The effects of COVID-19 on Estate Planning

Tax Talk

Tax Talk Podcast
April 14, 2020


 

   

Tax, Trusts, and Estate Planning attorneys, Jennifer Einersen and Stephanie Diaz, discuss the unique challenges facing their practice during the COVID-19 pandemic.

Transcript: 

STEPHANIE DIAZ

Welcome to Bilzin Sumberg’s Tax Talk.  My name is Stephanie Diaz, and I’m an attorney working with the International Private Client Group of the firm.  My practice focuses on in-bound tax and estate planning for international high net worth individuals.  I’m joined today by my colleague Jennifer Einersen.

 

JENNIFER EINERSEN

Hi, Stephanie.  Thank you for the introduction.  Like Stephanie said, my name is Jennifer Einersen, and I’m a trust and estates attorney that focuses on domestic estate planning for high net worth individuals. My practice also guides clients through the probate and estate administration process after a loved one has passed.  I’m happy to join you for today’s episode of Tax Talk.

 

STEPHANIE DIAZ

Great.  Today’s episode is going to be focused on the issues you’re seeing in your practice stemming, in part, as a result from the Coronavirus pandemic.

 

JENNIFER EINERSEN

Yes.  Like all of us, our clients have been impacted by the Coronavirus pandemic.  Today I will walk you through the unique challenges facing my practice, and I will highlight some of the opportunities that we have identified for our clients.

 

STEPHANIE DIAZ

Yes.  This is a challenging time, and so I’m sure that feeds very much into your practice.  What challenges are you experiencing?

 

JENNIFER EINERSEN

Well, first and foremost, we are all worried about our own health and about the health of our loved ones.  And while it’s always important to have basic estate planning documents in place, now is a time for our clients to revisit and review these documents to make sure they are in order.

 

STEPHANIE DIAZ

Can you describe how your documents work?

 

JENNIFER EINERSEN

Of course.  So when I talk about a client’s basic estate planning documents, these documents include the client’s last will and testament and a revocable trust agreement, and these are the documents that memorialize how an individual wants their property to pass on their death.  In addition to these documents, a basic estate plan will also include a durable power of attorney, a living will, a designation of healthcare surrogate, and a designation of a preneed guardian. And for any of our clients who have minor children, these documents will also include a declaration of preneed guardian for minors.  And that’s the document where you can select a guardian of any minor children in the event one needs to be appointed. Your revocable trust will contain the dispositive provisions of your estate plan and direct that your trustee, who will either be a trustworthy family member such as your spouse or a bank or a trust company, and it directs them how to dispose of your property as you wish.  Now while these documents go into effect upon your death, the power of attorney and healthcare documents are in effect while you’re living.  So under a power of attorney, this is a very important document but a very powerful document, so it’s important that you appoint someone who you trust as your attorney-in-fact because once this document is signed by both you and the person you appoint, it’s effective immediately.  This is the document that allows your agent to handle a wide variety of matters on your behalf.  This can include real estate, banking, and investments.  There are also certain superpowers that you can grant your attorney-in-fact that affect your estate plan.  This is including the ability to make gifts, to designate beneficiaries of accounts, possibly to change survivorship elements and modifying estate planning documents. So as you can see, your attorney-in-fact can really do anything that you can with your property, so that’s why it’s both an essential document, but it can be a scary one, so you want to be responsible with who you choose.  The last piece of your estate plan is the designation of healthcare surrogate and your living will.  These documents work together.  First, the designation is the document where you name someone who will make healthcare decisions on your behalf in the event you are unable to do so.  Unfortunately, we’re seeing how important that type of document can be amid the current crisis that we’re all facing.  So this is an extremely important document that you’ll want in place.  The living will works with the designation of healthcare surrogate and governs end of life decisions and provides instructions to your surrogate.  For instance, this document would state that if there is no hope of recovery, you may not wish to be kept alive artificially.  And, of course, that’s a personal decision, but these are documents that are really imperative to have in place.

 

STEPHANIE DIAZ

I can see why your clients are hyper-focused on these documents in their planning --

 

JENNIFER EINERSEN

Absolutely.

 

STEPHANIE DIAZ

-- especially in light of this pandemic.

 

JENNIFER EINERSEN

Yes, that’s exactly right, Stephanie.  This is a really scary time for everyone and produces a lot of anxiety and uncertainty.  And it’s a really important time to revisit these documents, but a unique challenge that we’re faced with right now is meeting the statutory requirements in Florida to properly execute these documents.  Florida statutes require that a testator sign his or her will in the presence of two witnesses, and this physical presence requirement also applies to other documents that are testamentary in nature, such as the durable power of attorney that I mentioned earlier and it also applies to the healthcare documents.  So normally under normal circumstances, this really isn’t an issue, but currently, it’s very difficult and very dangerous to be within the physical presence of someone.  Most recently, as we all know, Governor DeSantis issued an executive order which requires all persons in Florida to limit their movements and personal interactions outside of their home, and that’s beginning on April third.  With such restrictions in place amid the public health emergency we are experiencing, the physical presence requirement is a significant obstacle to the execution of these important estate planning documents.

 

STEPHANIE DIAZ

I know a lot of states have considered allowing electronic signatures in light of all the challenges you’ve mentioned.  For estate planning documents, has Florida enacted any legislation, or are we considering doing any electronic wills?

 

JENNIFER EINERSEN

So actually yes, there is a new Florida statute that permits the electronic signing of various estate planning documents.  However, this statute doesn’t become effective until July first of this year.  And even when the statute does become effective, the option will not be immediately possible,  most likely because practitioners across the state are still figuring out how to comply with the requirements under the law, including the need for a custodian of the documents.  It’s also not clear whether there will be any third-party service providers available as of July to be able to implement the new Florida statute and allow the signing of electronic wills.

 

STEPHANIE DIAZ

That’s going to be an added hurdle.  Has there been any consensus among the legal community as to how to deal with this interim problem?

 

JENNIFER EINERSEN

Well, you know, the entire trust and estates legal community is struggling with this issue, and there really is no clear solution. Many practitioners including our own Jennifer Wioncek, who’s a partner in our Tax, Trust and Estates Department, have sent letters to the governor requesting that he issue an executive order to either relax this physical presence requirement due to the concerns of the coronavirus or possibly move up the effective date of the new Florida electronic will statute.  But if he were to move up the effective date, we’d also need him to relax the custodian requirements that are stated in the statute.  Jennifer’s letter among -- in addition to other practitioners are stating that if the governor doesn’t have this authority in Florida that we ask that he ask the Florida legislature to meet and to discuss this issue and hopefully pass legislation that will implement these requests.

 

STEPHANIE DIAZ

 These requests are obviously needed.  Has there been a response at all from the governor?

 

JENNIFER EINERSEN

You know, as you can imagine, I think the governor is completely inundated and overwhelmed with issues stemming from this pandemic.  So we have not yet received a response from the governor directly.  However, the Florida Bar’s Real Property Probate and Trust Law Section, or RPPTL as they’re referred to, they recently released a statement addressing the concerns of Florida trust and estate practitioners amid the coronavirus.  And from what we understand, they had talked with the governor expressing what these concerns are.  The statement from the RPPTL section describes that while many other states have remedied the problem by issuing an executive order, the power to create and amend statutes in Florida rests with the legislators and not with the governor.  There may be a legislative fix to this problem.  If the governor can’t act, the legislature may be able to enact new legislation, and because the legislature is not currently in session, this would require the calling of a special session.  And it’s not clear if the legislature will meet on this issue, but the statement from RPPTL did communicate that RPPTL would likely support an earlier effective date of the electronic will statute or offer new legislation addressing the problem.  However, one issue is that not all practitioners in Florida support the passing of new legislation, and there is an important reason for this.  These protective measures in the Florida statutes governing the signing of estate planning documents are put in place to protect vulnerable people in our state, and as everyone knows, there is a very large elder population, and we’ve seen issues with undue influence or duress when it comes to these very powerful documents that I’ve explained.  So really, to address these concerns, the Elder Law Section of the Florida Bar is working with RPPTL, and I’m confident a balance will be struck between keeping these protections in place, but also effectively addressing the need for relaxation of the physical presence requirement in light of these really unprecedented -- the unprecedented situation of the pandemic.

 

STEPHANIE DIAZ

I hope they find a way to strike a balance.  I understand the concern of the Elder Law Section, but admittedly, I imagine some clients want to proceed with basic estate planning documents immediately.  So how do you advise clients who want to go forward now?

 

JENNIFER EINERSEN

Until we receive clear instructions from the governor or legislature on this issue, we’re suggesting that individuals who need to execute these basic estate planning documents take certain precautions.  For instance, while the testator needs to be in the physical presence of two witnesses, physical presence can be accomplished by standing six feet apart and even looking at each other through a window or glass partition.  Really, as long as there is no visual impairment, and you can see each other and the witness, this will comply with a physical presence requirement.  We also recommend that the document be signed in counterparts.  So this means that each person signing the will will sign a separate page and will not pass around the same page over fears of, you know, infecting one another.  In addition, if available, we recommend wearing gloves and a mask.  And lastly, any documents that are executed in this way should really be re-executed once things are back to normal, and this is to avoid any questions about the validity of the document.

 

STEPHANIE DIAZ

Those are interesting solutions.  I can see how that might work for someone who’s anxious to go forward.  
So who can actually serve as witnesses for these documents considering all the restrictions we have with social distancing and the pandemic?

 

JENNIFER EINERSEN

Yeah, I mean another thing to talk about is generally when we are choosing who will witness our estate planning documents, you know under normal circumstances, the preference would be for those people to not be interested persons.  So that would mean not having a family member sign the document or someone who’s receiving property under the will sign the document.  
However, it’s not a requirement under Florida statute that the witnesses be disinterested.  Currently, most people are staying at home and only have access to family members.  And the good news is it is okay, and it will be valid if family members, even if they are beneficiaries, act as witnesses to your will or trust.  One thing to note is that for the healthcare documents, the witness requirements are a little different.  So when signing a designation of healthcare surrogate, which is where you name the person who will make the healthcare decisions on your behalf, the surrogate named under the document cannot be a witness.  And for the living will, at least one person witnessing the document must not be the person’s spouse or blood relative.

 

STEPHANIE DIAZ

There’s a lot of interesting challenges as a result of the pandemic.  Are there other measures that people can take in the meantime?

 

JENNIFER EINERSEN

Yeah.  One of the important reasons why we use revocable trusts in our estate plans is to avoid the Florida probate process, which can be extremely expensive and cumbersome.  And the good news is that there are some measures that can be taken now to avoid probate that won’t involve creating these testamentary documents.  So for instance, if an asset that you own is titled in a certain way, such as jointly with your spouse, or if the bank account is possibly a pay on death account where you name a designated beneficiary, that type of asset is going to pass by operation of law directly to the survivor of the joint account or directly to the designated beneficiary, which means it bypasses probate and is distributed to the beneficiary you would like for it to be.  And you can work with your bank, and fill out those forms now and it doesn’t require -- it shouldn’t require any witnesses.  I mean, it really varies by institution, but it should be as simple as filling out a form and keeping it on file with your bank.  It’s also important to review any retirement accounts or insurance policies that you may own because a lot of times, maybe the beneficiary designation won’t be filled out immediately, or maybe something’s changed and you want to change who the beneficiary of that policy is.  Many times this is overlooked, and when there’s no designation on file, the asset passes through your estate, which requires the probate to be opened.  So it’s an important time to kind of review your assets and how they’re titled.  If something is titled individually in your own name, then it’s a good time to think about if you want to change that.  You could name your children as beneficiaries on a bank account just to kind of give you some security that your assets will pass as you want them to.

 

STEPHANIE DIAZ

There’s certainly a lot to consider and a lot of challenges in your practice right now.  Are there any points of opportunity or relief?

 

JENNIFER EINERSEN

Yes.  In addition to kind of all these challenges and problems that I’ve been talking about, there are some real opportunities for our clients.  Due to the volatility of the financial market, our clients’ assets really have depressed value.  And in our field, that means that there’s opportunities to transfer wealth in a tax-efficient manner.  So just to explain this a little bit, when you have a depressed valuation of an asset paired with what we’re seeing is historically low interest rates, it’s really an opportune time to transfer your wealth using some of the strategies that we really use for a lot of our clients.  And this might include a grantor retained annuity trust or for clients that are charitably minded, a charitable lead annuity trust.  And these are strategies that are really excellent tools, especially in a low interest rate environment.

 

STEPHANIE DIAZ

 If a client wishes to take advantage of some of these strategies, will there be issues with the signing of documents in light of all the challenges you discussed earlier?

 

JENNIFER EINERSEN

No, and that’s a great question.  The documents involved in implementing these strategies are not testamentary in nature, and that means that the documents can be signed without being in the presence of witnesses and can really be signed from the comfort of the client’s home and a scanned signature page can be sent to the attorney just to have the signature on file.

 

STEPHANIE DIAZ

That sounds great.  Thank you, Jen, for explaining these unique challenges and opportunities affecting your practice and your clients.

 

JENNIFER EINERSEN

You’re welcome, Stephanie.  And I’ll certainly keep you posted on any direction that we receive from the governor or any efforts that are taken by the legislature to relax these requirements that I’ve described.  And for anyone listening who wants to learn more about tax-efficient strategies to transfer wealth in the current environment, please reach out directly to a member of our Tax, Trusts and Estates team and also I recommend visiting our website.  Mildred Gomez, who is a partner in our Tax, Trusts and Estate Department, issued a client alert describing some of these tax efficient strategies in more detail than we discussed during today’s podcast.  So please take a look at that, and we’re here for any questions you may have during this pandemic.

 

STEPHANIE DIAZ

Thank you, Jen.

 

 

This information is intended to inform our clients and other friends about legal developments, including recent decisions of various municipalities, legislative, and administrative bodies. Because of the rapidly changing landscape related to COVID-19, we intend to send out regular updates. The information we provide is not intended as legal advice and viewers/readers should not rely on information contained in these materials to make business or legal decisions. Before making any legal decisions, consult your lawyer. Please do not hesitate to contact us should you need assistance responding to the many issues which have arisen, and will continue to arise, out of this situation.

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