The experience of the pandemic over the past 14 months should have made us more aware of the need for estate planning. This is a subject that many people do not like to think about, or they plan to address later.

More than 500,000 people have lost their lives during this crisis and many of them probably were not prepared.

The first step is to have the legal documents prepared. They may include a will, power of attorney, a trust, a health care directive and a living will. These documents will let your loved ones know your wishes, potentially save on taxes, administer the estate, pay final bills and distribute assets according to your desires.

Power of attorney is especially important if someone other than a spouse must make a decision for you when you do not have the capacity to do so. It also can be important to have for children over 18 who are not married and away from home. Without one, you may not be able to access medical records or help make decisions.

Some people have amended their living wills since the pandemic started. Those who do not want to be kept alive just by a respirator may want to grant an exception for some condition such as COVID-19. Also, remember that beneficiary designation overrides anything in your will.

Your will may say everything is split 50-50 between two children, but if the life insurance policy says Junior is the 100% beneficiary, he gets all of the death benefit and possibly half of everything else.

Properly titled beneficiary designation can avoid probate and cost, which may be 2% to 7%. The assets often move faster and there is no public record of your wealth. Remember, some assets are more valuable than others.

Qualified funds such as 401(k)s, IRAs and 403(b)s are partly owned by Uncle Sam and he will want his share. Non-qualified funds and specially treated accounts, such as a Roth, do not have the same tax consequences. The Secure Act requires that both qualified and Roth accounts be distributed before the end of the 10th year after death. Spouses have more generous choices.

People worked hard and saved to gather assets. Sometimes, beneficiaries just do not recognize hard work when receiving an inheritance. I recently witnessed a case in which someone paid $30,000 more in taxes than was necessary just to have immediate access to the funds. The taxes were paid out of the inherited funds, so it took no work on the part of the beneficiary.

It is important that you have some form of record to let beneficiaries know where assets are located. In our office, we use a survivor guide to help simplify the process. Without this, it is much harder on your family during very emotional times. If you have a special-needs child, you will probably need additional planning.

Federal estate taxes have not been an issue for most families under the Trump tax plan. You could have about $23 million before the 40% federal estate tax became an issue. There is some talk in Washington about lowering that to maybe $3 million, which would create a planning issue for many more families. This will be especially challenging to people who own most of their assets in 401(k) plans. If you are in this situation, it is important to start the plan now.

While everyone knows they will need an estate plan someday, why not make sure that you start preparing today. It could save a lot of problems later, and maybe a lot of taxes.

Gary Boatman is a Monessen-based certified financial planner and the author of “Your Financial Compass: Safe passage through the turbulent waters of taxes, income planning and market volatility.”

To submit columns on financial planning or investing, email Rick Shrum at

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