The sudden emergence of Covid-19 has forced many individuals to face the possibility that they could unexpectedly become sick and face the unthinkable. Most of us never consider our mortality, or the possibility that we could pass-away at any time.
However, with the necessities of sheltering at home, social distancing, and wearing face masks in public, the uncertainties created by the Covid-19 pandemic has served as a wake-up call for individuals who have not prepared an estate plan, and for those who have not updated their estate plan in many years.
A proper estate plan can reduce the burden on your family should you become ill, incapacitated, or even die. If you become hospitalized or incapacitated, then a Durable Financial Power of Attorney, Durable Power of Attorney for Healthcare, and Living Will all become very important in allowing your attorney-in-fact to manage your financial affairs and make health care decisions when you are unable to do so. Everyone eighteen (18) years of age and older should have durable powers of attorney in place.
If you die without a Last Will and Testament ("Will") or Living Trust, then state law will determine who will receive your assets. This leaves open the possibility that your assets could pass to individuals that you never intended to receive your estate. For example, in the State of Tennessee, if you are married and have adult children and die without a Will, then your spouse will not receive all of your assets upon your death. State law requires your spouse to split those assets with your adult children which could result in your spouse ending up with as little as 1/3 of the estate assets. Consequently, if you do not have any family, heirs, or descendants and die without a Will, then your estate will "escheat" meaning that it will be forfeited to the State of Tennessee. These are just two examples which could be problematic.
Having an estate plan is important and a basic estate plan can be a relatively inexpensive way to ensure that the people or organizations you care about receive your assets. Generally, an estate plan consists of either a Last Will and Testament or a Living Trust, coupled with a Durable Financial Power of Attorney, a Durable Power of Attorney for Healthcare and a Living Will. A Will is a legal document wherein you name an individual or corporation to serve as an executor to distribute your assets in accordance with your directions after your death. A Will can also identify and appoint guardians for minor children, or children with special needs.
You can create a testamentary trust in your Will and name a trustee to hold estate assets in trust for children, or adults, until such time as they are able to receive the assets. In addition, a testamentary trust can protect your loved one from creditors and protect the trust assets should a beneficiary get a divorce, declare bankruptcy, or have a judgment against them. All Wills must be filed with the probate court in order to be administered.
A Living Trust is a legal document which can be established during your lifetime wherein a designated trustee is given the responsibility for managing the assets in the trust for the benefit of the trust beneficiaries. You can name yourself and your spouse as the initial trustees and initial beneficiaries of the trust and have any number of successor trustees who will serve as trustee if you and your spouse become incapacitated or die. Like a testamentary trust, a Living Trust will also provide creditor protection, but only after death. Unlike a Will, a Living Trust does not have to be filed with the probate court to be administered if set up properly.
A Durable Financial Power of Attorney is a legal document that allows someone you designate as attorney-in-fact to manage your finances in the event that you become incapacitated and unable to make financial decisions yourself. Specifically, it grants someone the legal authority to act on your behalf in all matters regarding your finances.
A Durable Power of Attorney for Healthcare is a legal document that allows someone you designate to make all health care decisions for you in the event that you become incapacitated or unable to make health care decisions yourself.
Finally, A Tennessee Living Will is a legal document expressing your medical decisions should you become incapacitated in a terminal condition. The decision as to whether you want a Will or a Living Trust depends on your situation and whether you want to avoid the administration of your estate by the probate court. A Will can be a much simpler legal document and less expensive. A Living Trust is more expensive to set up, but if set up properly it can reduce the stress on family members because the estate can be administered by the trustee and probate court can be avoided entirely.
Moreover, it is important to note that one of the most unexpected results from the Covid-19 pandemic has been that it has limited access to the Court making it more difficult to probate estates or hear issues that may arise during the administration process. While Courts are still operating, the time it is taking to administer an estate has increased significantly.
If you already have a Will or a Living Trust, you should update those documents every few years, or at the very least every time there are significant changes in your life. Some examples include: if you or your children get married, have a baby, go through a divorce, inherit money, have a loved one die, children reach adulthood, or upon retirement. It is important to address these types of life changes because they can have a direct impact on the estate plan that you have already put in place.
If you already have a Will or a Living Trust, you should update those documents every few years, or at the very least every time there are significant changes in your life.
For more information:
Grant, Konvalinka & Harrison, P.C. is located at Republic Centre, Ninth Floor 633 Chestnut Street and can be reached at 423-756- 8400.