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.

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