Many, if not all, of us are practicing social distancing as we attempt to navigate through this pandemic. For most, that means working from home, and putting a majority of important tasks on the back burner. Considering one’s estate plan is likely one of those tasks, since attorneys’ offices are currently closed. However, what many clients and advisors may not know is that there are a number of things clients can do at home in order to protect themselves and their family in the event of a crisis. Perhaps the most important thing to note is that our office is fully operating remotely, and our attorneys are available to draft documents, facilitate document executions, and answer clients’ questions and concerns.
Last month, Governor Andrew Cuomo passed Executive Order Number 202.14, which permits remote notarization of documents, and Executive Order Number 202.14, which permits remote witnessing of estate planning documents. That being said, assuming clients have the necessary technology, estate plans can be created from start to finish, all without having to leave the house. The first step would be to set up a conference call or video conference meeting with a client to discuss the client’s desires and what estate planning documents are needed. Our office then proceeds to draft the documents, and send them via email to the client for review. Once the documents are approved by the client, we schedule a remote will signing. This entails the client and our staff setting up a video conference, whereby the client signs the documents under the attorney’s direction, while the staff act as witnesses.
While the above seems simple enough, there is one major issue with the current environment as it relates to estate planning: the Surrogates’ Courts. Typically, when one passes away, his or her Will is submitted to the Surrogate’s Court in the county in which he or she resided, in order for the named Executor to be formally appointed. This is the process of “probate.” However, the Surrogates’ Courts are largely shut down, as they have been deemed non-essential, aside from certain emergency situations. As a result, the family members of decedents are unable to submit applications to the court in order to begin the administration of a loved one’s estate. While we hope that this is the only shutdown of non-essential businesses we will go through during our lifetimes, it seems unlikely that that is the case, as there has already been a prediction for another outbreak of the virus for the fall.
As a result, where possible, the requirement for one’s heirs to go through the probate process should be avoided. This can be achieved through the use of a Revocable Living Trust. A Revocable Living Trust is a document executed during lifetime that immediately becomes effective. An individual can be the Trustee of his or her own Revocable Living Trust, and it can be revoked and terminated at any time. Utilizing a Revocable Living Trust could avoid the probate process because assets owned by a Revocable Living Trust pass outside the terms of one’s Will, and instead through the terms of the trust.
In order to fully avoid probate, however, one must ensure that all his or her assets are transferred to the trust, with a few exemptions. In order to accomplish this, all bank, brokerage, and investment accounts must be retitled in the name of the Revocable Living Trust. For any real property owned by the individual, deed transfers must be executed to transfer title of the property to the trust. Finally, any personal property or business interests must be assigned to the Revocable Living Trust through a document signed by the client in front of a notary. As noted, there are a few instances in which certain assets need not be owned by the Revocable Living Trust. The most common situation in this regard is any asset or account with a joint owner or a named beneficiary. Joint ownership is common with husband and wife for bank accounts and real property. In this case, the ownership must be owned “jointly with rights of survivorship.” By designating that there are rights of survivorship, when one owner dies, the other owner automatically takes title to the asset as a matter of law. Similarly, by having a named beneficiary on a bank account, retirement account, or life insurance policy, upon the owner’s passing, the beneficiary automatically becomes the rightful owner. Thus, any assets owned jointly with rights or survivorship or with a named beneficiary need not be titled in the name of the Revocable Living Trust since probate will already be avoided by operation of law. One additional exception is any asset that is already owned by another trust.
With the passing of the above-referenced Executive Orders, our office has the capability of drafting Revocable Living Trusts for clients and ensuring their proper execution. The challenge of utilizing Revocable Living Trusts at this time may be the difficulty of transferring assets while many companies remain in quarantine. However, most businesses have staff working remotely in order to effectuate these transfers. In any event, a Will should also be put in place as a back-up to a Revocable Living Trust that is not fully funded.
In addition to executing one’s estate planning documents, there are other related tasks that clients should consider taking care of while in quarantine. As mentioned above, one could name a joint owner on his or her bank account with rights of survivorship. This is a tactic that many should consider to facilitate the administration of one’s estate. For instance, by naming a beneficiary as a joint owner on a bank account, upon the individual’s passing, the beneficiary will have immediate access to that account to pay bills and funeral expenses. This alleviates the burden of one’s beneficiaries being out-of-pocket for certain expenses upon a loved one’s death. The issue, however, is that the beneficiary named as the joint owner will legally be entitled to 100% of the account. Therefore, if there are other beneficiaries that the individual wishes to share in the account, that must be considered.
Finally, clients should take this opportunity to review their existing beneficiary designations. Beneficiaries should be designated on all life insurance policies, as well as all retirement accounts. For life insurance policies, naming a beneficiary allows him or her to get the death benefit proceeds fairly quickly upon the client’s death, instead of waiting for the administration of the estate. Typically, proceeds are paid within weeks of the life insurance company receiving the death certificate. For retirement accounts, failing to have a named beneficiary could have negative income tax consequences for the client’s heirs. If a beneficiary is not properly designated on an account, the ultimate beneficiary will be required to withdraw the full balance of the account over a 5-year period. Earlier this year, a new tax law was enacted called the SECURE Act, which has many implications on beneficiary designations. This should be discussed and reviewed with a client’s tax advisor.
This pandemic continues to negatively impact many individuals across the country. Our office is urging all clients to be prepared and review their estate plan. We are here to help in any way that we can. For specific questions, our estate planning team can be reached by email at: firstname.lastname@example.org, email@example.com, and firstname.lastname@example.org, If you would like to schedule a conference call or video meeting, our legal assistant can be reached at: email@example.com. Stay safe, and do not hesitate to reach out to us with any questions.
Posted in: Estate Planning