Social Distancing, Quarantine, and Effective Estate Planning in a Pandemic

Social Distancing, Quarantine, and Effective Estate Planning in a Pandemic

For many of our business clients, addressing the realities of estate and business succession planning amid the COVID-19 pandemic may seem unnecessarily alarmist or generally depressing. However, it is an all too necessary and practical concern for the sober-eyed, forward-thinking business leaders that make up our clientele. The lynchpin of a good succession or estate plan is understanding of how the plan works during any type of disruption. Many of our clients, quite understandably, associate estate planning exclusively with severe health issues, their own mortality, and planning for the future care and well-being of their loved ones.

However, a good estate plan is a living set of documents, ideally updated with some frequency, that empower clients to effectively designate and delegate responsibilities. Thorough and effective estate plan documents are only as valuable as the client’s understanding of them. The true value of legal services when it comes to estate planning is the explanation of how the documents work. Deciding from there how to implement the planning tools available is a pretty straight-forward process.

For many clients choosing who and how they want their affairs handled is a fairly obvious albeit emotional decision to be made among loved ones and trusted business associates. But the reality of the situation often also requires coordination with financial institutions; health care providers; insurance, tax and retirement professionals; and government entities.

We encourage clients to take a step back from the uncertain, scary, and very real personal concern: “have I updated my Will?” And acknowledge the absolutely certain, but also equally scary and real concern: “how is this going to affect my business and personal estate?” This is where we want to help clients during this difficult period. Recent interest rate drops, SBA loan adjustments, COVID, CARES, PPP legislation, and fundamental post-pandemic adjustments will all have a lasting effect on individual estates, succession plans, and particularly on business owners and managers moving forward.

Some of these concerns when it comes to institutions will be in flux for some time, so it is important to keep in touch with legal and other professional advisors as situations develop. However, there are some very basic steps clients can take during this time to protect their businesses, themselves and their loved ones:

Most business clients have either already deployed or are developing ad hoc procedures for dealing with the COVID-19 disruptions. Hopefully, for small businesses they are aware of how this fits into their succession plan, presuming one exists. For some businesses, this will mean restructuring or even closing. Business owners weathering the storm can use this as an opportunity to integrate or develop plans for when one or more of their individuals are not physically available in the normal course of business. Frequently, decision-making chains of succession in by-laws or operating agreement fail to plan on any more than two tiers of decision makers not being available. Additionally, proxies, powers of attorney, and defining ‘unavailable’ or ‘incapacitation’ are afterthoughts in drafting these documents. Rather than resolving conflicts between emergency measures and standard protocols later, business leaders should seek to harmonize theses in an established plan. For some who may be closing or restructuring this is a time to reckon their personal and professional affairs towards the future.

This in turn raises perhaps the biggest challenge, especially with regard to personal estate plans, taking the plan out and reviewing it. Clients will frequently execute a Will, possibly a Trust and Powers of Attorney only to put them in a safe or file cabinet and forget about them. In any scenario, two of the most frequent estate planning problems are that clients never received an adequate explanation of what their documents do or why signing the documents alone is rarely if ever the last step.

Specifically with regard to a pandemic, the concept of a power of attorney and making sure those documents are effective deserves special attention. Obviously, the terrifying reality of quarantine, ventilation and intubation, and the need for isolation in infection and exposure situations makes clear why a durable health care power of attorney (“DCPOA”) is a necessity. We often recommend ensuring updated HIPAA information is also covered or incorporated. Access to medical records and information can be vital in an emergency. And empowering clients with proper documentation is key to self-advocacy in these times of overburdened healthcare infrastructure. We encourage clients bring these to their health care providers whenever a foreseeable need might arise and keep copies available.

But more broadly speaking; a general durable power of attorney or financial power of attorney document can be vital during this period of both financial upheaval and potential personal health crisis.

At this point, it may be wise to acknowledge human nature and for many clients they just never got around to setting up an estate plan much less getting around to reviewing it. And now they are worried about getting one secured in a time of social distancing. This should not be a cause for panic. Most law firms are staying open at least in an electronic capacity. While Nevada and Indiana are the only states to have codified the “electronic will,” the reality is that we have lived in the era of electronic wills for some time already.[1] Wills and estate documents can be drafted and emailed with ease. Although, as always, we caution clients against making the assumption that documents prepared with one state’s law in mind can be used in another state or jurisdiction.[2] In Missouri, the complication lies with getting two competent witnesses and for certain documents, a notary. However, the reality is that exercising caution (minimizing contact, gloves, proximity, antiseptics, etc.) can minimize risk while meeting the basic requirements. One new solution is using cars – which provide a safe window of protection – while still providing the ‘in person’ witness component. Video conferencing, such as FaceTime and Zoom, are still a largely untested methodology in the courts,[3] but as with all technology, its legitimacy or rejection will likely follow social perceptions as time moves on. This is not to encourage cavalier behavior in executing documents. The reality is that protecting at-risk individuals is part of why these well-aged traditional requirements exists. Therefore, we recommend exercising common sense to ensure your documents are valid and stand up to heightened evidentiary scrutiny in a court of law. This should be done with the assistance and advice of legal counsel.

However, assuming a client has gotten to the point possessing something resembling a signed and properly executed estate plan, the question is what does it do and how does the current pandemic change that?

Ideally, a business owner will have separate succession plans for their business and their personal estate. Although, with family owned businesses these can often overlap or intertwine. For the personal estate, the plan typically provides a Will which provides direction on how to handle the estate (specifically to avoid probate) and the traditional ‘upon death’ decisions. The Will is typically accompanied by a Trust. This is a more flexible tool for clients whose assets require some management both during their lifetime, during any period of incapacitation, and into the future following their passing. Even this, the barest of bones description, is just the generic case without getting into the specifics of pourover Wills; revocable and irrevocable Trusts; real estate tenants in common classifications, ‘transfer upon death’ documents; joint, separate, and family Trusts, etc. However, some variation on the above usually results in a Will that handles ‘the family side’ and a Trust that handles ‘the financial side.’

With that in mind, the next step is to update any specifics as to individuals and details that have changed and then ensure the legitimacy and validity of the documents. Many internet forms or do it yourself software can produce documents rife with outdated law, incorrect terms, and generally vague or contradictory language. When most people envision legal disputes about an estate they think of inter-family malfeasance and attempts to take advantage of elders or even forge documents. The reality is most disputes arise from documents drafted and executed in good faith but full of contradictions or vague instructions putting relatives at odds. A cursory legal review can expose and correct these often without a full scale rebuild of the essential plan.

Then specific to the pandemic, the issue of incapacity should be revisited. Often incapacity clauses are drafted more as an afterthought to cover relatively small likelihood situations such as falling into a coma. Or more often, clients who have concerns about mental health or lucidity seek to address the matter once onset is imminent or – arguably – too late. Specific to COVID-19, concerns about physical incapacity or inability to communicate loom large as it is the nature of pulmonary maladies. However, with quarantine, we may want to further examine what we consider incapacity and exactly when and how we want to empower others to act on our behalf. Several stories of celebrities and travelers being stranded abroad have been in the news lately. With internet communication and common proxy set-ups this may seem like an antiquated concern. And at first blush, it certainly does not seem like the kind of hurdle that would require invoking an estate-level power of attorney document to act on. But consider the mounting difficulties: Notaries, attorneys, CPAs, physical bank branches, and government offices have all limited their physical access. Travel and immigration are in a state of uncertainty. Nursing homes and elder care facilities are under extreme scrutiny. International markets are undergoing unprecedented change. Recent government stimulus has been issued on a first come, first serve basis. And COVID-19 related or not, healthcare access is at best uncertain. So knowing exactly who and when someone is empowered to act on your behalf is more important than ever.

Typically, a standard estate plan financial power of attorney (interchangeably referred to a simply a ‘durable power of attorney’ or DPOA) is drafted as a sort of financial HIPAA, often allowing the executor or executrix – person handling the estate (commonly one in the same with DPOA holder) – to work with banks, insurers, etc., immediately after some event of near death or incapacitation. The concept is that this would allow a smooth transition and settling of affairs as the assets and powers transitioned more fully into the Trust and trustees. This differs from a typical business or special power of attorney found in some company’s operating agreements or part of some transactions business clients may be familiar with. Those more closely fit the type of business decision making powers addressed above. However, given the increased risk in today’s climate, clients may want to give more thought as to how broad or narrow they want their personal DPOAs structured. Does incapacity mean unreachable? Are mental and medical incapacitation defined differently? What is the scope of authority? Another concern is not burdening loved ones with too much financial responsibility. Without an in depth discussion of the doctrine of the business judgment rule, clients should be aware that this power is governed by statute and that there is protection both for the person providing the DPOA and the person exercising the DPOA.

A power of attorney “shall exercise the authority granted in a power of attorney with that degree of care that would be observed by a prudent person dealing with the property and conducting the affairs of another, except that all investments made on or after August 28, 1998, shall be in accordance with the provisions of the Missouri prudent investor act, sections 469.900 to 469.913. If the attorney in fact has special skills or was appointed attorney in fact on the basis of representations of special skills or expertise, the attorney in fact has a duty to use those skills in the principal’s behalf.” Mo. Ann. Stat. § 404.714 (West)

Which is not to say the client granting the DPOA should rely on the statute to protect their wishes. And clearly, this decision requires both legal and financial advice to structure with maximum effectiveness. However, as a tool, it is another malleable document that clients concerned about what special measures to take during a time of crisis should be aware of.

Beyond powers of attorney and actually completing the documents, clients should take precautions to ensure their documents are valid and enforceable. Periods of upheaval bring additional stress and disharmony to events such as the passing of a loved one. While many of us assume that our loved ones and family are immune to the type of disharmony associated with estate disputes, the emotional gravity and unpredictability are part of why so much thought goes into estate planning. In the words of the boxer and sometimes philosopher, Mike Tyson, “everyone has a plan until they get punched in the mouth.” Unprecedented times such as these only exacerbate that uncertainty. So to avoid suspicion, accusations of fraud, duress, or general insecurity it is wise to take steps to document, verify, and validate any changes to an estate plan during this period.

In terms of a notary, on April 6, 2020, in Missouri, Gov. Parsons issued Executive Order 20-08 allowing notaries to witness signatures by video conference and lifting “in person” statutory requirement for notaries. In Kansas, on April 9, 2020, Gov. Kelly issued a similar Executive Order 20-20. Several other states have passed either permanent or temporary Remote Online Notarization (“RON”) laws.[4] Nevertheless, both the common law and RSMo § 474.330(1) require two witnesses to a Will signing. In addition to some of the approaches discussed above, the ABA provided the following health advice for in-person notaries that applies to witnesses as well:

  • Wear gloves and a mask and provide them for the principal signers.
  • Eliminate physical contact. Do not shake hands.
  • Do not share pens. Have all parties bring their own and sanitize after usage or gift them.
  • Always keep a safe distance from the principal (minimum of six feet). Standing at the opposite ends of a six-foot conference table or passing documents through a bank teller’s glass window satisfies the personal appearance requirement.
  • Do not touch the identification. View it from the desk or tabletop
  • Arrange the documents such that each document needing to be notarized is grouped together, so that the amount of time being spent with the signer can be dramatically reduced.
  • Have the signer sign all signatures that require an acknowledgment prior to meeting the notary. (Acknowledged signatures do not need to be signed in front of the notary; they simply must be acknowledged.)
  • Identify each page requiring a signature to be notarized prior to the notarial act so you can have the signer acknowledge each signature simultaneously. Doing so will allow the notary to notarize in bulk: “Do you acknowledge that you willingly signed pages 2, 4, 6, 8, and 12?”[5]

While clients should minimize their exposure and practice safe social distancing and public health procedures, taking creative steps to document and verify the circumstances of documents executed at this time is key. By consulting an attorney, clients can make sure they meet all the necessary technical details to execute their document. Then, the use of technology and creative resources can help protect against uncertainty or challenges to the legitimacy of a plan. As with most legal issues, additional communication can go a long way. In addition to the document, keeping a record of the intent and mental state of the parties can fortify the legitimacy of these complicated signings. Often dismissed as inadmissible or immaterial parole evidence, these records have a way of going from irrelevant to very relevant. So when in doubt exercise common sense and an abundance of caution.

www.evans-dixon.com


[1] Chaliss, John M., “Electronic wills in Missouri: The future is now” MO Bar News, Vol. 75, No. 6 / November – December 2019

[2] A fundamental flaw of ‘internet form’ or DIY estate planning is that many families end up spread over several states and jurisdictions. This one size fits all approach not only runs afoul of state to state probate laws, but with significant real estate and tax looming on the horizon of almost any estate planning question, failing to take into account the location of the client, the assets, and the beneficiaries is a recipe for disaster.

[3] It should be noted that Courts have with greater frequency relied on these to conduct hearings. However, the reference to ‘tested’ is more in the sense Courts’ academic questioning of the validity and evidentiary qualifications for ‘live video feeds’ is still a relatively new development.

[4] This list is subject to change as events are still unfolding. Arizona, Nebraska, Tennessee, Texas, Utah, Wisconsin, Florida, Idaho, Indiana, Iowa, Kentucky, Maryland, Michigan, Minnesota, Montana, Nevada, North Dakota, Ohio, Oklahoma, South Dakota, Vermont, Virginia, and Washington. States with temporary RON orders are: Colorado, Connecticut, Illinois, New Hampshire, New York, Pennsylvania, Wisconsin, and Wyoming.

[5] https://www.americanbar.org/groups/litigation/committees/trial-practice/practice/2020/covid-19-pandemic-advice-for-notaries/

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