If You Die From The Coronavirus, What Will Happen To Your Assets?

This is an update to Peak Prosperity's report on estate planning, which the coronavirus pandemic has suddenly and sadly made very relevant. Everyone with a family should take the time to read this.
Millions of us are now under home lockdown with little to do but watch the global covid-19 infection total continue to rise exponentially, as well as the deaths resulting from it.

It’s reported that 22,000+ have died so far. But the models show that soon, within a month or so, the death toll will be in the millions.

In the US, the virus’ spread is happening at such a swift rate that more and more people now know somebody who’s sick from it. I personally know two people who currently have it, plus a family that contracted it in January during a trip to Asia and has (thankfully) recovered.

If the projections prove correct, pretty soon everyone will know someone who has coronavirus. And following soon after, most of us will know folks who die from it.

Given that the average age of those reading this article is somewhere between 50-70, and that the virus’ fatality rate increases with a person’s age, a morbid but important question arises:

What will happen if you die from this thing?

Specifically, if you suddenly fell sick, were rushed to the hospital and ended up dying attached to a respirator, is an estate plan in place that will handle your assets and affairs the way you want?

The math says the answer is “no” for at least 60% of you.

So while you have the time, as we watch covid-19 cases metastasize faster and faster, create or update your will and/or trust.

Doing so is an act of love for those you care about, as I’ll explain below. And getting things in order will give you tremendous peace of mind.

And more than that, I can’t think of single good reason not to do this right now. We’re dealing with a global pandemic, folks. What other prod from the universe do you need?

To Fail To Plan Is To Plan To Fail

OK, so who is this relevant to?

Wills and living trusts make sense for those who are married, have children, own real estate, have financial or other material assets, and/or wish to influence how their estate is distributed after their death. I’m guessing the vast majority of folks reading this fall into at least one of these categories.

As a case in point, I had a good friend who died suddenly of a heart attack at age 42. There was no warning. He was a former college athlete, still-fit, and died on the basketball court during his weekly practice. He left behind a wife and three children, one with life-long special needs.

Fortunately, my friend was a lawyer, and had practiced what he preached professionally. He had put a well-constructed estate plan in place while alive (along with a healthy life insurance policy).

I saw first-hand the great benefits this gave his family upon his sudden passing. They were able to fully focus on dealing with their grief, as the estate plan largely took care of all the legal and financial details in the background.

If you’ve had an immediate family member or close friend pass away, you’re likely aware of the tremendous number of tasks and decisions that need to be dealt with when someone dies. Aside from the obvious treatment of their remains and funerary arrangements, the deceased’s estate needs to be settled.

This means an executor needs to be appointed who will manage the process, creditors need to be paid as will any estate taxes, heirs need to be identified and assets distributed among them (which in many cases requires selling/disposition of these assets first), care for minor children needs to be arranged, etc. This process is oftentimes managed by the state (i.e., slowly and often inefficiently).

This is an awful lot to put a surviving spouse through (assuming there is one) during a time of extreme grief. The same goes for children.

And this burden gets compounded if there’s no estate plan in place. What assets did the deceased own? Where are they? Whom did he/she want to inherit them? All of these questions need to be answered during the estate settlement process.

Imagine trying to untangle all this right after your spouse, parent, sibling or friend has died. When you’re already emotionally traumatized.

Now imagine that the heirs involved don’t agree on how the estate should be divided, and infighting ensues. Relationships can easily get permanently damaged and money quickly drained should expensive lawyers get involved to contest the matter. The situation often gets very ugly, very quickly. (Click here for a sampling of horror stories resulting from when folks died without a will.)

Why risk putting your loved ones through this? Especially when it’s so easily avoidable, and relatively inexpensive to do so?

Look, every one of us is going to die. That’s the only rock-solid guarantee we’re given during our time on Earth.

You’ve worked hard your whole life to take care of those important to you. Don’t drop the ball on the 1-yard line. Take care of them in your death, too.

Wills & Living Trusts

The bedrock of a good estate plan involves a will and a living trust. I'll explain the role of each, the differences between the two, and the wisdom of having both.
NOTE: What follows is a summarization. While wills and living trusts are fairly simple conceptually, there are lots of special cases. Many of those are not addressed below to prevent this article from becoming densely encyclopedic. Also, I am not a lawyer -- meaning: take this synopsis as education, not personal legal advice. If you want that, consult an estate lawyer.
OK, with that out of the way, let's proceed.

What Does a Will Do?

Most folks are familiar with the concept of a will. Every murder mystery usually has a scene where the family gathers at the lawyer's office to hear the reading of the late victim's will: "Being of sound mind, I hereby bequeath to my nephew, Chauncey, my collection of rare Amazonian butterflies..."

Simply put, a will is a legal document that specifies:

  • how you want your assets distributed upon your death,
  • whom you grant the power to oversee that distribution (i.e., your "executor"), and
  • whom you want to have guardianship of your minor children, should there be any
Sounds like something every responsible adult should have, right? I agree.

But amazingly, 63% of US adults do not have a will. And an additional 9% have a will that’s no longer up to date. Even among the more affluent, 45% do not have a will.

So those ugly issues I mentioned above of what can happen when you die without a will? They’re very real and actually happen a lot.

Which is criminal, as a will is a straightforward document that shouldn’t cost you more than a few hundred dollars (at most) and a few days to create (I’ll give more specifics on the will creation process in Part 2). There really aren’t any good reasons why the vast majority of us, especially those with minor children, shouldn’t have one.

The key downside to note with a will is that it’s subject to probate. Probate is the judicial process that determines the validity of the deceased’s will. None of the instructions laid out in your will can be undertaken until a court accepts its validity and “grants probate” to your specified executor.

Probate isn’t much fun. It takes time: typically a few months, but it can last years in certain cases. It can be costly: expect to pay somewhere between 3-8% of your estate’s assets in combined attorney, court and other fees.

Probate can be challenging for real estate, especially investment properties. Until these assets have passed probate, your heirs (including your spouse) cannot manage or dispose of them. They’re locked in limbo, which can get quite inconvenient if the probate period stretches for many months or years.

It’s also a public process. During the probate period, your will is made available upon request to anyone who asks for it. So the details of your estate and your disposition wishes are not kept private. And your will can be challenged in court during this time by anyone who feels they have a valid claim on your assets.

Which brings us to Living Trusts…

What Are the Benefits of a Living Trust?

A trust is a legal arrangement in which one or more people manage or take care of property for someone else's welfare.

There are several major benefits you can enjoy by placing your assets into a trust to manage them while you’re alive (that’s why it’s called a “living” trust). One of them is avoiding probate upon your death.

Once your assets have been placed inside a living trust, they’re managed by its Trustees on behalf of clearly-specified Beneficiaries. So with ownership transfer, executorship and distribution already worked out – the probate court doesn’t need to get involved.

For most couples, this allows the surviving partner to retain seamless control of all Trust assets after the other dies. The assets don’t go through the probate process, there are far less fees involved, and the process is private. (The estate still can be contested, though. But the details of the estate’s assets don’t have to be made available to the public upon request.)

Avoiding probate is just one of the advantages offered by living trusts.

Another big one is (potentially) reducing estate taxes. I’ll spare you the wonky details for now, but there are ways for your trust to take advantage of deductions and credits that may materially reduce the estate tax liability on your wealth after you and/or your surviving spouse die. Any estate lawyer or tax accountant worth their salt can walk you through the details.

Your living trust will also enable you to control how your assets flow to your heirs. If you have minor children, most states won’t let them own property directly while they’re 17 or younger. And if you’re passing along a substantial amount of wealth, giving it to all to them at age 18 in a lump sum is a bad idea (unless you want the inheritance squandered in an epic blast of debauchery).

Via your trust, you can specify how you want your assets (and any associated income from them) to be meted out to each heir over time – based on age milestones, financial need, use (e.g., education), mental competency, or any other conditions important to you.

Similarly, a living trust is helpful in keeping your assets managed the way you want should you become incapacitated (i.e., still living, but not able to mentally or physically manage your affairs). For many of us, living too long may become the bigger risk to our estate vs dying too soon.

Last, the most common form of living Trust is amendable throughout your life. You can change it at anytime, as often as you like. Or you can dissolve it altogether. The bottom line is, you’re in full control over everything while you’re alive (and mentally competent).

Getting Started on Creating a Will or Living Trust

OK, as a refresher:
  • A will is a good idea for pretty much everyone. But it's especially important for people with minor children. A trust does not specify legal guardianship in the event of your death. Only a will does that.
  • A living trust makes sense for anyone with assets and heirs (especially your spouse) they want to pass their wealth along to. Some experts say living trusts make sense if you expect your estate to be worth over $150,000; others go as low as $20,000.
The cost to set these up is pretty trivial compared to the huge benefits they can offer your loved ones. A will costs a few hundred bucks (or less) to set up and can be completed in a matter of days (or less). A living trust will range between several hundred and a few thousand dollars, depending on how sizable/complicated your estate is.

In Part 2: A Primer On The Essentials For Your Will & Living Trust, we walk through in detail the principal legal elements that your will and living trust should address. This includes specific clauses your documents should contain (unless advised otherwise by a professional), as well as helpful context for the most common decisions folks will face when creating/updating these legal vehicles.

If you don’t yet have a will and/or a living trust, or it’s been a while since you’ve reviewed the ones you have, read on. Your loved ones will be glad you did.

Click here to read Part 2 of this report (free executive summary, enrollment required for full access).

This is a companion discussion topic for the original entry at https://peakprosperity.com/if-you-die-from-the-coronavirus-what-will-happen-to-your-assets/

I got all this done, several years ago. Will, executor, power of attorney, medical directives, cremation plan when I was going in for a major surgery I was not sure I would survive. Told my executor and POA person the secure location where all records were stored. I am single, I think many people depend on a surviving spouse to deal with this responsibility. May not be a survivor in this mess.
My father died without any thing finalized. Luckily, my surviving mother was a bookkeeper and a good records keeper and had her wits. A big problem was keys. My father had several storage sheds and farm equipment, etc. Three big key rings. Also, I think when he got a new key made, he didn’t remove the old key. Took a while to sort that out. So, put in my records box, I made a labeled, complete set of new keys for my property and vehicles.
It took me about four months to get it all together. I had the luxury of time. Good luck.

who do i leave stuff to and who do i give poa to if i have no family

If you leave no will, the state will probably take your assets. If there is no person you want to leave stuff to, think of your favorite charity. This took a long time for me because most of friends and family are older, too and are trying to figure out who to leave things to, also. My younger relatives turned up their noses at a place way out in the rural area where I own property. We have no Covid-19 out here, yet. I wonder what they think, now.
My POA is a very responsible neighbor who lives down the road. I bought a small life insurance policy and left her some assets to pay her back. Good luck.

We have found the best solution is to own property in partnerships or LLCs, with transfer upon death. This way, when a person dies, control of the assets stay in the partnership and nothing changes. Literally, nothing happens; control of the asset never changes. It’s all about private law vs public law, and it works. There is simply no need for anything complex.
One can especially do this for cars & houses. Our motto: own nothing, but control & use everything. This makes death non-consequential, since everything is owned by the business. Not to mention it prevents lawsuits and allows children to slowly enter into ownership and control as they mature, rather than all-at-once inheritance.

I really appreciate this article. I had no idea how the trust worked versus a will. I just looked up Idaho’s living trust form. I like it. Instructions even include planning for your pets after death.
Because of being without spouse or child, I want my home (or the sale of it for assets) to go to the local domestic violence shelter. No one I know needs the money from my house but this organization sure does. They serve the whole state and have 3 month waiting list!
The only problem I see is getting a trustee, alternate trustee and 2nd alternate trustee. All must sign and it must be witnessed by two people. A bit tricky to do that during a lockdown.

We’ve already made trusts. In the past two weeks I’ve made sure that the relatives most likely to end up cleaning out the house have each other’s contact info, that they know where the other one lives (none are nearby), and that both know the details of the spare key location and the alarm system. And that they have contact info for the lawyer with the trusts. Also, our neighbor knows that we have 3 cats and I told her where the enormous stash of cat food is located (she has a kennel and would probably take them until she could find new homes for them). Cleaning out a house is a big deal, one that I would not wish on anyone. We’ve lived in a 200 yr old home for 30 yrs; I estimate it would take a year to clean it out responsibly.
It also seems likely there will be a lot of seniors dying alone at home, with or without pets. This is really a nightmare scenario. I don’t know if plans are being made to deal with this in cities (or in rural areas).

Catherder, it’s a horror, the way we Americans collect stuff. My parents went through the 30s, and never threw away anything. My poor sister, who inherited most things, had to clean up. The neighbors got an eye full as stuff from attic and house was dragged out and stacked on the lawn. I do my best to sort through, every year and throw away or give away stuff. If a new thing comes in the house, something old must go. And, two moves is as good as a burn out.
My mother never did forgive my father, tho, when after their last move, her frying pan lid went missing. I heard about that for 30 years ??.

I’m blown away at the production quality of this Queen parody:

A friend e-mailed me this link today. Top notch – if you skipped by it, go ahead and invest six minutes to listen. As Adam said, very high production quality. And worth a couple of belly laughs (IMO).

Adam, thanks for that, its an amazing take on Bohemian Rhapsody. Here is another great version good for putting a smile on your face (not Covid related) https://www.youtube.com/watch?v=tgbNymZ7vqY

about a month ago I reported here that I needed to update my will. I’m just checking back in the say-done ! I also prepared instructions as to where the bank accounts are, life insurance co. etc. As for the “stuff”, around here there are auction houses that do clean-outs and then bring in the dumpster, all for hire. No family member has to deal with your “stuff”. I also wrote down the GPS location as to where the PM’s are buried in the backyard. Yes, It was a slap in the face as to my immortality , but there, Its done. Now, back to getting the garden going !!

(Translated from French).
Jesus: With all the mess you have down there, I am not coming this Easter. You come to me.

My neighbor is screaming so much at her children, that I ended up cleaning my room too.

Your grand-parents have been ordered to go to war. You are ordered to stay on the couch. Courage! You can do it.

Imagine once the COVID-19 is gone, someone launches the COVID-19 S Plus.

3rd confinement day. My wife tells me to take a walk… She will pay the fine.

Yesterday, I did like in Italy: Sing at my window. I will redo it today… in the hope I get the second slipper.

Everyone is walking his dog. I have a tortoise, 7h and still in the stairs…

I am telling you: If schools stay closed longer, parents will find a vaccine before scientists.

Many parents are discovering that the problem is not the teacher.

Not easy, heh?

I had to have a document signed and notarized by myself and another this week. I called my credit union and they agreed to do it separately via their open drive-through. We could do it separately in different cars with our gloves on. Pretty safe.
Living trusts are great. We did it for my parents to preserve their house for the other if one of them needed to go to a nursing home. Be sure to talk with your lawyer about your needs there also.

My father collects antique farm equipment. He’s seen friends whose collectables are sold at auction for pennies on the dollar, sometimes just for scrap. That breaks his heart. He’s started selling pieces to people who will appreciate them and finding relatives that might appreciate them.
We’ve also slowly started cleaning out the house. He hired a helper to sort his shop equipment (he’s crippled and can’t) but the kid had to leave the local college because of Covid. Still trying to decide how to safely hire somebody whose laid off to help with this. If you can be sure they have been isolated for a couple weeks, you might look for folks who’ve been laid off to help you with cleaning out.
It’s going to be hard to sell or even give away household materials if someone dies of Covid. It’s already hard to give away things like sofas/chairs and mattresses because a lot of charities are afraid to take them because it’s hard to clean them.

Besides the good point you make about charities, as well as other people, being possibly afraid of accepting donations right now, there are a lot of people downsizing (I see it at work, the quantity and mostly bad condition of furniture and other donations which sometimes go straight to the compactors destined for the landfill… Broken stuff doesn’t even go out to the store. Some donations get sold, but just due to the massive scope and scale of donations an insane amount of stuff goes to the landfill.
The other setback for getting rid of stuff. A very high if not all Goodwill locations, the retail stores, outlet locations (rolling bins), and e-commerce across the country are currently shutdown. (The donation sites in my area are closed too and an update on the website says please don’t dump stuff at them for safety and hygiene reasons.)
I work for Goodwill, and there was a mistake on my paycheck today (direct deposit) for the last 2 weeks ($70 missing, but I figured out how come and wanted to let someone know, and to get it corrected), but I tried all of the phone numbers for my area with no luck. No one is answering… I even looked online last night and every district I looked at has closed up shop with notifications on their websites about being closed due to the Coronavirus, and are not taking donations. Because of that, I realized I have an additional 8 hours of vacation to get applied to this work week, but still it’s the principle. I worked a full day on Sunday but 2 hours into my shift on Monday we got shut down in response to the Governor’s Executive order and no one answers (including HR) at any of the phone numbers. 5,000 people are in my district. The manager told us on Monday before we left the building we should get something in the mail in 1-2 days, and 5 days later nothing. I’m sure I’m not the only concerned person. (I did go ahead and file for unemployment early Tuesday morning and I have a co-worker who had been waiting for his. He’ll go ahead now.)