Trust and estate advisors often receive the desperate call from a family member or close friend of a loved one who has just been diagnosed as terminally ill. The news is often sudden and unforeseen, leaving the family and loved one emotionally unprepared and disoriented. The advisor is informed that estate planning documents were drafted within the last few years, and the caller wants to know if anything else need be considered. The caller is concerned to hear that even if a well-prepared estate plan is in place, there may still remain many open matters that need to be resolved to ensure that the plan is effective and their loved one’s wishes are realized. Not surprisingly, the “deathbed” planning to be implemented involves much more than a phone call. Each engagement presents completely different scenarios, and diligent fact gathering is crucial.
Listed below are a few outstanding issues that the family and advisors may need to review; however, this list is no substitute for obtaining good legal and tax advice.
1. Locate and review the loved one’s estate planning documents, e.g., Will, Revocable Trust (if applicable), Financial and Medical Powers of Attorney, Personal Property List (if applicable), and Burial Instructions. Ensure that the documents are signed originals and the most recent versions.
2. If the loved one has capacity, have an attorney review these documents with him/her and make revisions as necessary. For example:
- Revisit the persons named to act on behalf of the loved one upon death or incompetency; e.g., Personal Representative (Executor), Agents, Trustee, or other fiduciaries;
- Examine HIPAA releases to determine if they are adequate under the federal medical privacy act to give the fiduciaries access to medical records in order to make informed healthcare decisions; and
- Ensure that the beneficiaries named under the plan are consistent with the loved one’s intent.
3. Consider whether the loved one desires to make any “deathbed” gifts. If so, address with counsel potential estate and gift tax issues, and ensure desired tax results by having donees cash their gift checks promptly. If mental health is in decline, consider dovetailing gifting powers into the trust and/or power of attorney to allow continued gifting, after incapacity, to additional donees and/or in subsequent years.
4. Meet with family members (and the loved one, if possible) to discuss caregiving, and division of duties and responsibilities. Similarly, arrangements may be required for the continued care of pets.
5. Locate and review the loved one’s medical insurance coverage and prescriptions; keep the phone number and address of his/her primary care physician handy.
6. Ensure a family member has a key to the loved one’s home, car, home safe, etc., and knows the codes to disengage the home security system and to access his/her computer files.
7. Determine what assets the loved one owns and how each asset is titled. Locate and review:
- Latest bank and investment account statements;
- Titles to all vehicles;
- Deeds to residence and any other real properties;
- Beneficiary Designations for all life insurance policies, annuities, IRAs or employee benefit plans;
- Formation documents for any closely-held businesses (S-Corp, LLC, Partnership, etc.); and
- Contents of any bank safe deposit boxes or home safes.
Check with counsel to ensure that title and beneficiary designations are appropriate to take best advantage of the capital gain “step-up” rules (which can reduce or eliminate taxes on a subsequent sale) and are consistent with other planning documents and the overall estate plan.
8. Consult with tax advisor(s) (attorney and/or accountant) about the impact of Federal and State estate taxes and the advantages/disadvantages of:
- Selling assets prior to death to harvest capital losses;
- Delaying the sale of capital assets with inherent capital gain until after death; and
- Converting a traditional IRA into a Roth IRA.
This checklist addresses some of the most immediate issues that may arise when a loved one is diagnosed as terminally-ill. We have attempted to make the list helpful to you as a concerned family member or as an advisor.