Estate planning during COVID-19: finding peace of mind in uncertain times

You have probably heard the expression the “new normal” a lot lately.  Society defines “normal” and we try to conform to it. When life does not conform to our definition of “normal,”  we need words to describe what is happening to us. Thus, the “new normal.”

The latest “new normal” is the onset of the novel coronavirus pandemic that is sweeping the globe and forcing people out of their comfort zones, sometimes drastically. Normal routine has been suspended, with authorities urging:

“Stay at home!”

“Stay at least six feet away from other people!”

“Do not congregate in large groups!”

This week my six-year old started to make these judgments: “They really should be social distancing,” he opined, watching a small group of neighbors with their toddlers running around together in a front yard.  When our children start using “social distancing” as a verb, you know something has changed.  

As a social species, our instinct to be with other people is hard to overcome. But coronavirus is ridiculously easy to transmit and very difficult to contain, so drastic measures being urged by government health officials are needed to keep the most vulnerable from getting sick.

Life was already complicated even before this “new normal” descended upon the world, as routine trials and tribulations of daily life seemed quite challenging enough. Now, for every one of us, the specter of serious illness, or worse, for us and our loved ones has made everyday living much more difficult. Few of us will ever adjust to the need for physical isolation from friends and family (and almost every other human, for that matter). Worst of all, perhaps, absolutely no one knows when life can return to something that we are able to recognize as “normal.”

With this uncertainty, it is important now more than ever to make sure your affairs are in order. As an attorney supporting wills and estate planning in the Capitol Hill neighborhood for the past several years, I wanted to share some thoughts on simple ways to get started.

First, make a checklist of what you have. This checklist should include:

1. A list of tangible assets, including real property, vehicles and any valuable personal property, such as heirlooms, that you may wish to pass on to descendants.

2. Insurance policies, including medical, life, and for any property.

3. Other financial records, including, but not limited to bank and securities accounts, retirement accounts and tax records.

4. Medical records, especially if you or anyone in your household is suffering from a continuing or chronic illness.

5. Property settlement, child support and alimony agreements, if applicable.

6. Estate planning documents, including wills, trusts, powers of attorney, and advance medical directives (living wills).

Then look at your checklist, take note of what’s missing, and try to figure out how to fill in the gaps. Out of all of the above items, perhaps the most overlooked are basic estate planning documents. A will? “I’m still young and have no assets,” or “I’m too busy raising a family to think of one.” An advance medical directive? “They’re for the very old or very sick, and I’m young and healthy.”

For a lot of people estate planning is for the rich or elderly. But it is never too early to execute a will, and everyone, healthy or sick, should have an advance medical directive just in case something unforeseen happens.

Just as everything else is more difficult at this point, we now arrive at this question:   How does one draft and execute estate planning documents in the middle of a pandemic that is keeping people at a physical distance? Technology has made it easy to interact without meeting face-to-face, so drafting estate planning documents is easily doable. To date, a few states have adopted laws to allow for electronic signature of wills--but here, as with most places in the U.S, estate planning documents need to be executed, with witnesses, in person.

As I think about how my practice will adapt, I realize that now is the time to be creative. Use multiple pens. Wear protective gear. Hold outdoor will executions standing more than six feet apart. But in these uncertain times, this is something that we can still do to claim some peace of mind. 

If this resonates with you, please be in touch. I am still accepting new clients, and I particularly enjoy working with my neighbors. I understand the constraints we all have on our time -- particularly with children out of school and the need to educate them at home -- and am pleased to offer virtual consultations whenever you may have a free moment. And while the stay-at-home orders are in effect, I will send detailed instructions on how to execute your documents yourself. My initial consultation is free, and my fees are commensurate with the complexity of the matter and ability to pay.

If you are interested in a Will and/or a Living Will (also known as an Advance Medical Directive), trust, power of attorney, or an estate plan, please contact me at pyabut [at] prylaw [dot] com, or visit my website at  http://www.prylaw.com.

This blog is an advertisement for the Law Office of Philip R. Yabut, PLLC, and the information in this post is not to be construed as legal advice, nor does reading it form an attorney-client relationship. Please do not post confidential information in the comments section.

Philip R. Yabut, Esq. || 1411 H Street, NE, Washington, DC 20002 || (202) 670-2429 || pyabut@prylaw.com

Wills vs. Living Trusts

A common and basic estate planning dilemma involves choosing whether to create a living trust or to write a will. These two instruments are similar because they create mechanisms for the distribution of property after death. But they have very different structures and uses, which are important to note when creating an estate plan.

When determining whether to use a trust or a will (or some combination thereof) to distribute assets, you should consider the advantages and disadvantages of each instrument.

WILLS

Advantages:

1. Less expensive on the front end. It typically costs more to set up a trust than to draft and execute a will.

2. Governing law. The law of wills has more protections in place for probated estates than laws governing trusts.

3. Time limit for creditors. The probate court sets a deadline for creditors to make claims on an estate.

4. Maintain title on property. There is no need to transfer title of property to another entity to make a will valid.

Disadvantages:

1. Public record. Upon death, your will is filed in probate court and is available for anyone to view.

2. Expensive probate. Probate can be both slow and costly.

3. Incapacity of testator. A will is only effective upon death, and cannot create mechanisms if the testator were to become mentally or physically incapacitated.

4. Multiple probate proceedings for out-of-state property. If you die with property outside the state where the will is effective, that property must be probated separately in that state.

5. Loss of control over fiduciaries/guardians. While you can nominate your own fiduciaries and guardians in a will, the probate court ultimately has the final say and has the discretion to ignore the testator's wishes if he/she believes it's in the best interest of the estate or children.

LIVING TRUSTS

Advantages: 

1. Avoid probate. Living trusts dispose of property like wills, but without the money and time costs associated with probate.

2. Incapacity of trustee. A living trust can immediately transfer property to someone else in the event of mental or physical incapacity without a court order.

3. Privacy. Unlike a will, a trust instrument is not a public document.

4. Out-of-state property. There is no need to probate out-of-state property held in trust.

5. Control over fiduciaries. Since a court is not involved in trust administration, you have complete control over who you name as trustee.

Disadvantages:

1. Initial cost. Unlike creating and executing a will, drafting documents and setting up the trust can be expensive.

2. Loss of ownership of trust property. You must relinquish formal title to the property placed in trust to a new entity.

3. No cut-off date for creditors. Creditors do not have a time limit for bringing claims against your trust.

4. No guardians for minors. You cannot designate guardians for minors in a trust.

For individuals and couples with large or complex estates, a good option is to utilize some combination of the two.  A will is highly recommended for anyone with minor children wishing to make a recommendation of guardianship as well as for anyone wanting to distribute property upon their death without losing control of it in their lifetimes. Under the right circumstances, supplementing that will with a living trust can provide you the security of knowing that your wishes will be carried out without interference from a court. Regardless of the approach you choose, be sure you contact an attorney before proceeding because much can go wrong if your trust or will is drafted or executed improperly.

This blog is an advertisement for the Law Office of Philip R. Yabut, PLLC, and the information in this post is not to be construed as legal advice, nor does reading it form an attorney-client relationship. Please do not post confidential information in the comments section.

Philip R. Yabut, Esq. || 1100 N. Glebe Road, Suite 1010, Arlington, VA 22201 || (571) 393-1236 || pyabut@prylaw.com

What is a "residuary estate?"

Generally a will contains three types of property to be distributed: direct bequests (gifts) to specific individuals, property to be held in trust for someone else ("testamentary trusts"), and the residuary estate.

A "residuary estate" contains all of the assets leftover after direct bequests and testamentary trusts.  In other words, it is what remains after you have given everything away to those whom you specify in the will.  Furthermore, any specific bequests that lapse before you die (for example, gifts to specific people who die before you do) automatically pass into the residuary estate.

In the probate process, all taxes, administrative fees, and creditors' claims are paid out of the residuary estate before it passes to your named beneficiary or beneficiaries in the will.  Therefore, if you have precious family heirlooms or other items that you want other people to have after you die, it is important to specify them as gifts to keep them safe from probate.

This blog is an advertisement for the Law Office of Philip R. Yabut, PLLC, and the information in this post is not to be construed as legal advice, nor does reading it form an attorney-client relationship. Please do not post confidential information in the comments section.

Philip R. Yabut, Esq. || 1100 N. Glebe Road, Suite 1010, Arlington, VA 22201 || (571) 393-1236 || pyabut@prylaw.com

Limits on wills

A will can give peace of mind by determining how your assets will be distributed after you die.  However, there are limits on what property a will can cover.  Assets that cannot be subject to a will include:

• Property held in joint tenancy with right of survivorship.  This generally affects married couples, but anyone can acquire and own property jointly.  A right of survivorship means that if one co-owner dies, the other automatically takes over the other's share.

• Pensions, retirement, life insurance, and other accounts that have right of survivorship and/or named beneficiaries.  These accounts already have beneficiary provisions that a will cannot override.  Transfer of ownership would be effective immediately at death and before a will goes through probate.

• Assets held in trust.  While a will can set aside assets to create a trust, it cannot affect property already held in trust for a named beneficiary.

The common thread in these instruments is the named beneficiary.  In short, a will only can dispose of assets whose ownership would be in question upon death of the testator.  Any will provision that tries to change named beneficiaries for established trusts or payable-on-death accounts is automatically invalid.  Furthermore, payable-on-death and right-of-survivorship assets are not subject to estate taxes.

This blog is an advertisement for the Law Office of Philip R. Yabut, PLLC, and the information in this post is not to be construed as legal advice, nor does reading it form an attorney-client relationship. Please do not post confidential information in the comments section.

Philip R. Yabut, Esq. || 1100 N. Glebe Road, Suite 1010, Arlington, VA 22201 || (571) 393-1236 || pyabut@prylaw.com