Managing risk has taken on new meaning in 2020. We are continuously assessing and taking risks to achieve a desired return, whether it’s grocery shopping in a pandemic or monitoring market volatility.

Most of us are comfortable with the steps needed to manage health risks, whether it’s wearing masks or remaining socially distant. Similarly, we implement investment strategies to minimize the impact of market gyrations. But have we implemented a foundation to manage the impact of this disruption? Have we advised clients to create a family wellness plan that manages risk?

Personal risk management begins by having a family wellness and governance plan, which can determine how our health and wealth will be managed if we become incapacitated. Each of us can and should create the foundation for our clients — and ourselves — to ensure loved ones will be cared for if illness, the markets, or death alter our plans. Here are five ways to get started.

Create Meaningful Powers Of Attorney
Powers of attorney are often viewed by both healthy clients and professionals as boilerplate documents for hypothetical incapacity. While often overlooked, health care proxies or powers of attorney, along with living wills and resuscitation instructions, are vital during a pandemic but equally important for aging clients and those with chronic conditions.

Be sure to identify qualitative and functional health care choices and how corresponding decisions should be made. Then prepare these documents so that risk-based health decisions are made with comfort and assurance.

Similarly, durable financial powers of attorney are important. Some prefer springing powers of attorney, which take effect only after an event of incapacity. If used, springing powers of attorney should clearly define incapacity to prevent family disputes. If multiple attorneys in fact are named, be clear as to whether the power is joint, or joint and several. If there are financial priorities to be met, state them in the document.=

Review and update powers of attorney periodically, as health care and financial institutions prefer more recent documents that indicate current intent. These documents should be part of a regular, periodic check-up, just like your annual physical.

Fund Revocable Trusts
Funding a revocable or living trust is often recommended to set in motion the governance of wealth for incapacity, death and as important, family harmony.

The basic estate planning goals of funded living trusts are well known, as they facilitate financial management during incapacity, minimize probate, foster privacy in estate settlement, minimize will challenges, bring certainty and reduce fees and expenses.

The risk management and family governance benefits of a funded living trust receive less focus, but can yield favorable returns. When an investment advisor manages liquid assets in a funded trust, specific preferences on investment risk, style and approach to the market signal the results to expect. Real estate held in a living trust makes it easier for a trustee to manage the property during incapacity and, at death, enables a trustee to secure real estate and transfer it without having to wait for executor appointment. Defining how closely held businesses should be managed and naming business trustees or other decision makers over unique assets helps retain asset value and manage transitions.

The benefits of a funded living trust improve if flexibility is drafted in. Consider granting the trustee the power to make gifts consistent with a gifting program established by the grantor, which can continue a practice of benefiting loved ones while enabling planning for tax law changes. Coordinate the document by giving the attorney the power to transfer assets to the living trust in the event of incapacity, and make sure the trustee is protected from family challenges in accepting those assets.

Check-Up On Insurance
Insurance coverage is at the heart of a personal risk and return analysis. No investment in an overall family wellness plan is complete without determining what type and how much is appropriate. In these plans, life and long-term care insurance typically need more attention.

It is not surprising that a pandemic would drive interest in life insurance. Modern policies bring more options for coverage, benefits and payment options. However, many older policies may not be yielding the best results for either death benefits or premiums. Consult your insurance professional for a policy review to make sure dollars are well invested for maximum returns. If a policy is held in a professionally managed insurance trust, the trustee likely reviews policy performance regularly, and the pandemic is a good occasion to check in.

Long-term care insurance is also receiving much needed attention. Potential lingering health impacts of the coronavirus may increase the prevalence of chronic conditions and may require extensive and prolonged care. Long-term care insurance can ease the drain on family wealth due to private or nursing care. Modern policies can provide more flexibility: discounts or carryover benefits for spouses, or new hybrid policies that provide a blend of long-term care and life insurance are just a few of the ways to increase the returns on your insurance investment.

Plan For Tax Law Changes
Stimulus to combat the economic effects of COVID-19 has come at a cost: the prospect of increased taxes. Speculation is that a democratic administration may decrease the current estate and gift tax exemption, resulting in potentially higher estate and gift tax on wealth transfers. With the current, generous exemption, gifting now may help lock in the benefits of the today’s higher gift tax exemption.

For those hesitant to commit to gifting in an uncertain environment, the creation of a Spousal Lifetime Access Trust (SLAT) may be a good investment. Under SLATs, best used in long term, stable marriages, one spouse can create and fund a trust for the other, enabling the beneficiary spouse to receive income and principal as determined under the trust document. Trust distributions that support the beneficiary spouse can generally be used to support the lifestyle and pay the expenses of the marriage, but cannot be directly accessed by the grantor spouse.

Secure Your Business
Small businesses have faced unprecedented challenges during the crisis. Even those benefiting from the take-out restaurant business risk financial collapse should an owner become incapacitated or die. The risk is particularly acute in co-owned businesses if one partner can no longer help manage the business.

It is critical that small, co-owned businesses create a governance plan for this situation. A buy-sell agreement that identifies how day-to-day operations of the business will occur is essential. The predictable transfer of ownership also must be detailed, including valuation methodologies, payment terms, and payment sources.

Today’s environment drives other considerations, like decisions to invest capital to keep the business open or responses to government-imposed restrictions on operations. While there are several criteria to consider, working with a trusted advisor can ease the process.

While the pandemic has changed the way we all manage risk, working with your clients to proactively manage risk to improve returns will pay dividends post-crisis.

Joan Bozek is chief fiduciary officer and director of trust services at Clarfeld | Citizens Private Wealth.