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Is It Time To Review Your Estate Plan? Thumbnail

Is It Time To Review Your Estate Plan?

Over months of living with the effects of COVID-19 all around us, many of us have faced fears about what will happen to our assets should we suddenly fall ill or pass away.  Restrictions have now eased, and we are returning to our pre-COVID lives, but events of the past year have left many with heightened anxiety about whether their affairs are in order. While it can be unpleasant to consider one's incapacity or death, an estate plan review (and update, if needed) can provide peace of mind.

A good rule of thumb is to to review estate plans every three to five years, and after a significant life event (such as a birth, death, divorce, marriage, or significant change in estate value). If you don't have plans in place, there’s no better time to get started.  It’s possible to tackle this hurdle on your own, but we don’t usually recommend it. Any missing or misguided legal language can sabotage your best intentions.  A qualified estate attorney can advise on estate planning vehicles and documents that are appropriate to your situation; we seek here only to outline the basics of broadly used estate planning tools. 

Protecting What's Yours During Life

While the term "estate planning" generally implies one's plans for assets after death, a strong estate plan may include several important documents that apply during life, such as a financial power of attorney, health care directive and a revocable living trust.

Whether due to disability, dementia, or simply enjoying extended travel, there are many ways you can end up unavailable to make critical financial or health care choices for yourself or your loved ones. If you’ve not documented your desires in advance, it can cause stress and unintended outcomes.

Financial Power of Attorney 

A financial power of attorney (POA) is a legal document authorizing someone (your “agent”) to make financial decisions on your behalf.  No matter how much authority you grant an agent, they still owe you a fiduciary level of care, which means any decisions they make for you must be based on what they believe to be in your best financial interests.  Anyone to whom you grant a POA is only your legal agent while you are alive; their authority ends the moment you pass away.  Keep in mind that you cannot grant a POA if you are deemed to be of unsound mind - it's important to set up your POA before any adverse event should occur.

A POA applies while you are alive, but unavailable to act for yourself. You can structure it to: 

•    Begin immediately or upon a triggering event (such as a debilitating accident or illness).

•    Remain in force during a finite time period or be ongoing.

•    Apply to all your financial matters, or only to specific transactions.

A financial POA can be helpful to address:

•    Capacity: If you become incapacitated due to illness, injury or dementia. 

•    Availability: If you’re unable to be present for a financial transaction, such as if you’re traveling abroad or you’re otherwise preoccupied. 

•    Convenience: If you’d simply like to make it convenient for someone else to be able to make financial decisions for you – such as your spouse or a trusted sibling (in general), your parents (if you’re heading off to college), or your adult children (if you’re aging).

If you are married, you may assume that your spouse will automatically control your assets if you are incapacitated.  However, should your spouse need to take action on property titled to you individually (selling a car in your name, for example), or to sell jointly titled property (i.e. your home) he or she may need to petition the court should you be incapacitated without a POA in place.

Healthcare Advance Directive

Your healthcare advance directive can offer two types of protection: 

•    Your living will provides your life-sustaining and end-of-life medical care instructions, and related healthcare preferences, in case a time comes when you cannot state them for yourself. 

•    Your healthcare directive can also name healthcare representative(s), or agent(s) and grant them healthcare power of attorney. If you cannot make your own healthcare decisions, your agent can decide on your behalf, guided by your living will. Medical professionals can also more freely discuss your condition with your agent, without violating HIPAA privacy rules

Your healthcare advance directive only comes into play if you are alive, but unable to direct your own medical care. 

Accidents and illnesses can rob you of your mental capacity – temporarily or permanently. If you do not have an advance directive in place, healthcare professionals and/or key family members may have to make medical decisions for you, without knowing what you would have preferred. Also, the individual(s) you would most want to have making decisions on your behalf may not be able to do so if you haven’t named them as your representative(s) in your advance directive.  This is especially important for unmarried couples who would like their partner to be empowered to make healthcare decisions in case of incapacity.

Make sure your healthcare advance directive is available when needed - distribute copies to your primary care physician, and ensure that your healthcare representative has a copy or knows where to find it when needed. Note to parents of young adult children: As soon as your child turns 18, healthcare providers may not be able to discuss your child’s case with you unless you have a healthcare power of attorney. Also, as described in this Wall Street Journal piece, if your child is attending school in another state, it’s worth establishing a healthcare power of attorney in their state and yours. 

Protecting Your Assets When You Pass


Nearly everyone should have a will to specify who gets what when you die. If you have minimal net worth and obvious beneficiaries, a basic will might do it. You typically name one or more executors to move your estate through probate (the legal process for carrying out the terms in your will). Your executors can be family members or professionals such as a bank’s trust services. If you have minor children, it is crucial to name a guardian and alternate guardian for them in your will.

What if you die intestate (without a will)? It usually takes a lot more time and money to settle even a simple estate, leaving a spouse, parent, or adult child with extra work during a painful time. Plus, your heirs will likely inherit less, as extra settlement costs eat into their inheritance. You’re also opening the door to ugly, and even costlier infighting if your potential heirs don’t see eye to eye. 

Revocable Living Trust

If your relationships and/or financial affairs are more elaborate, you might want to supplement your will with a revocable living trust. You should still have a will, to settle any assets that remain outside of your trust(s). But a revocable trust lets the bulk of your estate bypass public probate, which usually means a more rapid, private, and cost-effective settlement. With a revocable trust, you can establish successor trusts and trustees to oversee your estate.

Keep in mind that a revocable living trust is not effective if it is not funded.  For assets to be governed by the terms of the revocable trust, they must be titled to the trust, meaning that they are technically owned by the trust.  You, as trustee of your trust, maintain full control of these assets.  For example, if you have a brokerage account in your name, you'll need to re-title that account to the trust in order for it to transfer via the provisions of the trust.  Ask your estate planning attorney or financial advisor for a list of assets and assistance with re-titling as needed.

Beneficiary Designations

Certain assets transfer at death via beneficiary designation, rather than by will.  These include retirement accounts (401ks, 403bs, IRAs, etc), life insurance and annuities.  Beneficiary designations should periodically be reviewed to ensure that your assets transfer as you intend.  Let's look at a quick example of how an outdated beneficiary designation can lead to an unintended outcome:  Let's say Sally and Joe have divorced.  Sally has remarried, and has updated her will to leave the entirety of her estate to her new spouse, Sam.  Included in Sally's assets is an old IRA on which Joe is still listed as beneficiary.  If Sally passes without updating the beneficiary on that IRA, the IRA will transfer to Joe, regardless of what is stated in her will. 

Be sure to name contingent beneficiaries, who will receive the asset should you and your primary beneficiary pass away simultaneously.  You may also be able to add a POD (payable on death) designation to bank accounts, and/or a TOD (transfer on death) designation to non-retirement investment accounts, which allows them bypass probate and pass directly to the named beneficiaries.

Final Steps

Once you have your estate documents in place, make sure that your executor/agent/trusted contacts can access them when needed.  It's good practice to gather information about your personal data, contacts, documents and assets in one place - you can download our Essential Personal Information document and fill in the sections applicable to you.  Make sure that your agent and executor are aware of their roles, and know how to contact your estate attorney and/or locate copies of your estate documents and essential information.  Include alternate executors/agents as well.  

A carefully crafted estate plan can save time, money and heartache for your heirs, and can ensure that your assets are handled according to your wishes, whether in life or in death.  In our next post, we will discuss how to make sure your digital assets are covered in your estate plans. 

This content is developed from sources believed to be providing accurate information as of the date of publication, and is intended for informational purposes only. Please consult your financial professionals for specific information regarding your individual situation. Past performance does not guarantee future results. All investing involves risk, including risk of loss.