It's a safe bet that no one who lived through 2020 will ever forget the extraordinarily unusual year. In a society that is constantly on the go, the effects of the coronavirus pandemic have caused many people to pause and reflect on the important things in life, such as their families, their health and how they're doing financially. In a poll conducted by non-profit organization Life Happens, two-thirds of respondents said COVID-19 — which has led to the loss of life for a quarter-million people in the U.S. and 1.3 million worldwide, based on the latest figures from Johns Hopkins University — served as a "wake-up call" as it pertains to their financial well-being. More specifically, of this group, 33% said they'd sat down and talked about issues like wills and inheritance as well as their current health status (32%). Other subject matter respondents attested to having included life insurance coverage (30%) and emergency savings (27%).
If nothing else, COVID-19 has taught people the preciousness of life and how quickly things can change. It raises the question: Have you done any estate planning? If you're one of the estimated 1 in 3 Americans who have completed at least some form of estate planning — according to estimates from Caring.com — this may be a great time for you to re-evaluate issues or decisions you've made if COVID-19 has impacted you in some way, be it financially, physically or emotionally.
Update your documents
Estate planning is largely composed of asking yourself how you would like to leave a lasting legacy and how you will distribute your assets. New circumstances may warrant changes that you hadn't anticipated. It's important to then update your documents so that they reflect your wishes. The documents you may need to amend include those regarding power of attorney (who you want to make certain financial and health decisions on your behalf should you become unable to do so), healthcare proxy, living trust and last will and testament. Only 40% of adults in America have a will in place, so if you're one of them, you're in a great position. Just be sure to update it appropriately, with help from your financial advisor or lawyer.
If you set up a living trust, you may want to change it to one that is fully revocable. This means you can change it as you see fit — or terminate it entirely — even after it's been established. Some of the adjustments you may be considering include the distribution of assets, who is designated as the trustee and what their duties are.
Review your life insurance
As the survey revealed, at least 30% of Americans said this was a more common subject of conversation since the pandemic hit.
The reason is understandable. Numerous polls over the years have shown that families consistently underestimate how much life insurance they should purchase. More Americans may be prioritizing it these days because they know they can rely on it to be there for them when they need it. They can't say the same for their current job, their ability to save for retirement or an emergency fund, according to a recent survey from LIMRA.
How much life insurance should you buy? There are life insurance calculators that you can access for free online, but the general rule of thumb is an amount that is at least 10 times what you earn per year in salary. Consider speaking with your financial advisor, who can more effectively customize the proper type and amount based on your needs and long-term goals. They may also be able to provide you with counsel on chosen beneficiaries and if you should consider switching from a term life insurance policy to whole or indexed universal, among others.
Check to see if you can have your will notarized electronically
Online technology has been indispensable throughout the crisis, particularly video conferencing. But you may also be able to leverage it for signing important documents and getting them notarized. "Social distancing" and "community spread" have entered the global lexicon as a result of the coronavirus pandemic. Self-isolation and staying six feet apart are designed to slow the transmission rate. It remains unknown when people will be able to congregate like they used to, but in the meantime, you may be able to get your estate planning documents properly notarized via e-signature. Notarization certifies your documents are valid. However, as Forbes reported, online notarization isn't widespread just yet.
Again, talk to your financial advisor about this process. They should be able to provide you with specifics on requirements as it pertains to will preparation and if any laws have changed since the last time you made adjustments to your plan.
Understand the SECURE Act
Speaking of which, what do you know about the Setting Every Community Up for Retirement Enhancement Act? The SECURE Act became law in December 2019. It's a sweeping bill that touches on many aspects of retirement and funding, like the age at which minimum distributions are required, rules about inherited retirement accounts and penalties that may apply for early withdrawal.
Here as well, your advisor or attorney should be able to answer questions that may impact your estate planning from a compliance perspective.
From Leveraged Planning to estate planning, Global Financial Distributors is here to help you through this unpredictable time. We have the products, services and strategies that you can count on. Contact us today.