We know that some families think they are ready when, in fact, they have a few details to finish. Any planning left undone could make estate administration much more difficult or expensive for the family. Examples of unfinished items could include:
- Failing to transfer the title of an out-of-state property to a new trust or limited liability company, which would require a probate proceeding to be opened in that state.
- Failing to execute new beneficiary forms following a death or divorce in the family, which could lead to litigation later.
These items would be caught during a “stress test” of your planning, which is why this exercise is so important.
What is Involved in Testing my Estate Plan?
Stress testing your plan is a three-step process, and includes:
- Step One – Verify that your plan reflects your current wishes, your powers of attorney are recent and your relevant personal and asset information is accessible to those who will need it.
- Step Two – Confirm that buy and sell agreements and other entity documents are updated, succession plans are in place for your businesses and other entities, and documentation implementing such plans are in place for these.
- Step Three – Determine that your estate distribution mechanisms still work the way they were designed to work.
Completing Step One in Stress Testing Your Estate Plan
1. Are Your Powers of Attorney Documents Complete and Recent?
Documents more than three to five years old may be rejected by third parties who are unsure the documents still reflect your current wishes. At least every three to five years, sign a new:
- Durable power of attorney for business and financial matters.
- You may need to have separate power of attorney documents for different purposes.
- These need to include the power to make appropriate gifts if you wish for your agent to be able to make gifts on your behalf.
- Durable power of attorney for health care.
- Make sure you have stated your wishes in writing for end-of-life care.
- Attach copies of your DNR (do-not-resuscitate order) or POLST (Physician Orders for Life-Sustaining Treatment), if needed.
- Have a separate medical power of attorney for each state in which you have a significant presence, as these are state specific.
- Provide these updated documents to your physicians and to your patient advocates.
- HIPAA privacy release for your health care providers so they will speak to your representatives and family.
2. Do the Right People Know Where to Find Your Information?
Your important documents and electronic access information should be collected and stored in secure places that multiple people, such as family members, family office staff or attorneys, are aware of and that can be accessed in a crisis. Someone besides your spouse or significant other should know the location (in case you are in an accident together).
- Make sure the appropriate individuals have 24-hour access to the location of your health care directives, HIPAA releases and power of attorney documents.
- Provide someone with the location where your login names, passwords, codes and PINs are kept, and make arrangements for this location to be made accessible following your incapacity or death. Someone will need to be able to access your:
- Technology, including phones, computers and other devices, emails, voicemails, business or foundation websites, software packages, data and cloud storage, connected devices, security systems, safe codes, etc.
- Personal and entity social media sites, in order to continue running them, close them or memorialize them.
- Financial accounts, including banks, credit cards, investments, bills, loans, insurance, etc.
- Digital assets such as cryptocurrency.
3. Is the Pre-planning for Your Funeral/Memorial Completed?
While we don’t like to think about our own mortality, it will certainly make your family’s life much easier if you have completed your funeral planning in advance. That will allow the family to grieve together and support each other when the time comes instead of arguing over the best way to memorialize you. Ensure that:
- You have a funeral representative designated to provide directions regarding who has authority to make final funeral-related decisions. This is especially important if there is any risk that your immediate family will disagree on final arrangements.
- Wishes for the final disposition of your remains and any permanent memorialization are known by family and documented.
- A plan is in place for deaths that happen while traveling, while in another country or at sea outside of U.S. waters.
- Additional planning has been completed for public figures and owners of large corporations, such as:
- Drafting and updating obituaries.
- Planning for media inquiries.
- Creating a communication and crisis management plan.
- Choosing sites for any funeral/memorial ceremonies and planning for motorcades.
- Planning for guest invitation, event credentialing and security for ceremonies.
4. Do You Have a Plan for Distributing Your Personal Property?
To avoid family discord after your death, it is best to have a list in place detailing the distribution of items of special significance, such as jewelry or keepsakes, that you wish to go to specific people or for items over which you think family or friends may fight.
If you have already created this list, check it periodically to make sure you still own these items, and the list still reflects your wishes. It is truly aggravating for an executor who cannot find something that you indicated should be given to a loved one. The executor will have no idea if the item is lost or if you previously sold it or gave it away. For more information about planning for your personal property, see our previous blog post, Who Gets Grandpa’s Guitar Pick Collection?
It May Be Time for a Stress Test of Your Estate Planning
If you haven’t performed any testing of your planning, or if it has been several years since you have done this, it is worth doing this year to ensure that nothing has been missed in your planning, and your plan will operate as intended when the time comes.
Warner can help you with this process. Contact your estate planning attorney, or Mark Harder or Nina Lucido, for assistance in conducting a stress test of your planning.
