centered around a long-term disability from a dread diagnosis such as Alzheimer’s, Parkinson’s, MS, or the aftermath of strokes, slips, falls, and car accidents.
Everything I said about powers of attorney is true in these situations as well, but the real protection of your assets, and potentially of your income sources, that can be done in reaction to the more traditional health crises of life is centered around trusts.
A very good estate planning and elder law attorney will have tools in their toolbox to allow them to draft a trust that can protect things from the costs of long-term care for you and your spouse, and protect assets for use by your surviving spouse or your kids.
These trusts can do really incredible things and are like flavors of ice cream – too many varieties to name. The devil is in the details here, but there is just not enough time to discuss all the variations that can apply here.
The same protection can be extended to vulnerable children after you pass away, which can become very important for all sorts of vulnerabilities but especially for children who have health care vulnerabilities, inability to handle money, special needs, who own their own businesses, or who have marriages that you’re not confident in.
We can make sure their inheritance is not blown because of those vulnerabilities.