Estate Planning in the Time of COVID-19

Q. How can readers protect themselves against the pandemic’s economic impact?

A. During times of transition or uncertainty, it is prudent to review your current estate plan and ancillary documents to ensure they reflect your wishes and account for any changes to the law. Health-care proxies and powers of attorney should be reviewed to confirm that the agents named are still the best ones for the job and that the powers granted to them are appropriate. Wills and revocable trusts should also be reviewed with an eye toward the ultimate disposition of assets and any potential estate tax consequences. For those with an interest in more sophisticated estate planning, there are additional opportunities such as creating grantor retained annuity trusts (GRATs) and making sales to intentionally defective grantor trusts (IDGTs), which can be taken advantage of while interest rates remain low.

Q. What does socially-distant estate planning look like?

A. Even as Massachusetts and other states are slowly re-opening, physical distancing is still encouraged and it may be difficult, if not impossible, for clients to meet in person with their estate planning lawyers. Fortunately, technology and the law have made it possible to create, update, and execute estate planning documents remotely.

Lawyers, like everyone else, have become adept at conducting meetings over video conference and preparing estate plans from their home offices. In Massachusetts, emergency legislation was passed in April to permit notarization of documents by video conference, provided that all relevant parties are located in Massachusetts at the time of the signing. Documents executed through the remote process described in the law will remain effective even after the state-wide state of emergency has been lifted and the temporary law has been repealed. Similar laws have been passed in other states making it possible to conduct most, if not all, legal matters during this time.

Q. How does the CARES Act affect charitable giving and estate planning?

A. The federal CARES Act, signed into law in late March, provides relief to individuals and families in the form of one-time direct payments to individuals, as well as relaxed restrictions on retirement accounts and new guidelines on cash gifts to public charities.

Retirement Accounts:

• Individuals are not required to take otherwise-required minimum distributions (RMDs) from certain retirement plans and accounts in 2020, including 401(k)s and IRAs.
• Alternatively, for IRA beneficiaries who are age 70½ or older, there remains the option to make qualified charitable distributions of up to $100,000 per year directly from their IRA to a charitable organization, in lieu of taking their RMDs.
• Anyone who has been diagnosed with the novel coronavirus, who has a spouse or dependent who has been so diagnosed, or anyone who “experiences adverse financial consequences” as a result of the virus may withdraw up to $100,000 penalty-free from eligible retirement plans, including 401(k)s and IRAs, along with other benefits.

Increased Charitable Deductions

• The CARES Act temporarily suspended limits on charitable cash contributions as a way to encourage giving to organizations addressing the needs of people impacted by COVID-19 (such as BC’s Eagles4Eagles Fund), as well as charitable organizations facing an uncertain financial future.
• In 2020, people who do not itemize deductions on their income tax return can deduct up to $300 of charitable cash contributions, in addition to the standard deduction.
• Those who do itemize their deductions are able to deduct up to 100 percent (instead of the usual 50-60 percent) of their adjusted gross income for cash contributions to charitable organizations.

For more information on the CARES Act, visit bc.edu/caresact or speak with your attorney or financial planner.