The Old and New Worlds: COVID-19 and Estate Planning

Times have changed. The old way of living has given way for the time being to what has been deemed “the new norm.” Yet, as many experts are saying, the new norm for the near future is nowhere close to being defined.

No one is immune to the changes of this unique time. The newly acquired skill of social distancing has compelled businesses, communities and families to adapt to a new way of interacting with others and the world at large.  Time will tell how many of the changes resulting from COVID-19 will weave their way into the tapestry of what will ultimately be the new norm.

The estate planning community is no stranger to the new norm emerging from COVID-19. As allowed under emergency orders in many jurisdictions, trusts and estates lawyers have learned how to conduct virtual execution meetings wherein documents can be witnessed and notarized from a distance. Probate courts in some jurisdictions are now considering virtual court appearances to manage their dockets. Law firms have been forced to learn how to work remotely. Despite these changes, the work that estate planning professionals are engaged to complete for clients remains valuable and is certainly doable, even during an economic shutdown.

What should you be doing with respect to estate planning during these very unusual and changing times?

The first response to this question is obvious:  if you have not defined your estate planning objectives and executed a plan, then there is no better time than the present to do so. An effective estate plan accomplishes the following objectives:  (a) the appointment of individuals to serve in fiduciary capacities in the event you cannot act for yourself (i.e., as agent under power of attorney for property and health care and as executor/successor trustee of your estate/trust after your death); (b) the avoidance of probate in the administration of your estate after death, if desired; (c) the minimization of estate and income tax to the maximum extent allowable under current law and, where possible, as it may exist in future years; (d) the most efficient means of post-death transfer and administration of wealth.  Putting forth the effort to address these objectives during life often saves resources and unnecessary frustration during a time where you may become incapacitated and after your death.    

If you have an estate plan that was prepared some time ago, then now may be a good time to review what was done in order to ensure that your plan is consistent with your wishes and achieves your objectives. There have been significant changes in tax law that have made some plans obsolete or ineffective. For example, the 2017 Tax Act significantly increased the federal estate tax exemption amount, making estate tax planning not as relevant for estates below approximately $11 million ($22 million for married couples). Additionally, Congress passed what is known as the SECURE Act at the beginning of this year. This new law drastically changed the way inherited retirement accounts are paid to beneficiaries after the death of the original account owner.  Lastly, those who are Illinois residents now must now consider the impact of the newly enacted Illinois Trust Code on their personal estate planning. Other states have enacted similar laws governing trusts that warrant further consideration regarding their impact on the governance of trusts.

Estate tax planning remains very effective during these economic times. Low interest rates provide unique opportunities for individuals wishing to transfer wealth during life. Intra-family loans, sales to grantor trusts, grantor retained annuity trusts and other inter vivos estate tax planning techniques remain effective tools in transferring assets out of an estate that will most likely be subject to federal estate tax.

Despite the evolving “new norm,” the fundamentals of estate planning remain the same and are very relevant during this changing landscape. In fact, now might be the best time to complete or continue your estate planning.

Christopher Floss is a partner at Hoogendoorn & Talbot LLP, a Chicago based law firm. His practice concentrates on matters pertaining to trusts and estates, namely estate planning, estate administration, and gift, estate and income tax planning.  For further information on his practice, you may view his biography at the following link:  http://www.htlaw.com/lawyer/christopher-floss/

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