Eight Steps to Get Your Estate Plan in Order During a Pandemic

April 28, 2020
Wealth Planner Ross Bruch shares why now is a good time to examine your estate plan and offers eight key steps to do so.

The COVID-19 pandemic has provided many of us an opportunity to focus on tasks and household chores that we previously procrastinated on. One item that should be on everyone’s to-do list right now is getting one’s affairs in order. While the pandemic has provided an excellent opportunity to examine wealth transfer options, it also serves as a prudent reminder to make sure you have an estate plan in place and to confirm that your plan is accurate and up to date. While estate planning can become emotionally taxing as you consider a time after your passing, it is as important as ever to be proactive, both for yourself and for loved ones. Here are a few items we recommend you consider when working through your affairs.

1. Confirm that your plan is accurate and up to date. You should have your basic documents (a will, health care directive and power of attorney) already in place. If you don’t, this is an important place to start. If these documents have already been drawn up, they should be reviewed for accuracy to confirm they are still consistent with your wishes and the current tax environment. This is a good opportunity to map out the flow of your plan and compare it to your current net worth to ensure the right “buckets” are still being funded with the right assets. Reviewing the flow of assets will also provide a foundation for discussing the structure with your advisors and loved ones, when appropriate. If anything in your plan is unclear, consider reaching out to a BBH wealth planner or your estate attorney to help you better understand your documents.

2. Review named beneficiaries and fiduciaries. In addition to reviewing your general plan, confirm that the names of your designated beneficiaries and fiduciaries are accurate. Although most of your assets will pass under your will or through trusts that you have created, other accounts such as retirement or life insurance may pass directly to a named beneficiary (or contingent beneficiary). If your planning circumstances have changed since you first created these designations, update them accordingly. The same rule applies to your fiduciaries. An individual who was the appropriate person to name as a trustee 20 years ago may no longer be the ideal fiduciary for your loved ones. Use this review period as an opportunity to re-examine your relationships and who is best suited to serve in these important roles, as they are among the most important considerations in estate planning

3. Review life and property insurance coverage. Periodically examining your life and property insurance policies to ensure they still offer adequate coverage and meet the needs of their intended purpose is a worthwhile exercise to undertake in any environment. As your wealth increases, the planning purposes behind a term policy for risk mitigation purposes or a whole life policy to ensure ample liquidity upon your death may no longer be necessary. On the other hand, if the value of your assets has grown, you may need to re-examine if the property coverage you have in place is enough to minimize your increased potential liability.

4. Ensure your beneficiaries have sufficient liquidity. Even if you take the appropriate amount of care to ensure your loved ones have adequate resources under your estate plan, it is important to understand that the estate administration process can at times be slow and clunky. Although rare, it is possible that an individual may not have immediate access to liquidity after his or her spouse’s death depending on how assets are titled. A temporary (but significant) burden can be avoided by confirming that at least some liquidity will be titled in or directly available to your spouse after you have passed.

5. Locate and consolidate important information and account identification to make things easy for loved ones to find. One of the most difficult steps in the estate administration process is locating a decedent’s assets. Prior to the ubiquitous use of the internet for a majority of our financial transactions, it was easy for an executor to locate accounts simply by waiting for statements to arrive by mail. To make this process easier for loved ones, compile a list of all of your accounts (for example, checking, savings, investment, retirement and life insurance), property of significant value (such as artwork, collectibles and real estate interests), liabilities and a contact person at each relevant financial institution. This exercise will also serve a dual role by helping you and your advisors gain a clearer picture of your net worth (as mentioned in the first step). In addition, compiling all of your information can help bring clarity to the question of if and where it makes sense to consolidate assets and accounts while helping you evaluate the best fit for your current professional relationships. Make the list easily accessible to your next of kin should they need it (omitting account values if you are concerned someone will access it prematurely) and – most importantly – make sure it is updated any time an account is opened or closed. Formalizing this process helps, and at BBH, one way we have done so is by working with clients to build a “lifebook” that offers a comprehensive overview of their assets and where they fit in their estate plans.

6. Review digital assets and online accounts. As you examine your balance sheet for completeness, remember to include any digital assets in your planning. Items such as digital photographs/videos, social media accounts, music and digital currency tend to be very important but often overlooked with respect to access and ownership post-death. At best, accessing a decedent’s email and online accounts can be challenging, and may be a violation of the provider’s terms of service; at worst, it could be against state or federal law. Rather than sharing passwords or account access, consider adding a “digital assets clause” to your planning documents if you do not already have one in place. This language will allow named parties to access specific items within the bounds of currently accepted legal standards.

7. Write a letter of wishes. Regardless of how well-thought-out and intended your estate plan may be, there is always room for confusion, feelings of disregard or potential conflict when it comes to executing the details of your legacy plan. With the additional time and slower pace afforded in our quarantine state, now is an opportune time to put pen to paper to fully express your intentions and hopes. In our experience working with individuals and their families, these wishes are not only appreciated by families, but can also help open a dialogue that may have not otherwise taken place. Writing a letter of wishes can be a difficult, time-consuming and emotionally draining exercise, but it may also be one of the most valued things you can leave to loved ones after you’re gone. Consider reaching out to a BBH wealth planner for assistance in the process.

8. Plan to review. After you have completed your review, make a commitment to repeat the process on a regular basis. Set up a calendar reminder now with your BBH team to give yourself an annual financial and planning checkup. We won’t always be confined to our homes due to social distancing, but the importance of having your affairs will remain long after the COVID-19 pandemic has passed.

If you have any questions about getting your affairs in order during this pandemic, please reach out to your BBH relationship team.

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