Estate Planning Checklist for End of Life

Transcript

Brett Sovine:  Hi, I’m Brett Sovine. I’m an ACTEC Fellow in Charlotte, North Carolina.

Sandy Clark:  Hi, I’m Sandy Clark and I’m an ACTEC fellow in Raleigh, North Carolina.

Brett Sovine:  Today, Sandy and I are going to go over some things which might be helpful to you and your family should you or a loved one be faced with a terminal diagnosis.

Documents as You Prepare for End of Life

Sandy, as an attorney experienced in estate planning and estate administration, what documents should an individual and their family have for their basic estate planning needs?

Critical Estate Documents and Advance Directives

Sandy Clark:  Well, some of that’s going to be controlled over the individual’s capacity and ability to review and execute documents. Certainly, some with a shorter life expectancy are going to have a more difficult time. But given that there’s a possibility there might be some capacity and time to get documents in place, it would be good to have a Medical Power of Attorney that assigns an agent to discuss matters with the doctor if the individual cannot and also includes Living Will provisions that discuss options at the end of life, whether what type of medical treatments an individual may want.

Another document that’s important to have is a Financial Durable Power of Attorney. This document allows an individual to make financial decisions for the individual if they’re unable to do them for themselves. Certainly, if they can update wills and trust or review wills and trust, that would be ideal also.

Brett Sovine:  Yeah, I’d make the point that it’s helpful at this point to try to gather all the original documents so that you have access to all the original documents.

Sandy, are there other asset and planning documents the family should consider?

Asset and Liabilities Inventories, Beneficiaries, 504 Plans

Sandy Clark:  I love to have an individual have an inventory of assets and liabilities that’s as current as possible that lists out the assets, account numbers if possible, and then the liabilities so that the family is more aware of what’s going on if someone were to pass or become incapacitated.

Now would be a good time to review beneficiary forms. A lot of times life insurance and retirement accounts are one of your larger assets and those typically pass by a beneficiary designation. So reviewing those would be important.

Reviewing 529 Accounts, making sure there’s custodians in place and successor custodians also so that those assets could continue seamlessly.

And then, deciding whether you want to fund or move assets into a Revocable Trust or other methods to avoid probate would be an important planning opportunity.

Brett Sovine:  Yeah, I had a former partner of mine that used to call that the “where’s it at memo.”

Sandy Clark:  Yes, exactly.

Brett Sovine:  Who do you call? What are the account numbers? Very helpful.

How important, Sandy, is it to communicate with the attorney and other financial advisors?

Critical Conversations During Terminal Diagnosis End of Life Planning

Sandy Clark:  I think if your family is not personally introduced to the attorney, your financial advisor, your CPA, and life insurance agent, now’s the time to do it. Also if you could give permission for those individuals and advisors to discuss matters with certain family members, which would allow them to assist the family: one, during their lifetime if your capacity diminishes, but also even after you might pass, they can assist the family greatly.

Communication is vital. Allowing the attorney, your financial advisor, CPAs to assist the family is going to be extremely helpful. They can help with locating assets and moving assets as needed.

Brett Sovine:  Yeah, we sometimes see people will be reluctant if they haven’t been introduced to advisors. But the thing I would encourage everybody, this is why your loved one built a team. The team is there to help you. They want to help you. You should reach out to them.

Which brings us to another important topic. What about communication with other family members?

Sandy Clark:  Now’s the important time and I’m amazed sometimes that family during this end of life planning have not discussed some of the vital steps. I understand it can be uncomfortable, but it would be important and make things easier if the individual would discuss what, even if it’s written in a living will provision, they would discuss what their options are for end of life medical treatment and what type planning they would want in regard to end of life medical treatment.

Also, if they have particular preferences on burial, cremation, those type things would all make those decisions easier for the family member if someone were to pass.

Brett Sovine:  It’s hard to know really how much time you have. So communication, the more people that can get involved and help is important.

We hear a lot about digital assets and records. Should they be reviewed?

Reviewing Estate Documents and Sharing Access to Accounts

Sandy Clark:  More and more assets and documents are now stored on your computer. So having a family member be able to access that information is going to be key. I tell clients too if they don’t necessarily want to give them all their passwords and usernames now, at least tell them where your list is so they could access those if your capacity went down or if you were to pass away.

But most documents stored on your computer or your tax returns, those are important to have. Your social media accounts, your family photos, statements from your bank accounts, and other investment accounts, all that would be important information for an individual to have. So if they’re not comfortable giving the actual username and password to the family member now, maybe telling them where the list is would be important.

Brett Sovine:  An asset that we see neglected a lot are airline miles accounts. Particularly people who travel a lot, who built up some significant value. Just how to access those and know what your options are. And I guess the other thing are sort of keys, any keys or tokens, to cryptocurrencies, some of those kinds of assets.

Sandy Clark:  Good point.

Brett Sovine:  Are there other estate planning strategies that should be considered at this point?

Sandy Clark:  Well, updating documents would be important. So if you can, if they have the capacity to draft and execute and revise documents, that would be important if they can communicate to the attorneys and advisors in that regard. Prepaying for funeral expenses makes things, again, easier for the family. Also lets you designate what type of arrangements you want.

If you want assets to pass the quickest to individuals and if it’s the right plan for them, designating beneficiaries on accounts can be helpful for the family.

We often want the surviving spouse or family to have access to some immediate funds to continue paying expenses even after accounts are frozen or after an individual has passed away. So having a designated beneficiary on some accounts, if that’s the right plan for you, allows those individuals to access those funds. And oftentimes we recommend to have a month or two of liquid funds available for those needs.

Brett Sovine:  Yeah, that can be very helpful for those that are following up.

Are there estate and income tax strategies the family should consider?

Estate and Income Tax Strategies

Sandy Clark:  Again, when talking to the CPA, attorney, and advisor, there may be some good opportunities whether estate tax issues are the most important or income tax issues are prevalent. But it would be an option to weigh whether gifts should be made or large gifts.

You can make annual gifts that qualify for your annual exclusion, which would include smaller gifts to individuals and also paying directly tuition and medical expenses. So that might be an option. Larger gifts, the attorney and advisors can recommend whether to make a gift and then weigh that option with losing your stepped-up basis at death. So those could be discussed.

One other income tax element is that if there’s a large capital gain loss carry forward, considering whether capital gains should be generated to offset that since that’s one of those income tax elements that you lose when you pass. But certainly looking at, again, LLCs, maybe transferring to get minority interest if estate tax is one of the issues so that you qualify for minority discounts at death.

Brett Sovine:  Yeah, I guess the key point here is the family members don’t need to know all these things. They just need to know who to ask to go through and see if there’s something that they can do while time is short.

Of course, it’d be great if everyone’s documents and plannings were always up to date. Is there a key point that you would stress that families should consider during this difficult time, Sandy?

Sandy Clark:  If I could say the most important word is communication. So communicating with your advisors whether that’s an attorney, financial advisor, CPA, insurance agent, and your family members. Letting them know what your thoughts and plans are. Also, authorizing those family members that you want to discuss matters with your advisors, giving permission so that they can freely discuss matters and assist the family as things progress.

Brett Sovine:  Well, none of us ever want to experience the difficulty of receiving the news that ourselves or a loved one have a terminal diagnosis. But if you find yourself or a family member in this situation, we hope you find this information helpful.

ACTEC has prepared a companion piece to this presentation, so please stay tuned for that video (Estate Planning Checklist for After Someone Dies).