Remote Document Execution and Other Tax Matters Related to the Coronavirus CrisisApril 27, 2020
This alert was updated on September 9, 2020 to reflect Executive Order 20-14.
The coronavirus pandemic and the response by federal, state, and local authorities has severely impacted nearly all individuals and businesses. These effects extend to estate planning matters, which, in a time of a deadly pandemic, may be more pertinent than ever. Below is a brief overview of relevant legislation and executive orders enacted as a result of the current crisis.
Remote Document Execution
In an effort to protect citizens from coronavirus while allowing them to complete necessary legal documents, an increasing number of states, including Missouri and Illinois, have implemented emergency orders authorizing remote witnessing and notarization.
Pursuant to Executive Order 20-14 issued by Missouri Governor Mike Parson, any notarial act required under Missouri law is authorized to be performed remotely using audiovisual (A/V) technology. The order also allows witnesses to certain estate planning documents, including wills, trusts, and powers of attorney, to appear remotely. However, documents that have been remotely notarized must be mailed or transmitted to the notary within five business days of execution. The order is valid from April 6, 2020 until December 30, 2020, unless extended.
Likewise, Illinois Governor J.B. Pritzker issued Executive Order 2020-14 allowing notarization and witnessing requirements under Illinois law to be completed remotely using A/V technology. All legal documents, including deeds, wills, trusts, and powers of attorney for property and health care, may be signed in counterparts by the witnesses and signatory. The same day the documents are signed, the signature pages must be electronically transmitted to the notary for certification. This order is valid for the duration of the COVID-19 Gubernatorial Disaster Proclamation.
The Estate Planners at Lewis Rice are capable of complying with either state’s remote notarization requirements. However, some estate planning practitioners have concerns regarding a Governors’ authority to issue the orders. Out of an abundance of caution, Lewis Rice encourages all clients who utilize remote witnessing and notarization during this time to reaffirm the signatures on their documents after the pandemic has passed. In the event such a document is challenged, reaffirmation would ensure its validity. Alternatively, if a client wishes to sign in-person, Lewis Rice adopted a drive-through procedure that complies with the notarization and witnessing requirements.
Waiver of Required Minimum Distribution
The CARES Act, which was recently enacted by the federal government in response to the coronavirus pandemic, waives the Required Minimum Distribution ("RMD") rules for the calendar year 2020. This waiver applies to IRAs, including inherited IRAs, and certain defined contribution plans. For those who reached age 70 ½ in 2019 and had a required beginning date of April 1, 2020, the CARES Act waives the RMD if it was not taken by December 31, 2019. However, the RMD waiver does not mean distributions cannot be made. Individuals who wish to take their RMDs may still do so.
Waiver of Early Withdrawal Penalty
The CARES Act waives the 10% early withdrawal penalty for distributions of up to $100,000 from qualified retirement accounts if such funds are used for coronavirus-related purposes. Coronavirus-related purposes include any distribution to a person who has been diagnosed with COVID-19 or whose spouse or dependent has been diagnosed with the virus. Additionally, individuals not directly medically affected by COVID-19 may also take a distribution if they have suffered adverse financial consequences as a result of being quarantined, furloughed, laid off, suffered a reduction in hours, were unable to work because of child care responsibilities due to the crisis, or own a business that has been forced to close or reduce operating hours.
Although the income attributable to such distribution is still taxable as ordinary income, an individual making such a withdrawal may elect to pay the tax over a three-year period. In addition, the taxpayer may re-contribute the funds to an eligible retirement plan within three years of the distribution, regardless of that year’s cap on contributions.
For more information on any of the above issues, please contact a Lewis Rice Estate Planning Attorney.