Major Estate Planning Challenges that are Exposed by Covid-19
The current COVID-19 global pandemic has shaken the entire human race. Not only has the problem affected the physical and mental health of people across the globe, but it has also altered the very fundamentals of life with its monetary repercussions. COVID-19 has exposed gruesome realities and made one thing clear that human life is extremely vulnerable. The pandemic has caused people to isolate, quarantine, or even be treated for the virus. As a result, many have considered either instating or reinstating their estate plans. But given the uncertain times, as exposed by COVID-19, estate planning today is witnessing some major challenges. These hurdles need to be defied with a focused strategy and financial prudence.
Here are some of the major estate planning challenges that are exposed by COVID-19:
- The validity of the will
- Updating estate documents
- Reduced value of assets
- Allocating foreign assets
- Risks of litigation
- Tax filing
The global pandemic requires people to isolate, quarantine, or receive treatment for the virus to ensure safety. This becomes a prime challenge in estate planning since as per the legal requirements, the will of the person must be duly valid and should have signatures of the person bestowing the estate, along with those of a witness who should also be physically present. Given the current critical times, physical presence in such situations is not feasible. Going over the will reinstating process right now can be nothing short of daunting and full of hassles. Also, for all those people who are unable to either form or update their will, the distribution of their estate will be carried out as per the law and not as per the wishes of the deceased. However, this does not imply that anyone should sign their estate planning documents without legal proof or advice. Timely advice must be taken, and all estate planning documents, along with the validity of the will must be duly checked, created, or updated and signed with legal formalities.
COVID-19 engulfed the entire world without much of a warning. In this rush, estate planning is likely to take a back seat for many, increasing the probability that vital documents such as the power of attorney, revocable trusts, beneficiaries, medical directives, etc., would not be updated to reflect the current wishes of the person. The challenge poses some critical issues to the overall value, functioning, control, as well as the distribution of the estate. Hence, for people who have considerable time at hand, this is the best phase to update or put in place all the necessary estate documents. Professional help must be sought immediately to ensure everything is seamlessly in order.
Another alarming challenge faced during the current pandemic is the decline in the value of assets in all spheres, irrespective of the geographies. The virus has shrunk even the mightiest of all economies and has had a considerable impact on the American monetary health too. A major challenge in estate planning is reconsidering the value of assets because of their reduced worth. This will imply that the assets which were set aside for a person in the will may have reduced in their general value and may no longer be as valuable as they once were. Hence, individuals need to review and reconsider the worth of their assets and evaluate if the allocation of the estate is still as desired. It is crucial to check if the current distribution and worth of assets to nominees is as intended or not.
The pandemic has caused significant losses for all economies, though some worse than others. This has had a direct impact on the ownership, value, and transfer of foreign assets. It would be increasingly challenging to ensure that the foreign assets are streamlined and passed on as desired to the beneficiaries. Moreover, given the depreciating worth of assets, the value of once high-priced possessions could now have shrunk to the knees. Hence, it is pivotal to reconsider the distribution of these resources as per the new value. Additionally, the requirements and legal formalities of the concerned country could have become more complex because of COVID-19. Each would need to be assessed and carefully adhered to avoid any legal issues that could ultimately hamper the estate worth.
The pandemic situation has substantially increased the volatility of financial markets, depressed the values of assets, and produced the lowest interest rates in a long time. Such dramatic changes would imply that there are high chances that a child or spouse may not get the desired value of assets, as deemed by the will at the time of creation. Simultaneously, this increases the probability that a beneficiary of the will may no longer be provided for or could be in an even financially worse situation than before. This increases the risk of the affected person claiming for better provision in the court of law under the Family Provision Application. This act will certainly add huge dollars with regard to fees, and meanwhile, with the litigations in progress, the estate division will remain pending until resolved. Hence, you need to reconsider your estate worth and distribution well-in-time and inform your lawyers about it.
A serious challenge immersing from the COVID-19 situation is the filing of taxes. The coronavirus has resulted in all countries imposing travel to and from restrictions. This has led to multiple people being stranded in a foreign land with no confirmation on their return home. While this has caused emotional stress, it has also gravely created financial and tax complications. Some countries, such as the U.S., tax people who have been in the country for a certain length of time, even if they are not a U.S. citizen. This can ultimately cause a non-U.S. citizen to fall prey to the tax implications of the country and have an adverse impact on the estate of the person. In such cases, estate planning needs to be revised to reduce an individual’s tax burden. Moreover, for U.S. citizens stranded outside the country due to COVID-19, taxes continue to pile up even in their absence. However, tax issues can be handled and minimized to a possible extent, with the help of professional advisors.
To sum it up
In this precarious situation, the level of uncertainty is alarming with a bleak hopeful trajectory of recovery. The world needs to focus on the ‘ifs’ now, more than ever, and plan for the future in an air-tight fashion, keeping in mind all scenarios. With the pandemic affecting more than a third of the world’s population, it is time important measures are taken to reduce vulnerability, at least in the financial aspects of life. This is the ideal time to consider, revise, and update estate plans to ensure that all allocations and divisions are correct. Such times call for taking immediate steps rather than contemplating for too long or pushing the subject to a later date, since that could bring more challenges to the surface.
It is advisable to timely seek guidance from Financial Advisors to ensure your fundamental estate plans are accurately in place, and you encounter minimum challenges in the future.