Ethan R. Okura
Hawai‘i Herald Columnist
At the time of this writing, it has been only six weeks since Governor Ige’s stay-at-home order went into effect. And yet, somehow, it feels like it has been going on for months. The world feels like a different place. Daily life has been disrupted for most people, and even when they eventually get back to normal, I suspect things won’t really be “back to normal.”
Having lived through this experience has changed the how we look at and experience the world. For example, the Okura & Associates law firm has started offering client meetings by video-conference over the internet, as have many other businesses. Some of our employees have transitioned to mostly work from home.
Some other things that have changed include what an appropriate estate plan should be and how your estate planning documents should read. Here are the four most important estate planning update considerations in the post-coronavirus world:
1) Everyone should have a plan. Before COVID-19 took center stage, estate planning was something that young people almost never thought about, certainly not those in college or just out of high school. We’ve been fortunate in Hawai‘i that we’ve not had as serious a problem as other parts of the U.S. such as New York City. Indeed, the U.S. has seen COVID-19 deaths of babies less than a year old, all the way to seniors topping a century on the earth. Life is unpredictable and fragile. Everyone should at least have a basic estate plan consisting of a Last Will and Testament, a Power of Attorney, Advance Health-Care Directives, and HIPAA Authorization. By “everyone,” I mean everyone over the age of 18. What if your college-aged child or grandchild were to fall ill during this or even the next pandemic? Would the family be able to legally make medical decisions on his or her behalf? Would the family be able to access the bank accounts and pay their bills? What if he or she were to pass away? A very basic estate plan with a Will, Power of Attorney, and Advance Health-Care Directives can be prepared relatively inexpensively, so encourage everyone in your family to have a plan in place.
2) Prepare a medical “bug-out” bag or an emergency envelope. Normally a bug-out bag is a backpack with enough basic supplies to survive for 72 hours in the event of an emergency such as a natural disaster. I suppose a better name for what I’m talking about would be an “emergency envelope.” It should contain a photocopy of your AHCD, POA, and health insurance card, together with a list of any medications and vitamin supplements you take, or things you’re allergic to. If you had to be rushed to the hospital, this information would be critical for the emergency first responders to have. It should be stored in a place where it can be quickly grabbed in the event of an emergency.
Another alternative is a secure, online vault where digital copies of these documents can be stored. You can keep a card in your wallet or purse with the URL or website location — just don’t write your password on it if you want to maintain privacy, or if you upload even more sensitive documents than those suggested — just in case your wallet is stolen. A simpler cheaper version of this would be to have those documents scanned and uploaded to a Dropbox or Google Drive account online.
3) Review and Revise Beneficiary Designations. In my February column a couple of months ago, I wrote about the SECURE Act — or the Setting Every Community Up for Retirement Enhancement Act — that was passed in December 2019. This legislation had a huge effect on how much tax our retirement account beneficiaries will pay. I won’t go into too much detail here, but we should all reconsider our beneficiary designations as the traditional “wisdom” on this point might result in the worst tax outcome going forward. Besides reviewing these beneficiary designations with a tax-planning expert who is familiar with the effects that the SECURE Act will have, you should also consider getting rid of any “Conduit Trusts,” and instead use a version of an “Accumulation Trust” designed to protect your heirs’ inheritance in light of the SECURE Act and other recent changes in the law.
4) Review Incapacity Language in POA and Trust. Many trusts and Power of Attorney documents that I review have a requirement that your attending physician — or sometimes two doctors — must certify in writing that you are incapacitated before your spouse, child or trusted agent can step in as successor trustee or before they can use your Power of Attorney. In these times, it’s almost impossible to get an appointment for a doctor to see you, let alone two physicians. Your family might not be able to access your assets for a long time if that’s what your documents say. Here are two workarounds: (i) You can change that requirement so a majority of family members, or an independent person such as your estate planning attorney or financial advisor, approves the successor agent stepping in; or (ii) You can have most or all of your bills on automatic bill-pay and your income on direct-deposit, so that even if it takes a little while for your family to get access to your accounts through your trust or POA, you don’t have any late bills or credit problems in the meantime.
The key takeaway from today’s column is that estate planning is constantly evolving. It’s not a one-time event. It’s a process. And you get to be actively involved in that process on a regular basis for the protection of your loved ones in this wild and crazy world. Stay safe out there!
© OKURA & ASSOCIATES, 2020
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Ethan R. Okura received his doctor of jurisprudence degree from Columbia University in 2002. He specializes in estate planning to protect assets from nursing home costs, probate, estate taxes and creditors.
This column is for general information only and is not tax or legal advice. The facts of your case may change the advice given. Do not rely on the information in this column without consulting an estate planning specialist.