King & Wood, P.A.

What are Typical Estate Planning Documents?

“If you want loved ones to remember you fondly, tackle your estate planning tasks. Your heirs will thank you for not leaving a legal mess to sort out.”

For many people, eight documents form the foundation of an estate plan. It’s not that difficult a project as it seems, explains the article “8 Documents That Are Essential to Planning Your Estate” from msn.com. When you’ve completed your estate plan, you’ll also gain the peace of mind of knowing that you’ve done what was needed to protect your family. It’s well worth the effort.

Last will and testament. This is the basic document that gives you the ability to tell your family what you want to happen with your assets. It is used to name an executor—a person who will be in charge of managing your estate. Your will is also where you name a guardian who will be in charge of raising minor children. You can use the will to convey funeral instructions, but you may want to do that in a separate document, in case your will isn’t found right away. Your estate planning attorney will help you figure out the best way to handle that.

What happens if you don’t have a will? In that case, a probate court will determine who will be your executor. It might be a spouse, a grown child, or someone you don’t know or would not want to handle your estate. It’s best to have a will and select your executor yourself. When your estate goes through probate, all of the information in your will becomes part of the public record, so don’t put anything in your will, like passwords or account numbers.

Revocable living trust. Trusts are used to pass assets and property without going through probate. Your estate planning attorney will help create the trust and you’ll decide who will be in charge of it upon your death. You can be the trustee while you are living, but then you lose any estate tax benefits. If you have substantial property or wealth, trusts are a good tool to control assets and save on estate taxes.

Beneficiary designations. Any time you purchase a new insurance policy or a retirement plan, you are asked to name a beneficiary. If your first job came with a retirement plan, you likely also named a beneficiary for that plan. These designations allow the assets to pass directly to the beneficiary upon your death. They aren’t included in your will and they don’t go through probate. The biggest problem with beneficiary designations? Neglecting to update them through the many changes in life. Review and update your beneficiary designations on a regular basis.

Durable power of attorney. This document allows you to name the person to act on your behalf, if you become incapacitated because of illness or injury. They can manage your legal and financial affairs. Here’s an important point: if you become incapacitated, you cannot assign this role to someone. It needs to be done when you are legally competent.

Health care power of attorney and living will. The health care power of attorney lets someone else make medical decisions on your behalf, if you are too sick to do so yourself. The living will gives you the opportunity to explain what kind of care you do or do not want if you are close to death. If the idea of staying alive on a heart machine makes you unhappy, for instance, you can document your wishes, so loved ones don’t have to wonder what you want. 

Digital assets. Much of our lives are lived online, and we have assets that won’t be found in a search of the attic or basement. Each online platform that you use may have a directive process, where you can clearly state who you want to have access to your digital assets and what you would like to have happen to them upon your death.

A letter of intent. Writing a letter of intent is a way to convey your wishes to loved ones for what you’d like to happen after you die. It may not be legally enforceable, like a will or a trust, but your loved ones will appreciate knowing what you want for funeral planning or a memorial service.

List of important documents. Sparing your family a post-mortem scavenger hunt is a gift to the living. Make a list of documents and make sure they know where important documents can be found. Include a list of routine bills, the professionals you rely on, including contact information and account numbers. Some families use a briefcase to store the important papers, but a fireproof and waterproof safe is more secure.

Reference: msn.com (June 19, 2021) “8 Documents That Are Essential to Planning Your Estate”

What Is the Purpose of an Estate Plan?

 

“You can reduce stress and expenses for yourself and your family, if you develop an estate plan that includes these important documents.”

No one wants to think about becoming seriously ill or dying, but scrambling to get an estate plan and healthcare documents done while in the hospital or nursing home is a bad alternative, says a recent article titled “The Essentials You Need for an Estate Plan” from Kiplinger. Not having an estate plan in place can create enormous costs for the estate, including taxes, and delay the transfer of assets to heirs.

If you would like to avoid the cost, stress and possibility of your spouse or children having to go to court to get all of this done while you are incapacitated, it is time to have an estate plan created. Here are the basics:

A Will, a Living Will, Power of Attorney and a Beneficiary Check-Up. People think of a will when they think of an estate plan, but that’s only part of the plan. The will gives instructions for what you want to happen to assets, who will be in charge of your estate—the executor—and who will be in charge of any minor children—the guardian. No will? This is known as dying intestate, and probate courts will make all of these decisions for you, based on state law.

However, a will is not enough. Beneficiary designations determine who receives assets from certain types of property. This includes life insurance policies, qualified retirement accounts, annuities, and any account that provides the opportunity to name a beneficiary. These instructions supersede the will, so make sure that they are up to date. If you fail to name a beneficiary, then the asset is considered part of your estate. If you fail to update your beneficiaries, then the person you may have wanted to receive the assets forty years ago will receive it.

Some banks and brokerage accounts may have an option of a Transfer on Death (TOD) agreement. This allows you to plan out asset distribution outside of the will, speeding the distribution of assets.

A Living Will or Advance Directive is used to communicate in advance what you would want to happen if you are alive but unable to make decisions for yourself. It names an agent to make serious medical decisions on your behalf, like being kept on life support or having surgery. Not having the right to make medical decisions for a loved one requires petitioning the court.

Financial Power of Attorney names an attorney in fact to manage finances, paying bills and overseeing investments. Without a POA, your family can’t take action on your financial matters, like paying bills, overseeing the maintenance of your home, etc. If the court appoints a non-family member to manage this task, the family may see the estate evaporate.

Creating a trust is part of most people’s estate plan. A trust is a means of leaving assets for a minor child, or someone who cannot be trusted to manage money. The trust is a legal entity that inherits money when you pass, and a trustee, who you name in the trust documents, manages everything, according to the terms of the trust.

Today’s estate plan needs to include digital assets. You need to give someone legal authority to manage social media accounts, websites, email and any other digital property you own.

The time to create an estate plan, or review and update an existing estate plan, is now. COVID has awakened many people to the inevitability of severe illness and death. Planning for the future today protects the ones you love tomorrow.

Reference: Kiplinger (April 21, 2021) “The Essentials You Need for an Estate Plan”

How to Protect Digital Property

“While cryptocurrency isn’t new, it’s attracted a lot of attention in the past year because of its skyrocketing value, promotion from prominent figures like billionaire Elon Musk, and bitcoin offerings from traditional financial firms like Morgan Stanley.”

When people built wealth, assets were usually tangible: real estate, investments, cash, or jewelry. However, the last year has seen a huge jump in digital assets, which includes cryptocurrency and NFTs (Non-Fungible Tokens). Combine this growing asset class with the coming biggest wealth transfer in history, says the article “What happens to your NFTs and crypto assets after you die?” from Tech Crunch, and the problems of inheriting assets will take more than a complete search of the family attic.

One survey found only one in four consumers have someone in their life who knows the details of their digital assets, from the location of the online accounts to passwords. However, digital assets that require two factor authentication or biometrics to gain access may make even this information useless.

There are many reports about people who purchased digital assets like Bitcoin and then lost their passwords or threw away their computers. More than $250 million in client assets vanished when a cryptocurrency exchange founder died and private keys to these accounts could not be found.

Digital assets need to be a part of anyone’s estate plan. A last will and testament is used to dictate how assets are to be distributed. If there is no will, the state’s estate law will distribute assets. A complete list of accounts and assets should not be part of a will, since it becomes a public document when it goes through probate. However, a complete list of assets and accounts needs to be prepared and shared with a trusted person.

Even traditional assets, like bank accounts and investment accounts, are lost when no one knows of their existence. If a family or executor doesn’t know about accounts, and if there are no paper statements mailed to the decedent’s home, it’s not likely that the assets will be found.

Things get more complicated with digital assets. By their nature, digital assets are decentralized.  This is part of their attraction for many people. Knowing that the accounts or digital property exists is only part one. Knowing how to access them after death is difficult. Account names, private keys to digital assets and passwords need to be gathered and protected. Directives or directions for what you want to happen to the accounts after you die need to be created, but not every platform has policies to do this.

Password sharing is explicitly prohibited by most website and app owners. Privacy laws also prohibit using someone else’s password, which is technically “account holder impersonation.” Digital accounts that require two factor authentication or use biometrics, like facial recognition, make it impossible for an executor to gain access to the data.

Some platforms have created a means of identifying a person who may be in charge of your digital assets, including Facebook and more recently, LinkedIn. Some exchanges, like Ethereum, have procedures for death-management. Some will require a copy of the will as part of their process to release funds to an estate, so you will need to name the asset (although not the account number).

A digital wallet can be used to store access information for digital assets, if the family is reasonably comfortable using one. A complete list of assets should include tangible and digital assets. It needs to be updated annually or whenever you add new assets.

Reference: Tech Crunch (April 5, 2021) “What happens to your NFTs and crypto assets after you die?”

It Is Important to have a Digital Estate Plan

“What happens to all your digital accounts, services and property after you die? The official name for all these is a Digital Estate Plan. With the lines increasingly blurred between our on-and off-line lives, it's more important than ever to have a plan for your digital holdings.”

Just as you organize your physical possessions and financial accounts, you need to organize and plan for your digital estate. Otherwise, according to the recent article “Why You Need a Digital Estate Plan and How to Make One” from Next Avenue, you will leave a giant mess for your family.

Nearly 50 states have already passed laws that give a person’s family or their executor the right to access and manage some of their digital assets after they die. However, if the digital platform does not allow an executor or anyone to access and manage accounts, the problem will not be easily resolved.

Facebook has created a “Legacy Contact” and Google has an “Inactive Account Manager,” but they only work if you take the time to go through the process in advance. Sharing passwords and instructions or setting up an online password manager may or may not solve the problem for the 200 other accounts. Why?

Increasing security means that many accounts require confirmation codes, typically sent to a mobile phone or email address, before an account may be accessed. If the phone or email is locked, then access will be impossible. Two-factor authentication makes it harder for digital criminals to access your accounts, but it also makes it difficult for heirs and executors. Some people have taken a step into the future to have their accounts opened via facial recognition. How then do you access accounts?

Not all digital accounts and services have the same requirements for access.

Here is a way to think about your digital estate: what is the level of importance for each account? If it were deleted and all contents removed, how would it impact your life? Is it a “single sign on,” where credentials are needed to log into other accounts? Are there payment methods attached to the account, like automatic withdrawals or credit cards?

Many accounts may be dormant, like an old email address you stopped using ten years ago. However, what about the important accounts that are central to the business of your life, like checking and savings accounts, or personal email?

Tech giants like Google, Amazon, Microsoft, and Apple have made their way into many aspects of our lives. If you have a library of ebooks, or an online gaming presence with digital assets, would you wish to maintain those assets? Think about all the autopayment accounts that you have—and how much money your estate would lose if those accounts could not be shut down.

Once you have identified all of your important accounts, examine them one by one to see what if they have a legacy process. Then start thinking about what you would like to happen to the accounts and their contents, in case of your incapacity or death. Having a digital estate plan today is not futuristic at all—it’s how we live, and our estate plans should be updated accordingly.

Your estate planning attorney will know what your state’s laws are for digital assets, just as they do for more traditional assets.

Last word: do not include your usernames or passwords in your will. A will becomes a public document upon probate, and this information must be protected from identity thieves if the accounts are to remain secure.

Reference: Next Avenue (Jan. 1, 2021) “Why You Need a Digital Estate Plan and How to Make One”

What Do You Do with a Loved One’s Digital Footprint When They Die?

“In this digital age, it is the rare person who does not have some form of digital footprint. Facebook, Twitter, LinkedIn and others are part of everyday life for most people.”

What do you do with the digital footprint that a loved one has left behind when they die?

The Catholic Register’s recent article, “An executor must deal with digital footprint,” says it seems like it’d be a relatively easy issue, but folks are seeing that this is far from a simple process.

Think about what’s on your digital footprint: your Facebook account has many details of your daily life and personal history. Your email account(s) have your personal and business communications. You also probably do your banking online.

After you’re gone, do you want your heirs looking at virtual territory that you would rather keep private? How will your digital accounts be wrapped up? It's important that you name a digital executor.

In many instances, the person who is handling your estate may not be the person who has the technical aptitude to take care of your digital assets.

Remember that the executor named in your Will has to settle all issues relating to your life. Clearing out your digital footprint is one more task. Be specific with your instructions and keep a list of all the websites and login credentials, so the executor can take action as appropriate.

Speak to someone you trust about your online legacy and tell them “Just so you know, I put my passwords here, this is where I store them, and these are my accounts. Make sure you take care of those.”

Some accounts like Facebook, are easier to delete than others. It’s much easier with a death certificate. Facebook allows you to set up a memorialized account to remember the deceased. The timeline is kept, and friends and families can post comments and photos.

Reference: Catholic Register (November 6, 2017) “An executor must deal with digital footprint”

Are You Certain That You Have Included Everything in Your Will?

“We uncovered the biggest things people overlook when drafting a will. Find out if you’re missing a one of these key elements.”

There are a few common items that folks neglect to put in their wills or estate plan. These can have a major effect on your family.

An article from Philly.com offers some thoughts on commonly overlooked subjects for wills in “5 Things People Forget to Include in Their Will.” Folks keep neglecting important items in their estate planning documents. Here are a few items that need to be in there:

1. Alternate Beneficiaries. A big item in your estate planning should be to include at least one alternative beneficiary, in case the named beneficiary dies before you or isn’t able to claim under the will. Provide an alternative beneficiary to be sure that the property goes where you want it to go.
2. Personal Property and Family Heirlooms. Some heirlooms can have a great deal of sentimental value, such as holiday ornaments and handmade linens. You should clearly state which family members get which item. You can add a list in your will. However, this can make it hard to add or delete items. A personal property memorandum is a separate document that lists which friends and family members get what personal property. Some states have laws that say if it’s referenced in the will, it’s legally binding. Even if the personal property memorandum isn’t legally binding, it’s helpful for your heirs to avoid confusion and fighting.
3. Digital Assets. What becomes of our digital assets and accounts when we pass away? Take these steps to help your family deal with your digital property:
4. Put together a list of all your online accounts, like e-mail, financial accounts, Facebook, and anywhere online where you conduct business;
5. List your username and password for each account;
6. Include access information for your digital devices (such as smart phones and computers); and
7. Be sure the agent under your durable power of attorney and the personal representative named in your will, have authority to handle your online accounts.
8. Pets. Pets can’t take care of themselves after you are gone. And although you can’t leave property directly to a pet, you can designate a caretaker in your will and leave him or her assets to care for the pet. You should also name an alternative beneficiary. Some states allow pet trusts, where the trustee makes payments on a regular basis to your pet’s caregiver and pays for your pet’s care.

Reference: Philly.com (September 2, 2015) “5 Things People Forget to Include in Their Will”

Digital Asset Estate Planning

“The goal is having enough money to live the rest of your life on your terms.”

There are many things to consider when drafting your will, such as dividing up your assets and ensuring that your family members all get a share. This can be a real challenge, but now you also need to include your online assets.

Starts at 60 explains in “The assets you probably haven’t thought of in your will,” that your digital assets are worth considering when drafting your will. Estate planning attorneys have seen an increasing number of cases where digital assets are left in limbo because people failed to take them into account.

There are two different kinds of digital assets, sentimental and financial. Sentimental assets are your social media accounts, photos, videos, and emails. There’s no real reason to include your sentimental digital assets in your will, but it’s still relevant to your estate planning because of the issues concerning the cancellation of your Facebook account.

Facebook and Google allow for a legacy contact person to be appointed prior to death. He or she is given rights to handle the account after the owner’s death. To access the account, you need to appoint someone as the digital heir. If you don’t, your family will need a court order to authorize the deletion of accounts.

Other types of financial digital assets can include intellectual property. These are things like books, screenplays, and computer programs.  It can be thought of as anything worth money that’s on your computer or in the cloud. Some experts say that digital assets should be owned by a company or a trust. That’s because assets held by a person are part of his or her estate and they pass in accordance with the will. If they’re not owned by the person in their own name, but instead are held in a trust, there are no transfer issues that would apply in a will.

To develop a sound plan, understand who owns the asset, where it’s located, and how to gain access. It’s important to consider what you’d like to happen with your digital footprint, and to identify any valuable assets that may be out there.

Reference: Starts at 60 (November 14, 2016) “The assets you probably haven’t thought of in your will”