Disaster Preparedness for Trust and Estate Planning

“Disaster Preparedness for Trust and Estate Planning,” that is the subject of today’s ACTEC Trust and Estate Talk.

This is ACTEC Fellow John Challis of St. Louis, Missouri.

Nothing is certain except death, taxes, and disasters. While we can’t predict when disasters will strike, thoughtful planning can help one prepare for it, persist through it, and recover from it. There’s a lot to consider from evacuation and insurance coverage to temporary housing and government assistance programs.

Based on his real-life disaster recovery experience, ACTEC Fellow Jeff De Francisco of Pasadena, California, will share his recommendations on how to prepare for disaster from evacuating and navigating insurance claims to accessing FEMA and SBA assistance and provide tips on how to support clients through legal, financial, and emotional challenges that follow.

Welcome, Jeff. Maybe you can start by telling us a little bit about your disaster experience.

A Real-Life Disaster: Lessons from the Eaton Fire

Jeff De Francisco: Sure. Thanks, John. So, on January 7th, 2025, the Eaton fire roared through Altadena, California, claiming 19 lives over 9,000 structures, burning over 14,000 acres, and causing over $27 billion in damage. I was at the office when the fire started, but I made it home in time to pack up the car and evacuate my family, but within 30 minutes, our entire lives were turned upside down. Although our house did not burn down, it did sustain smoke and ash damage and was covered in lead asbestos and other environmental hazards that left us on an unplanned 15-month journey of both despair and recovery.

Understanding the Three Stages of Disaster Recovery

John Chalice:  I’m sorry to hear that story but tell us what you learned from your experience about how to prepare for a natural disaster.

Jeff De Francisco: Yeah, I think the key to preparing for a disaster is understanding what actually happens during and after a disaster. So, I kind of think about breaking it down into three recovery periods.

Short-Term Recovery: Immediate Survival

Sort of the short-term period, the days and weeks after disaster, where you’re trying to figure out how to take care of your basic needs of having a place to rest your head, clothes, water, food.

Mid-Term Recovery: Stabilizing Life

And then there’s the mid-term recovery period, which is a few weeks to a couple months after the disaster. Here you’re trying to figure out your longer-term housing plan, figuring out how your insurance claims work, how much insurance you have, how you’ll manage your workload, your personal life, and how to bring some normalcy to your life and that of your kids.

Long-Term Recovery: Rebuilding and Legal Challenges

And then I would say there’s this longer-term recovery period, which could be one, two, three, four years after the disaster, the rebuilding process, the restoring process might be trying to find government assistance, fighting with the insurance company if they don’t pay out or potential lawsuits.

Each of the different recovery periods require a different type of planning.

John Chalice:  Can you provide us with some ideas on how to prepare for each of these recovery periods?

Evacuation Plans and Emergency Readiness

Jeff De Francisco:  Sure. For the short-term recovery period, again, these immediate needs, I would say the most important thing is to have an evacuation plan. Make sure you talk with your family; figure out where will you all meet. You might not all be in the same place. You might not be able to get to the same place, but to have some type of a plan for how to meet.

Go-Bags and Grab Lists

Another idea is to have some go-backs. Maybe a 10-minute bag, a 20-minute bag. If I only have 10 minutes to get out, this is the bag I’m going to take. If I have 20 minutes to get out, I’ll also take this bag with your most immediate needs in those bags.

I think another good idea is to have a grab list. This would have been really helpful for me. As you’re evacuating, to have the list to go to that says, go grab this item from the dining room, that item from the office, this item from the kitchen, whatever it is. But at the time, you’re not going to be able to think clearly, so having a list will help you with the evacuation.

Digitizing Important Documents

And I think digitizing as many documents as possible, we’re lucky to live in this era where we can digitize. So many people lost passports, driver’s license, birth certificates, photos, and having it digitized just makes the path to recovery so much easier.

Securing Housing Quickly

For the midterm recovery period, which is a lot of that is housing. What happens right after a disaster is the short-term rentals become scarce and price gouging becomes rampant. There’s not enough hotel rooms in your area to really cover housing for everybody, so everybody’s scrambling to find a place to live. My tip there is to have a realtor in your Rolodex that you can call immediately who already has some listings available and could hopefully get you in immediately right after the disaster.

If not, then you just try to get to your local hotel, and I’d recommend picking a place as close as possible so that you don’t disrupt your daily routine, because that’s the other part if you leave the area, you might not be able to come back for a long period of time, which is going to make it harder for your commute to work and for getting your children to school if you have any.

Business Continuity Planning

The other part of the midterm recovery period, I’d say, is planning for your business. We oftentimes don’t do that piece of it, but when you’re not working and you’re trying to deal with a disaster, who’s handling your cases? Who’s handling deadlines? How will profits be shared during that time? Your employees could also be affected by the disaster if it’s a big enough disaster, so, who’s doing their work? Who’s supervising the work of those who weren’t affected? There’s just lots of things to think about through that whole business disaster plan.

Planning Insurance for Long-Term Recovery

And lastly, I guess for the long-term recovery period, probably the most important thing to plan ahead on is your insurance. And the most important part of insurance is picking the right insurance company. When disaster hits, you want an insurance company that’s on your side and that’s going to pay out. You’re not going to be thinking about the $1,000 that you saved every year on premiums when your insurance company is not paying you out.

Choosing the Right Insurance Company

So, my tip there is don’t be pennywise and dollar foolish. Take a look at some news reports from the recent disasters and see which insurance companies are being sued, which insurance companies have negative stories about them and avoid them. And then once you get your insurance, think about understanding your insurance policy. There’s dwelling coverage, which is going to cover your house itself, but it’s not going to cover landscape and fences.

Understanding Coverage Limits

And if you’re like me, you just went to your insurance company and told them their square footage of your house and some features of your house, and they give you a dollar per square foot of how much it costs to rebuild the house. That might be true if your house is the only house affected by the disaster, but in a major disaster, surge pricing comes into effect. The contractors come in and they start doubling their prices, tripling their prices. So, the insurance that you’re quoted is probably not going to be enough. I recommend trying to get as much insurance as you could afford.

Also consider other structure insurance. Make sure your garage, your pool, your non-attached houses are covered. Another important one is the alternative living expenses. So, this is the insurance that’s going to cover your temporary housing while you’re going through the recovery. It has both a dollar cap and a time cap. Usually what happens is the insurance company will determine how much your house would have rented for had you rented it, and that’s the amount that you can spend each month on housing. But be careful, if you use that money, to stay at the Ritz Carlton, you might hit your dollar cap before your time cap, and you might not be ready to move back into your house, and then you might be out of pocket paying for the rest of your recovery period.

Preparing for Personal Property Claims

And then lastly on the insurance piece, I recommend making sure you understand your personal property coverage. This is what covers all of your personal items that either got destroyed or are somehow ruined in our case from environmental needs in the disaster. So here, this is probably the hardest part. You have to go through and list every single item in your house in every single room. It’s hard to remember. It’s very emotional to do.

My tip there is maybe consider creating a list now before there’s a disaster and just keep it current once a year, every six months, or take photos of your items in your house regularly. Open up all your drawers, all of your cabinets, and take photos. And I say photos and not videos, because some insurance companies were denying coverage if all you had was a video.

Planning for Environmental Risks and Home Hardening

Another issue to think about for long-term recovery is environmental testing. If you have a disaster that has environmental issues, you want to have a baseline to be able to prove that the disaster caused the environmental problem. Maybe having your house tested now for lead as best as volatile chemicals, et cetera, might be a good way to prove that baseline.

And then lastly, think about your house itself. How can you harden your house to prepare for a disaster? Maybe it’s putting in proper windows for a fire or for hurricane or bolting your foundation for earthquake or particular types of vent covers to prevent embers from entering into your attic space or a roof that’s fire or wind resistant. There’s lots of things that you can do to help minimize the risk on your house if there is a disaster.

Government Assistance After a Disaster

John Chalice:  Now, what if someone doesn’t adequately prepare for a disaster? Is there government assistance available to them?

FEMA as a Last Resort

Jeff De Francisco:  That’s a great question. I mean, I suppose whether you prepare or don’t prepare, government assistance is available to you. The most common one that we hear about is FEMA. But FEMA is really a department of last resort. You have to go through all of your insurance, any lawsuits, any charitable money that you receive. And then if you don’t have enough, FEMA will give you a grant for some portion. It’s not an unlimited amount, but FEMA is available.

SBA Loans for Recovery

The other is through the SBA, Small Business Administration. They offer both personal and business loans for rebuilding and restoring. It’s not just for businesses. But both of these, FEMA and SBA, there’s an onerous application process. You have to provide tax returns, mortgage statements, bank statements. So, it’s not easy to get. It takes a lot of time. And if you lost a lot of those documents in the disaster, then you have a hard time actually applying for this assistance.

Apply Early—Even If Unsure

The one tip here is both the FEMA and SBA applications have very strict statutes of limitations as to when you must apply by in order to qualify for aid. Oftentimes you don’t know yet whether you’re going to need the aid, but the recommendation is to file anyway. Better to have an application in process that you don’t need than to not have one and not be able to file one once you determine that you do have a need.

Supporting Clients Before and After a Disaster

John Chalice:  Do you have any tips for how attorneys can help their clients either prepare for or recover from a natural disaster?

Jeff De Francisco:  I do. I think it’s something with attorneys, financial advisors, any professional can help with.

Serving as a Trusted Resource

I think one is for estate planning attorneys, especially when you’re helping your client by transferring their houses into the revocable trusts, make sure you’re always also telling them to transfer their insurance policies into their revocable trusts because some insurance companies were denying claims if the house was in the name of the trust, but the insurance policies were in their personal names.

Building a Referral Network

Another is just be a resource. Victims are going to be disoriented. They’re going to be inundated with a lot of decisions, a lot of paperwork. Use your training to help them. Maybe pay attention to what’s happening in the newspapers and the advertisements to help direct them to a resource that could help them. Maybe they’ll need help reading a contract for their contractors or their environmental tester or their house cleaner or whatever it is, but people will be coming in trying to take advantage of you and having a voice of reason, a sounding board will be helpful for your clients.

Another might be to have a list of insurance brokers and adjusters and lawyers at your fingertips so when they call and they need some help, you have some referral sources to give to them. Really anything to help them move forward, I think would be helpful. If you’re a firm who sends out regular newsletters, consider sending out a newsletter about disaster preparedness now to your clients so that they too can start preparing in case a disaster does come.

Offering Practical Support

Another idea is to provide office space. If somebody completely lost their home and their computers, they might just need a place to come every day for a while to browse the internet, talk to their insurance company, get some help. If you have some extra office space, that could be helpful.

Maintaining Digital Estate Planning Documents

Then lastly, I say if you’re one who helps with estate planning, keep digital copies of your clients’ estate plans. So many clients lost their documents in the fire and didn’t have copies, and now they’re scrambling to find those copies in order to help them.

John Chalice:  Thank you, Jeff, for sharing your story and your practical experience. Join us for next week’s episode of this podcast when we discuss the charitable aspects of disaster recovery.

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