DeAngelis Legal’s pandemic planning for individuals is a list of topics you should address in light of the COVID-19 outbreak. For topics related to businesses see Pandemic Planning for Businesses.
CARES Act for Individuals.
The CARES Act has many provisions benefiting individuals. These pandemic planning topics are wide ranging from the much discussed rebates, to lesser mentioned benefits related to retirement, charitable giving and healthcare expenses. Our favorite is the relaxation of the charitable giving rules – essentially adding a $300 above the line deduction for cash contributions to public charities in 2020 in addition to the standard deduction and for those itemizing, the deletion of the 60% limitation, allowing an individual’s qualifying contributions to public charities to be as much as 100% of modified adjusted gross income. We are not as excited about the retirement plan relief in the form of a waiver of the early distribution penalty and the required distribution rules, as these are merely deferral mechanisms. For more on how the CARES Act impacts individuals see CARES Act for Individuals.
Estate and Gift Tax Planning.
The Tax Cuts and Jobs Act of 2017 doubled the federal estate tax exclusion to almost $12,000,000 until December 31, 2024. We no longer are taking a wait and see approach on whether to utilize the exemption and recommend anyone with greater than $12,000,000 initiate some type of gifting program. We believe it is time to utilize the additional estate tax exemption if you have not done so already. This change in approach is based on the current (i) historically low interest rates, making the threshold to break even easy for most strategies to achieve, (ii) relatively low asset values based on the economic downturn and (ii) the expectation that the federal government will need to raise taxes to pay for the stimulus package. For an example of a recent project where we implemented this type of planning see Example Lifetime Gift in Trust.
Wills, Trusts and Powers of Attorney.
Yes, this is a good time to review your current will, trust and powers of attorney. Your review should include who is nominated to be your personal representative under your will and successor trustee of your trust. Life insurance and retirement account beneficiary designations should be reviewed to account for changes under the Secure Act of 2018 and ensure coordination with your objectives and documents. Most importantly, are your assets properly titled in the name of your trust? A couple hours now will save a lot of time, energy and frustration if an emergency strikes your family. As a reminder of what can happen, see Quinn’s article on the topic based on his family emergency in 2008 at Arizona Attorney Article “3 Months – Estate Planning Before Emergencies Strike”.
Personal Emergency Plans.
Emergency plans outline the key components of your life and what would need to be done in an emergency. These plans evolve and spending a little time to update your plan today can substantially reduce the time and stress involved in an emergency later. For an outline of topics to address see DeAngelis Legal’s Emergency Planning Checklist.
Sufficient liquidity to withstand a period of time with reduced or no income is essential pandemic planning. There are many schools of thought on how much you should have on hand, depending on your assets, liabilities and fixed v. variable expenses. Owners of highly illiquid assets such as a closely held business or real estate and those with greater fixed expenses and liabilities will need more money in case of an emergency than those with liquid investments such as cash, stocks and bonds and variable expenses that can be cut easily.
Much has been written about personal safety and we encourage you to regularly checking the recommendations of the Center for Disease Control at CDC COVID-19 and Arizona’s Department of Health and Human Services at AZDHS COVID-19. These sites offer great resources for your personal safety. To see how we are incorporating the the guidelines and precautions in our own office, see DeAngelis Legal’s COVID-19 Response.
Plan Well and Stay Healthy. DeAngelis Legal.