Estate Planning Basics with COVID and Back to School

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The combination of COVID and back to school time has a lot of people thinking about their personal estate planning. Even if you are not working in a medical facility or a school environment with a heightened concern regarding COVID, back to school time can be a good reminder to “clean house” and ensure your affairs are in order, and that includes your estate planning.

What is “estate planning” and why do I need it?

Estate planning is more than just a will, and more than just the documents. It means thinking through and having a plan for when you can’t make your own decisions, and ultimately, how to handle your affairs after your death.

Having the documents is the first step, but best practice is to take it a step further and ensure you understand how the documents work, and how everything comes together. A couple years ago, I wrote about a case involving a DIY will that shows why estate planning is more than just purchasing documents.

There are lots of terms, what does it all mean?

Estate planning - This is the big picture, wrapping everything together. For example, the process of estate planning will connect your life insurance and retirement benefits with your will or trust by appropriate beneficiary designation.

Will - Formally, this is often called a last will and testament. This is the document that controls your assets upon your death, names an executor to handle your affairs, and possibly names a guardian to care for minor or disabled adult children. We wrote the “Top 10 Reasons You Need a Will” to detail the importance of a will for everyone.

Trusts - There are many kinds of trusts with many different purposes. Generally, this refers to one person (trustee) holding money for the benefit of someone else (beneficiary), and many times the beneficiaries are minor children.

Powers of attorney - These documents name someone to make decisions for you when you are alive, but unable to make your own decisions. There are commonly two kinds of powers of attorney, one for financial decisions, and one for medical decisions. We reviewed the importance of these documents a couple of years ago in “Unfortunate Reminder of the Need for Powers of Attorney.”

Living will - This term can mean many things and the common definition seems to vary by state or region. Typically, and most recently, this is a document stating your wishes surrounding certain medical procedures and end-of-life care. The term “advanced directives” is also used. Very importantly, this is NOT the same as a will.

Do I have to use an attorney to create a will, powers of attorney, or living will?

The short answer is no. Certain forms are set by Iowa law and readily available. For example, the Iowa State Bar Association and Drake University both have forms for advanced directives and medical powers of attorney. The Iowa State Bar Association also has a form for financial powers of attorney.

However, just having the forms may or may not be enough. I can buy shingles for my house, but that doesn’t mean I know how to properly install a new roof. Some people can install their own roof, but I cannot. Similarly, buying blank documents or completing an online form will work for some people, but not others. 

The tough part with estate planning is you will potentially be incapacitated or dead before you know whether the documents were appropriately completed. Working with an attorney that regularly handles estate planning allows you to receive guidance specific to your situation and ensure the documents are appropriately completed.

How long are the documents good for? How often do I need to update my estate planning documents?

Estate planning documents generally don’t expire, but at some point, they will become outdated. As a general rule, I recommend clients review their estate planning documents every five years.

That type of review is done on your own, simply looking at the documents and ensuring everything remains appropriate. Some questions you might ask yourself in that review:

  • Has your family situation changed? (e.g. marriages, divorces, new children, children over 18)
  • Have your assets changed significantly?
  • Is the person you named as executor still a good choice?
  • Is the person you named to be guardian of your minor children still willing and capable of caring for them?
  • Is the age you set for your children to receive assets still appropriate, or should it be a later age now that you see how your children handle money?

If you need to make changes based on any of these questions, those changes must comply with Iowa law just as the initial documents did.

Big Picture

Just like changing out your summer wardrobe or getting new supplies for children heading back to school, fall can be a great temporal landmark to review your estate plan, ensure it’s up to date and encompasses any life changes. Over the next two weeks, we’ll dive into two estate planning topics to keep in mind as the coronavirus continues to threaten our health and our families.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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