King & Wood, P.A.

What Is the Biggest Mistake People Make on Their Wills?

“Have you managed to avoid the eight most common estate planning mistakes? Your family will thank you.”

Making mistakes in your estate planning can torpedo every effort made to protect your family after you die, warns a recent article from Kiplinger, “Common Estate Planning Mistakes.” Everyone benefits from a professionally-made comprehensive estate plan, a process for preparing your legal and financial affairs so assets and possessions are passed on after your death to the people or charities you want.

Not having an estate plan can create a world of trouble for those you love. The biggest estate planning mistake of all is not having an estate plan. After that, there are several others.

Procrastination. Suppose you unexpectedly become incapacitated and don’t have an estate plan. In that case, your family will be left guessing what you would want your medical care to be, in addition to needing to go to court to apply for guardianship so they can pay your bills and keep your household running. Everyone should have documents like Health Care Power of Attorney, Power of Attorney, HIPAA Release Form and Living Will in place.

Trying to make an estate plan on your own. Unless you’re an experienced estate planning attorney, there’s a lot you could leave out if you attempt a DIY estate plan. If there are errors, a court could declare your will invalid and it’s as if you never had a will in the first place. The laws of your state will be used to distribute your assets. It may not be what you had in mind.

Keeping estate planning documents in a safe or safe deposit box. Documents need to be where someone can get them in an emergency or after your passing. Safety deposit boxes are often sealed on the death of the owner. Give copies of your estate plan to your appointed executor or trustee, a trusted family member and your estate planning attorney.

Missing key documents. If your estate plan lacks key documents, your heirs might find themselves battling over the estate. Make sure your estate plan includes these documents:

• Last will and testament—This document outlines all final wishes and instructions for distributing your assets and how you want your affairs managed after you die. It also is used to name a guardian for minor children and an executor to oversee the instructions in the will.
• Beneficiary designations—Any account allowing for beneficiaries, including IRAs, pension plans, investment accounts and insurance policies, will pass directly to named beneficiaries. Be sure that these are up to date.
• Durable power of attorney for medical care—Allows another person to make medical decisions for you if you become incapacitated. Depending on your jurisdiction, it may include an advanced healthcare directive, which gives your instructions on whether or not to use life support.
• Funeral instructions—Do you want a traditional burial? Cremation? Tell your family your wishes for a funeral or memorial service.
• Proof of identity—Your Social Security card, birth certificate, marriage and/or divorce certificate and any prenuptial agreements will be needed for administering the estate.
• Deeds or loan documents for large assets—Collect paperwork for homes, boats and other big assets.

Digital assets. These include websites, cloud storage, social media accounts and cryptocurrency, to name a few. By assigning a digital fiduciary and sharing key information, you help heirs avoid identity theft and lost assets.

Failing to update your plan. Your estate plan needs to reflect the changes in your life. If your estate plan is outdated, you may unintentionally disinherit beneficiaries.

Appointing the wrong person as executor or trustee. If your eldest child is a disaster with money management, don’t name them your executor. Consider a trusted person who is unbiased and able to manage money and family dynamics and talk with them about taking on this role before appointing them to this critical role.

Reference: Kiplinger (Dec. 30, 2023) “Common Estate Planning Mistakes”

Top Tips for Estate Planning

“There’s a lot to keep up with when estate planning. These tips could help, from updating beneficiaries after changing your plan to understanding will-substitute options, like transfer on death.”

Social media and in-person conferences are filled with “hacks” to improve lifestyles, finances and everything you can imagine. Taking a page from the world of “life hacks,” this article from Kiplinger, “14 Rapid-Fire Estate Planning Tips,” presents short and impactful info on estate planning.

Tip 1—Consider using a professional trustee in your estate plan for a more effective estate plan and more efficient administration.

Tip 2—For business owners, make sure that your estate planning attorney, CPA and financial advisors all understand your business. Invite them to your office or factory, so they can see how production or business practices are handled and the role of key employees, especially family members.

Tip 3—Discuss Transfer on Death (TOD) and Payable on Death (POD) options to see if they might be useful or detrimental to your estate plan. Many banks are pushing these arrangements, but they are not for everyone.

Tip 4—If you own a closely held company, have your estate planning attorney review any buy-sell provisions in the shareholder and operating agreements. Were these terms coordinated with the liquidity available to your trust or estate?

Tip 5—Do your trust documents include provisions regarding substance abuse powers and protections for beneficiaries? Give the trustee the power to deal with any substance abuse issues, including the power to pay costs directly to vendors and not directly to the beneficiary, require testing and treatment programs and pay for them with trust funds, and withhold mandatory distributions until the beneficiary meets certain testing and treatment standards.

Tip 6—Use an active voice in all forms, communications and agreements. Avoid ambiguity and provide clarity by using the active voice to identify the person who is or will exercise power or duty.

Tip 7—Be careful with personal information and documents. Your estate planning attorney and all other advisors should use encryption to protect emailed documents. Multifactor authentication should be used on any remote access. Don’t open attachments from anyone you don’t know or click on a link in an email from someone you think you know. Pick up the phone and call advisors before opening the email or link.

Tip 8—Ask your estate planning attorney to review the trust’s express standards of care, so you understand the duties and liabilities of the trustee. When a trust states a trust advisor is not a fiduciary and is not liable for actions taken in good faith, then any actions must be in good faith. This is a standard of care, and they are liable for actions taken in bad faith.

Tip 9—Ask your estate planning attorney about having your trust absolve successor trustees of all prior acts of the predecessor trustee. When a trustee is named successor trustee, they will look for this language absolving them of the predecessor trustee’s prior acts of omission or commission. If there’s no such provision in the document, the successor trustee will want all qualified beneficiaries to sign a release and indemnification.

Tip 10—Don’t rely on your memory regarding gift and estate tax returns filed in the past or your past use of lifetime estate tax exemptions, annual exclusion gifts, withdrawal notices and Generation-Skipping Transfer Tax (GSTT) allocations. Locate copies of these documents in your records to ensure that they match. Document your file with any notes or communications about gifting. As a taxpayer, you and your estate are responsible for maintaining records and have the burden of proof in any tax matters.

Tip 11—Anytime you review or update your estate plan, take the time to review any beneficiary designations immediately. Existing deeds, titles, account details and beneficiary designations should all be up to date, as your new estate plan may be ineffective at best (and, at worst, worthless) if those forms are not completed and updated.

Tip 12—If you are a beneficiary, you are allowed to review trust administration and ask questions of the trust officer. You are entitled to know how often you will receive statements or annual accounting, the standards the trustee must follow for making distributions and whether or not you have any control over the use of trust benefits during your lifetime or upon your death.

Tip 13—When updating your estate, ask your estate planning attorney about drafting trust restatements and new wills rather than trust amendments and codicils. Modern word processing makes it just as easy to prepare complete restatements rather than multiple amendments.

Tip 14—If you file personal tax returns and fiduciary tax returns for trusts, it may make sense to use the same accounting firm for both.

Reference: Kiplinger (Nov. 8, 2023) “14 Rapid-Fire Estate Planning Tips”

When Should You Update Your Estate Plan?

“From the birth of a child to a newfound charitable drive, these are the instances in which an alteration to your estate plan is critical.”

We know we need to see our doctor for annual checkups and see the dentist every six months, not to mention getting a good night’s sleep, brushing and flossing our teeth. In the same way, your estate plan needs regular maintenance, according to an article from The Street, which asks, “When Is It Time to Update Your Estate Plan?”

Far too often, estate plans are created with the best intentions and then lie dormant, in many cases, for decades. Provisions no longer make sense, or people in key roles, like executors, either move away or die.

Failing to update an estate plan can lead to a beloved child being disinherited or an animal companion ending up in a shelter.

This is an easy problem to solve. However, it requires taking action. Scanning your estate plan once a year won’t take long. However, when certain events occur, it’s time to bring all your estate planning documents to an estate planning attorney’s office.

Here are a few trigger events when you may want to make changes:

Welcoming a new child into the family. Wills and trusts often contemplate future children. However, when the children arrive, you’ll need to update wills, trusts and beneficiary designations. Life insurance policies, investment accounts and retirement accounts allow you to name a beneficiary, and the proceeds from these accounts go directly to the beneficiaries, bypassing probate.

If no beneficiary is named or cannot be located, the asset usually goes back into the estate, meaning it goes through probate and there may be tax liabilities.

Charitable giving goals often change over time. An organization with great personal meaning in your twenties may be less important or may have closed. If you’ve become involved with a charitable mission and want to leave assets to the organization, you’ll want to create a charitable bequest in your will or trust. Those changes need to be reflected in your estate plan.

People’s ability to serve in fiduciary roles may have changed. If the people you assigned certain roles to—like trustees, executors, agents, or the guardian named for minor children—may no longer be suitable for the role. The person you selected to serve as a guardian for minor children may not be available or willing to manage adolescents. If your trustees are over 70, you may want to name an adult child to serve in this role.

Reviewing insurance policies needs to be done regularly. In some cases, the value of life insurance proceeds may be subject to estate tax. Proper planning should be able to avoid this by making certain the policy is not included in your taxable estate.

If you are considering taking out a new life insurance policy, revisit your existing plans with your estate planning attorney. It may make sense for you to create an insurance trust, which allows you to exempt certain assets from your taxable estate.

Are pets an important part of your life? If so, you may want to make plans for who should take care of your pet if you pass away. In many cases, a pet trust works to name a trustee to manage funds for the pet’s care and formally outlines how you want your pet to be cared for.

Reviewing your estate plan every three to five years with your estate planning attorney or whenever a significant life event occurs will ensure that your wishes are followed.

Reference: The Street (Oct. 30, 2023) “When Is It Time to Update Your Estate Plan?”

The Team Behind a Successful Estate Plan

“Human nature is such that we often tend to focus on the bigger and more important steps. That’s a good thing, but it doesn’t negate the need to address the secondary coordination steps.”

Most advisors stick with their areas of knowledge. The estate planning attorney drafts the necessary documents, your CPA files tax returns and the investment advisor fine tunes assets. However, coordinating these professional silos is critical to ensuring your estate plan works, says a recent article from Forbes, “Your Estate Plan Must Be Coordinated To Work.”

Communication needs to extend past advisors to key loved ones and people you name in roles, such as agents, trustees and executors. Many people find these discussions awkward. However, preparing heirs and fiduciaries for their roles and setting expectations is a crucial step to avoid issues during transition periods. Some of the most significant estate planning problems arise when the baton is passed, such as if you fall and become incapacitated. You need to be sure your agents know what is expected of them and when they will be called upon to perform their respective tasks.

Coordinating advisor actions will save time and expense in the long run. Your estate planning attorney, CPA, trust officer, wealth advisor and insurance broker should know what each other is doing on your behalf. Many people shy away from doing this because of concerns about cost. However, not doing it can lead to much larger expenses.

You want to foster coordination and collaboration, in a controlled and cost-effective manner. One way to do this is to have advisors prepare a summary of key points, facts and decisions following your meetings, so you can circulate it to other advisors. This way they all know what is being done and can share their knowledge and experience if they think something is wrong or won’t work as planned.

One example of what can happen when advisors are not coordinated is paying bills from incorrect accounts. For instance, if you incur legal fees for the estate plan but pay them from a trust account or business entity, a creditor could argue this is a personal benefit from a trust you are not a beneficiary of, or you’ve violated the business purpose of an entity, which could expose all trust or entity assets.

Your estate planning attorney should know how your assets are titled, which are owned jointly, or other designations used to avoid the terms of your will and/or any trusts. Beneficiary designations, wills and titles must be planned and coordinated to avoid derailing your estate plan.

If you die and an asset is owned in your name only, the asset will go through probate and be distributed according to the terms of your will. If you are incapacitated, your agent, under your financial Power of Attorney, must act concerning the asset to help pay bills.

Many people opt to have assets held in a joint name so that on death, the asset will pass to the named joint owner without going through the will and probate. If the person named as the joint owner is not the same as the POA, you may have created a logistical nightmare. How will the POA pay bills if the joint owner does not cooperate?

Coordinating professional advisers is as important as coordinating family members. There are many different agents and positions to be appointed. People often sign a financial POA with their estate planning attorney, and no one looks closely at any conflicting appointments.

The same kind of issues occur with health care agents. There are several different health care documents, and you’ll want to coordinate them to eliminate the possibility of conflicting appointments. The key to achieving this is diligence, communication and follow-up.

Reference: Forbes (Oct. 31, 2023) “Your Estate Plan Must Be Coordinated To Work”

Estate Planning can Protect Beloved Pets

“Estate planning, once limited to human beneficiaries, has now extended to include beloved pets in order to provide for their well-being after the owner’s death.”

While pets are still legally considered possessions, they are also recognized as family members deserving of a safe and happy future, says a recent article from The Record-Courier, “Estate planning for pets.”

Estate planning for pets involves creating provisions for the pets’ care and well-being if their owner becomes incapacitated or after the owner’s passing. The goal of estate planning for pets is to be sure that they will receive the same level of care, attention and resources they enjoyed even if their owner is unable or alive to care for them.

Estate planning for pets involves more than securing funds for their care. It requires a complete plan to protect their future, from designating caregivers, addressing specific needs, habits, preferences, daily routines, and personality quirks, considering any legal or financial issues and planning for alternate solutions if the primary plan becomes unattainable.

The more details addressed in the estate plan for the pet, the better protected they will be.

Designating a guardian for the pet is usually the most important step. This is the person you want to care for the pet and probably bring the pet into their home. It is critical to have a detailed conversation with the potential guardian to ensure that they understand what they are being asked to do and ensure they can and are willing to follow your wishes.

You should have one or even two backup guardians, if the primary guardian becomes unable or unwilling to serve. The estate plan should also prepare for a situation where no designated people can care for the pet and provide an alternate solution, such as placing the pet in a no-kill shelter or charging the trustee with finding a good home.

Designation of sufficient funds is also necessary. Consider how long the pet is likely to live, the cost of veterinary care in your community, and any emergency care.

Different legal documents are used to prepare estate plans addressing care for a pet. A pet trust is a legally recognized document, with funds set aside for the pet’s care in the trust, managed by the trustee by the terms of the trust. You can also use provisions in your last will and testament, with a designated individual nominated to care for the pet. However, the trust is more enforceable, with the trustee having a fiduciary obligation to carry out the terms of the trust.

Estate planning with pets in mind is a responsible way to ensure that your beloved animal companions have a secure future even if you cannot provide it for them. Your estate planning attorney will be able to create a pet trust to alleviate any concerns about your pet’s future.

Reference: The Record-Courier (Oct. 21, 2023) “Estate planning for pets”

Revocable Living Trust can Help with Planning for Incapacity

“While physical disabilities may not impact a client’s ability to manage their own assets, mental illnesses and age-related cognitive impairment can eventually lead to incapacitation and the inability to manage their own assets.”

Planning for potential disability and mental incapacity is part of a comprehensive estate plan. Women, in particular, are at a higher risk of becoming disabled, with 44% of women 65 and older having a disability. Most people understand the value of an estate plan. Nevertheless, few know how to use a Revocable Living Trust, or RLT, when planning for incapacity, as explained in the article “Incapacity Planning: The Hidden Power Of A Revocable Trust” from Financial Advisor.

Revocable Living Trusts are highly effective tools to protect assets against failing capacity. Although everyone should have both, they can be more powerful and efficient than a financial Power of Attorney. An RLT offers the freedom and flexibility to manage your assets while you can and provides a safety net if you lose capacity by naming a co-trustee who can immediately and easily step in and manage the assets.

Cognitive decline manifests in various ways. Incapacity is not always readily determined, so the trust must include a strong provision detailing when the co-trustee is empowered to take over. It’s common to require a medical professional to determine incapacity. However, what happens if a person suffering cognitive decline resists seeing a doctor, especially if they feel their autonomy is at risk?

Do you need an RLT if you already have a financial Power of Attorney? Yes, for several reasons.

You can express your intentions regarding the management and use of trust assets through the trust. A POA typically authorizes the agent to act on your behalf without specific direction or guidance. A POA authorizes someone to act on your behalf with financial transactions, such as selling a home, representing you and signing documents. The co-trustee is the only one with access to assets owned by the trust, while the POA can manage assets outside of the trust. Having both the POA and RLT is the best option.

Trustees are often viewed as more credible than a POA because RLTs are created with attorney involvement. POAs are often involved in lawsuits for fraud and elder abuse.

Suppose there is an instance of fraud or identity theft. In that case, RLTs provide another layer of protection, since the trust has its own taxpayer ID independent of your taxpayer ID and Social Security number.

Your co-trustee can be the same person as your POA.

Adding a trusted family member as a joint owner to accounts and property provides some protection without the expense of creating a trust. However, it does not create a fiduciary obligation, enforceable by law, for the joint owner to act in the original owner’s best interest. Only POAs or trustees are bound by this requirement.

Once a POA is in place, it is wise to share it with all institutions holding accounts. Most of them require a review and approval process before accepting a POA. Don’t wait until it’s needed, when it will be too late because of incapacity, to have a new one created.

Talk with your estate planning attorney about planning to create an RLT and POA to ensure that your assets will be protected in case of incapacity.

Reference: Financial Advisor (Oct. 18, 2023) “Incapacity Planning: The Hidden Power Of A Revocable Trust”

Why You Need to Include Digital Assets in Your Estate Plan

“From Bitcoin to Gmail accounts, the rules governing ownership, storage and transferability of digital assets differ significantly from traditional forms of wealth.”

A new form of wealth, with different ownership, storage, and transferability terms, has created a new challenge for estate planning from traditional forms of wealth. These are digital assets, electronic records in which an individual has a right or interest, as explained in a recent article, “Planning for Digital Assets 101,” from Wealth Management.

Digital assets can be divided into two groups: sentimental digital assets and investment digital assets.

Sentimental digital assets are those with an emotional tie, like photos, videos, social media accounts, etc. For these assets, the goal is to provide access to loved ones after a person’s death. Some platforms allow settings to name a legacy contact. A list of accounts, usernames and passwords will be helpful for family members.

The IRS defines investment digital assets as “any digital representation of value which is recorded on a cryptographically secured distributed ledger, like a blockchain, or any similar technology as specified by the Secretary.” This type of asset includes cryptocurrency, stablecoins and non-fungible tokens.

The challenge of digital investment assets in estate planning centers on how they are owned and stored.

Digital assets are stored in digital wallets, web-based or hardware-based. “Hot wallets” are web-based and run on smartphones or computers. Many investors use them for small amounts of cryptocurrency and frequent trading. “Cold wallets” are hardware-based wallets stored on devices not connected to the internet, reducing the risk of unauthorized access. A cold wallet can only communicate with an internet-connected device when plugged in. An investor will have a seed phrase or backup code to access the cold wallet, which the owner must store in a secure place.

Understanding the storage system is essential for estate planning for two main reasons:

Beneficiary Access. The recipient of a gift or bequest of the digital asset must have access to the relevant storage device to access the actual investment. Sharing this information comes with an element of risk, as access is inherently tied to value.

Fiduciary Access. If only the owner has access, heirs will have no way to gain access to the digital assets when the owner dies. Digital exchanges don’t allow users to name a contact to access the investment information upon death. Most exchanges don’t have centralized entities to record information. If access is denied to the heir, the investment could be lost.

Transferring digital assets requires providing access to beneficiaries and/or fiduciaries. There are several ways to structure such a transfer while minimizing the risk of theft or loss.

Digital assets can be transferred to a Limited Liability Company, and subject to certain limitations, retain control of the digital assets' management by serving as LLC manager. Transferred LLC interests can also provide a mechanism to discount the value of the transferred interest. In addition, LLCs can provide asset protection since, in most states, LLCs protect a member’s personal assets from an LLC’s liabilities.

A directed trust is another way to transfer digital assets, while maintaining control and decision-making with the owner. In some states, a directed trust can have an “investment trustee” or “investment trust director” to exclusively handle investment responsibilities, including managing and storing digital assets.

Even using these two methods, someone other than the original owner must be granted access to the digital assets. One way to do this is by naming a “digital fiduciary”—someone tasked with managing the digital assets.

Estate plans involving digital assets must clearly outline heirs for the digital investment and its tangible storage devices. The assets can pass with the residuary, and complexities can arise if the residuary beneficiaries differ from tangible property beneficiaries who will receive the storage device. Speak with an experienced estate planning attorney to be sure that your digital assets are included in your estate plan.

Reference: Wealth Management (Sep. 19, 2023) “Planning for Digital Assets 101”

Who Should Be Your Executor?

“The person you have placed in charge of your estate under a Will is called a ‘Personal Representative’ or ‘Executor/Executrix.’”

Most people mistakenly believe they must name their eldest child as their executor, the person in charge of administering their estate. According to the article “Eldest child, best friend, C.P.A.—Who should you put in charge of your estate?” from Coeur d’Alene/Post Falls Press, even people who understand they are not legally required to name their eldest child still think their oldest child is supposed to be their executor.

This may have been a social norm way back when. However, those days are gone. Here is what you should consider when determining who you want to be in charge of your estate.

First, what estate planning documents does the executor need to deal with? An executor is primarily concerned with your Last Will and Testament. This document states what you want to happen to your possessions and assets when you die. It also includes your choice of executor.

Not everyone has a trust. However, you’ll likely rely on a trust if you have assets you don’t want to go through probate. The instructions in the trust have nothing to do with the will. The trustee is in charge of the following the directions in the trust, which spells out exactly what you want to happen with any assets owned by the trust.

Your executor and trustee can be the same person. However, they don’t have to be. They need to be someone you have a high degree of confidence in, capable, self-starting, organized and able to navigate the relationships of the other family members and beneficiaries of your estate.

While your will and trust will have specific language, there are also many things an executor and trustee will need to make discretionary decisions on. For instance, if your executor sells your home to distribute proceeds to named beneficiaries, they’ll decide which realtor to use, what the listing price should be, what offers to consider, which offer to accept, what terms of acceptance should include, etc.

You’ll also need to be confident that the person you name will honor your wishes and do their best to achieve the desired outcomes for the benefit of your heirs. If the executor/trustee is also a beneficiary, they must understand their fiduciary responsibilities. They are responsible for putting the estate and not their own interests first.

They’ll also need to be highly organized and able to handle duties without procrastinating. If they are not, they may decide to retain an estate planning attorney to be organized and manage the details. There’s nothing wrong with doing this. It may be impossible for a layperson to know precisely how to manage an estate and probate in highly complex estates.

Consider all of the people who have an interest in your estate or legal rights to be made aware of its administration. They may include children, stepchildren, non-family member beneficiaries, charities, etc. Your executor may need to deal with all of them.

Finally, be realistic about who you select as an executor and trustee. If they need to work together, do they get along? If you know they haven’t seen eye-to-eye on anything since fifth grade; it’s not likely to change because you’ve given them this responsibility. An estate planning attorney may be a better alternative to avoid family feuds or long-standing battles erupting over your estate.

Reference: Coeur d’Alene/Post Falls Press (Aug. 6, 2023) “Eldest child, best friend, C.P.A.—Who should you put in charge of your estate?”

Estate Planning for Today’s Modern Blended Family

“The modern blended family has far more needs when it comes to estate planning than a traditional family. Here are some challenges, tips and solutions.”

If you grew up watching Leave it to Beaver, you saw a family with traditional estate planning goals and challenges, as compared to today’s Modern Family, with stepparents, stepchildren and a host of dynamics which calls for a vastly different estate plan, reports a recent article, “Comparing Estate Planning: ‘Leave It to Beaver’ vs. ‘Modern Family’” from Kiplinger.

Planning goals require identifying overall goals and concerns and identifying heirs. Are you concerned about divorce or lawsuit protection? What do your family members need? Probate will subject your estate and family to higher costs, delays and the public nature of a formal court proceeding where heirs’ names, inheritances and asset values become public information.

Failing to identify heirs or beneficiaries and their needs clearly is especially important for a blended family. This could result in your state's probate code becoming the guiding law, which may not align with your wishes. The probate code is less likely to identify desired heirs of a blended family.

Estate planning for a blended family must also address who will be authorized to make decisions in the event of incapacity to make medical decisions. Failing to do so could result in a family member whom you might not have named making important decisions on your behalf. An estate plan should include healthcare proxy and HIPAA release forms.

When correctly drafted and executed, trusts can help avoid probate. Here’s an example of how this can go wrong. A woman’s husband died. He had handled the couple’s finances. All of the assets were in his name alone. In this case, California, the probate code limited the distribution to one-third for the surviving spouse and two-thirds for the children, including one minor child. The surviving spouse felt she was a 50% owner of the combined assets and fully expected to receive control and ownership of all assets upon his death. Having assets go to children was unexpected, created financial difficulties and strained the family relationship.

Do you live in a community property state? In these states, property for married couples is characterized as community (jointly owned) or separate (owned by one spouse). Care needs to be taken by both spouses as to how properties, assets and accounts are titled.

Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, and Washington are community property states. Property rights established in a community property state can still have consequences for those moving to states that don’t have community property rights. If that describes your situation, a meeting with an estate planning attorney should take place to discuss the implications for your estate property distribution.

An estate plan should be created to provide for the surviving spouse and the deceased spouse’s children. In traditional families, all assets usually go to the surviving spouse with few restrictions. In the case of second marriages, there are ways to provide for the surviving spouse. One way is to retain the deceased spouse’s assets in a trust. The trust provides for all the income to the spouse and discretionary principal distributions. A Qualified Terminal Interest Trust (QTIP) may permit the trust to qualify for the marital deduction for estate tax purposes.

The selection of trustees is an important decision for a blended family. In this case, it may be better to have a professional fiduciary who is not emotionally engaged with one side or another to alleviate any emotional baggage.

An experienced estate planning attorney will be able to guide the family through creating a comprehensive estate plan to assuage concerns about children from prior marriages receiving their rightful inheritance, while protecting the surviving spouse’s quality of life.

Reference: Kiplinger (June 12, 2023) “Comparing Estate Planning: ‘Leave It to Beaver’ vs. ‘Modern Family’”

Protect Cryptocurrency in Your Estate Plan

“Cryptocurrency has become a new wrinkle in the development of an estate plan.”

The very nature of cryptocurrency as a secure digital asset is the result of the complete absence of any identifiable information associated with an individual crypto account. These types of assets are also not easily identifiable to executors or heirs, says a recent article, “Today’s Business: Cryptocurrency and estate planning” from CT Insider.

The only way an heir or designated fiduciary (like an executor) may gain access to crypto accounts after the owner’s death is to have the password or “private key.” Without it, there is no way to gain access.As a result, the cryptocurrency is worthless. Therefore, safeguarding the passwords, especially the crypto “seed” phrases, is critical.

The “key” to a person’s cryptocurrency must never exist only in the owner’s mind. The owner must never be the only person who knows where the passwords are printed, whether on a piece of paper, in an encrypted file on a thumb drive or laptop, or an online password manager.

At the same time, this critical information must be secure. How do you accomplish both?

Start by telling your estate planning attorney that you own cryptocurrency. Just as they wouldn’t be able to help protect a traditional asset if they didn’t know it existed, they will need to know you own cryptocurrency, so they can incorporate it into your estate plan.

To safeguard seed phrases and other passwords for estate planning purposes, consider these options:

A straightforward way of storing passwords and seed phrases is to write them down (legibly) on a piece of paper and store the paper in a secure location, such as a personal safe or safe deposit box.

Using a password manager can work. This is software used to store all passwords in an encrypted format. It allows the storage of secret seed phrases, passwords and other sensitive information, accessible through a single password. Be careful to select only a high-rated password manager from a recognized company. You should also never store seed phrases or passwords with the cryptocurrency wallet address to minimize the chances of hackers accessing your digital wallet.

Because of the importance of securing information from physical and digital threats, you may want to invest in a fire and water-proof safe and give a trusted friend or relative a means of accessing the stored information. In addition, as the security landscape continues to change, it’s essential to regularly change passwords and seed phrases to ensure digital assets remain secure and loved ones can access them if you become incapacitated or pass away.

Properly securing seed phrases and other passwords is a part of today’s estate planning. You and your estate planning attorney need to plan for digital assets to ensure that they are properly managed and passed on to loved ones without compromising sensitive information in a last will and testament.

Reference: CT Insider (March 18, 2023) “Today’s Business: Cryptocurrency and estate planning”