Self-Employed must take a Proactive Approach to Estate Planning

January 16, 2025

Freelancers and the self-employed must take a proactive approach to estate planning. These types of jobs operate without the safety nets provided by traditional employment. This independence brings freedom. However, it also adds complexity to financial and estate planning. From managing irregular income to protecting business assets, creating an estate plan ensures that your hard work is preserved and distributed according to your wishes.

Unlike salaried employees, freelancers often lack access to employer-sponsored benefits, such as life insurance, retirement plans, or disability coverage. Their business assets and personal finances are frequently intertwined, making careful planning essential to avoid unnecessary complications for heirs.

A well-crafted estate plan for freelancers addresses:

Transfer of business assets or intellectual property.
Continuity of income for dependents.
Minimization of taxes and legal hurdles.

Freelancers and the self-employed must create a plan that considers their unique financial circumstances and provides long-term security for loved ones.

Freelancers often rely on their business as their primary source of income. Without a plan, the value of that business could be lost upon their death. Key steps include:

Appointing a Successor: Identify someone to take over the business or handle its sale.
Creating a Buy-Sell Agreement: Outline how ownership interests will be transferred for partnerships or joint ventures.
Documenting Procedures: Maintain clear records and instructions to help successors understand ongoing operations or intellectual property management.

Freelancers often experience fluctuations in income, which can complicate traditional estate planning strategies. To account for this:

Establish a rainy-day fund to provide a financial buffer for your estate.
Work with an estate planning attorney to identify flexible asset protection strategies.
Consider annuities or investments that provide steady income streams for beneficiaries.

Unlike traditional employees, freelancers must set up their own retirement savings plans. Options include:

SEP IRAs or Solo 401(k)s: Tax-advantaged accounts tailored for self-employed individuals.
Roth IRAs: Flexible savings accounts that grow tax-free, offering greater liquidity for heirs.

Ensuring that retirement savings are properly designated to beneficiaries avoids complications later.

The self-employed often own valuable digital assets like intellectual property, domain names, or online portfolios. These assets must be included in your estate plan to ensure seamless transfer. Create an inventory of:

Login credentials for key accounts.
Ownership documentation for websites or digital products.
Instructions for transferring or licensing intellectual property.

Many self-employed generate income from intellectual property, such as writing, artwork, or designs. An estate plan should specify how copyrights, patents, or trademarks are managed after death. This may include:

Assigning ownership to heirs or beneficiaries.
Creating trusts to manage royalty payments.
Licensing or selling rights to preserve income streams.

The first step to creating an estate plan is drafting a will that distributes assets, business interests and personal property according to your wishes. Without one, state laws determine asset distribution, which can result in unintended consequences. However, there’s much more to an estate plan than just making a will.

Establish Powers of Attorney

Freelancers should designate a trusted person to handle financial and healthcare decisions, if they become incapacitated. Powers of attorney ensure continuity in managing personal and business affairs during emergencies.

Consider a Living Trust

A living trust can help freelancers avoid probate and ensure that assets are distributed efficiently. Trusts are beneficial for managing complex assets, like intellectual property or business income.

Secure Life Insurance

Life insurance provides a safety net for freelancers with dependents by replacing lost income and covering future expenses. Policies should be aligned with your estate plan to ensure that benefits are directed appropriately.

Reach Out to an Estate Planning Attorney

Freelancers should consult estate planning attorneys and financial/tax advisors to create a plan that addresses their unique circumstances. Regular reviews ensure that the plan evolves alongside income, assets, or family structure changes.

Freelancers and the self-employed must take a proactive approach to estate planning. You can ensure your hard-earned legacy benefits your loved ones by addressing business continuity, income fluctuations and digital assets. An estate plan tailored to your needs secures your financial future and provides peace of mind, knowing that your assets and values will be protected. If you would like to learn more about planning for the self-employed, please visit our previous posts.

Reference: American College of Trust and Estate Counsel (ACTEC) (Oct. 19, 2023) “Estate Planning for Freelancers and the Gig Economy”

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Understanding the Rights of an Heir After the Death of a Relative

January 2, 2025

When a loved one passes away, it’s natural to have questions about your rights regarding their estate. Who gets a copy of the will? How are assets distributed? What if you need legal representation? These are common concerns that can often feel overwhelming. This article provides an understanding of the rights of an heir or beneficiary after the death of a relative. If you are in this situation, a probate lawyer can guide you through the legal complexities and advocate for your rights.

Who has the Right to See the Will?

A will is a private document until the testator (the person who made the will) passes away. At that point, the personal representative or executor is responsible for filing the will with the probate court.

Here’s what you need to know about accessing a will:

Named Beneficiaries: If you are named in the will, you are entitled to receive a copy.
Legal Heirs: Even if not explicitly named, heirs under state law may also have rights if the deceased did not leave a valid will (intestate succession).
No Public Reading: Contrary to what movies and TV shows portray, there’s rarely a dramatic reading of the will.

If you suspect you’re named in a will but haven’t been notified, a probate lawyer can help you determine your legal rights and ensure transparency.

Responsibilities of the Personal Representative

The executor or personal representative plays a key role in managing the estate. Their responsibilities include:

Filing the will with the court.
Identifying and valuing the deceased’s assets.
Communicating with beneficiaries about estate progress.
Preparing an accounting of financial transactions, even if the will waives this duty.

If the personal representative fails to fulfill these obligations, beneficiaries have legal recourse, including filing a petition with the probate court.

Can You Choose Which Assets You Receive as an Heir?

It’s important to understand that beneficiaries don’t always have a say in the specific assets they receive, explains The American College of Trust and Estate Counsel in their video, “A Child’s Right to Information When a Parent Dies.” For example, suppose a will leaves equal shares of an estate to two siblings. In that case, the personal representative may allocate one sibling the house and the other the cash, as long as the distributions are equivalent in value.

Disputes over asset allocation can arise, potentially leading to litigation. Consulting with a probate lawyer can help you navigate disagreements and ensure a fair resolution.

What If You Don’t Want an Inheritance?

It’s possible to decline a bequest or inheritance for various reasons:

Avoiding Tax Consequences: Disclaiming certain assets may prevent unnecessary tax burdens.
Simplifying Your Estate: You may prefer the inheritance to pass directly to your children or another heir.
Avoiding Unwanted Property: Some assets, such as a high-maintenance house, may carry more costs than benefits.

To disclaim an inheritance, you must act within legally defined timeframes to avoid tax implications or other complications. A probate lawyer can help ensure that the process is handled correctly.

Do You Need Legal Representation as an Heir?

While the estate’s lawyer assists the personal representative, they do not represent beneficiaries. Hiring a probate lawyer is essential if you have concerns about asset distribution, the executor’s conduct, or your rights.

An experienced probate attorney can:

Help you understand your rights as a beneficiary.
Request information or accounting from the personal representative.
Represent you in disputes or litigation over the estate.
Assist in disclaiming unwanted inheritances.

Why Work with a Probate Lawyer?

Losing a loved one is already a challenging time. Adding legal questions about the estate can make the process even more stressful. A probate lawyer will give you a better understanding of the rights of an heir or beneficiary after the death of a relative. The lawyer will be advocating for your interests and ensuring that the estate is administered by the law. If you would like to learn more about the rights of an heir or beneficiary, please visit our previous posts.

Reference: The American College of Trust and Estate Counsel (ACTEC) (Jan 23, 2020) “A Child’s Right to Information When a Parent Dies”

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What Art Collectors should know about Estate Planning

December 18, 2024

Art collections often hold deep sentimental value, while also being some of the most valuable assets in an estate. As any art collector knows, these pieces represent more than just investments—they carry a legacy, a story and a connection to the collector. However, without a thoughtful estate plan, artwork can face unique risks, from tax impacts to complications in transferring ownership. Here’s what art collectors should know about estate planning to ensure that their collections are preserved and passed on according to their wishes.

For art collectors, estate planning goes beyond finances. Artworks can be valuable assets with historical and emotional significance. Without planning, however, the collection may be subject to significant federal estate taxes, which can reduce what heirs receive. Any lack of clear instructions for the collection could lead to conflicts or, in some cases, force the sale of cherished pieces. According to SmartAsset, an effective estate plan can protect the integrity of the collection and outline specific wishes for its future.

One of the first steps in estate planning for art collectors is creating a comprehensive record of the collection. This involves cataloging each piece with descriptions, condition reports, and, if available, provenance or historical background. These details validate ownership and add to the artwork’s value. For instance, including an exhibition history or previous owners can enhance its worth.

Professional appraisals are crucial in determining each artwork’s fair market value. Appraisals consider the artist’s reputation, historical importance and market demand. Accurate valuations are also essential for estate tax purposes, ensuring that taxes are calculated based on a clear understanding of the collection’s worth.

What are the Tax Implications of Owning Art?

Taxes can significantly impact art collections. The federal estate tax, for example, is calculated based on an artwork’s fair market value at the time of the owner’s passing. The tax burden could often mean heirs must sell a piece to cover these expenses. This is particularly concerning if the estate lacks liquidity, meaning there may not be enough cash to pay taxes without selling assets.

By understanding potential tax liabilities and consulting a professional, collectors can consider strategies to reduce estate taxes, such as placing artworks in trust or donating select pieces to reduce the taxable estate.

Understanding intellectual property rights is crucial for collectors who own works by living artists or have purchased pieces with retained copyrights. Intellectual property can include copyrights, trademarks and any royalties tied to the job. These rights allow for continued earnings and control over how the artwork is displayed, reproduced, or used publicly.

Art collectors should ensure that these rights are documented and decide who will control them after their passing. This can prevent confusion for heirs and ensure that the art collection is managed according to the original collector’s wishes.

How Does Provenance and Documentation Help Protect Your Collection?

Maintaining detailed records on each artwork is more than just good organization—it’s a valuable part of preserving the collection. Provenance, or the history of ownership, verifies an artwork’s authenticity and is especially important for high-value pieces. For example, documentation that records where a piece was displayed or whether it was ever restored adds value and simplifies the transfer process.

Heirs inheriting an art collection will appreciate clear records. Such records support authenticity and value, making it easier for them to handle sales, insurance, or any future artwork exhibitions.

How Can Insurance Safeguard Your Collection?

Art collections face unique risks, including theft, damage and loss. Appropriate insurance coverage is an essential part of estate planning for art collectors. Ensuring that the collection is adequately insured can protect against unexpected financial losses. Regularly reviewing and updating the policy based on current valuations helps keep the coverage relevant, reflecting any changes in value or additions to the collection.

Several strategies exist to help collectors protect and manage their art collections in the long term. Here are some popular options:

Trusts: Placing artwork in a trust allows collectors to control how and when the collection is used or sold. Trusts can help reduce estate taxes and keep details about the collection private, which can be a priority for families or those with valuable, publicized pieces.
Comprehensive Wills: Drafting a will that explicitly addresses art assets can help avoid complications. Collectors can outline whether pieces should be sold, donated, or bequeathed to specific family members or institutions. This is also a way to ensure that the collection is passed on according to the collector’s wishes.
Charitable Donations: Donating to museums or charities can offer tax benefits, allowing art collectors to support cultural institutions, while reducing their estate’s taxable value. Some collectors also establish private foundations to maintain family control over how the artwork is displayed or used in the future.

An art collection can be more than a collection of assets; it’s a legacy that can endure through generations. An experienced attorney can educate art collectors on what they should know about estate planning. By adequately documenting, valuing and securing the collection, art collectors can help ensure its future. If you would like to learn more about planning for items such as art, heirlooms, or other personal property, please visit our previous posts.

Reference: Smart Asset (Jul. 19, 2024) “Guide to Estate Planning for Artists and Art Owners”

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Managing a Vehicle Title Transfer after a Loved One’s Passing

December 11, 2024

Managing a vehicle title transfer after a loved one’s passing can feel overwhelming, especially during an already difficult time. The process varies depending on the estate’s status, the deceased’s will and the state’s specific regulations. However, you can avoid future complications by properly transferring the title.

Determine How the Vehicle was Titled

The first step in transferring a vehicle title is to understand how the title was set up. Some vehicles are jointly titled, meaning another individual may automatically inherit ownership without probate. The car might also be titled solely in the deceased’s name, which likely requires probate to transfer ownership.

Jointly titled vehicles are often more straightforward to transfer, especially if designated as “Joint Tenancy with Right of Survivorship” (JTWROS). In this case, vehicle ownership passes directly to the surviving joint owner. However, the process will require additional legal steps if no joint owner is listed, or the title doesn’t specify JTWROS.

Review the Will or Estate Plan

If the deceased left a will, it’s essential to determine who they designated to inherit the vehicle. The named executor or administrator of the estate is responsible for managing the title transfer, ensuring that the legal ownership matches the deceased’s wishes.

In cases where there is no will, known as intestacy, the state’s intestate succession laws dictate how assets, including vehicles, are distributed. This often means the vehicle may go to a close family member, like a spouse or child. However, the rules vary by state. Consulting the estate plan or legal professional can help clarify any uncertainties regarding rightful ownership.

Complete Probate If Required

The title transfer may require probate if the vehicle was solely titled and there is no joint owner. Probate is the legal process by which a deceased person’s assets are distributed according to their will or state law if no will exists. To initiate probate, the executor typically files the will with the local probate court, which then authorizes the distribution of assets, including the vehicle.

The probate process can take weeks to months, depending on the estate’s complexity and any potential disputes. During this time, the executor must gather all necessary documents to satisfy the state’s probate requirements, including proof of the deceased’s identity, a death certificate and other relevant paperwork.

Gather Necessary Documentation

Once you confirm whether probate is needed, the next step is to gather essential documentation to transfer the title. Generally, you’ll need:

A certified copy of the death certificate
The original vehicle title (if available)
Documentation proving estate executorship (if applicable)
Valid photo ID for the new owner
Title transfer application (available from the DMV or Secretary of State’s office in many areas)

Some states may require additional documentation or affidavits. Contacting your local Department of Motor Vehicles (DMV) or visiting their website can clarify the specifics for your state.

Submit Title Transfer Documents to the DMV

With the required documents, the next step is to visit your local DMV or title agency to submit the paperwork. If probate was necessary, bring documentation verifying that the estate has cleared probate, along with the other materials. The DMV will process the title transfer, though the timeline can vary by state and county.

In some cases, fees apply for the title transfer process. States may also impose specific requirements for emissions or safety inspections before the transfer. Consulting your DMV in advance can help you avoid potential delays and understand any associated costs.

Consider Tax Implications

Transferring a vehicle title after a loved one’s passing may also involve tax considerations. For example, some states have inheritance taxes that could apply, while others may require registration fees for the new owner. It’s wise to consult with a tax professional or attorney to clarify potential financial implications and ensure that the transfer complies with tax laws.

Managing a vehicle title transfer after a loved one’s passing can be challenging, especially with differing state rules. If you would like to learn more about transferring ownership of a vehicle or property after death, please visit our previous posts.

Reference: Capital One (2024) How to Transfer a Car Title When the Owner is Deceased

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Navigating Estate Planning as a Military Family can be Complex

December 9, 2024

Navigating estate planning as a military family can be complex. Military families may benefit from distinct survivor benefits, VA pensions and other special programs, so they need unique estate planning solutions. While resolving VA benefits regulations can be challenging, help is available.

Military families have access to resources and programs that can significantly impact estate planning. These benefits provide financial security and ensure that loved ones receive the support they need, even in the most challenging times. Here are some foundational elements to consider when planning for the future.

The Survivor Benefit Plan (SBP) is one of the essential estate planning tools for military families. SBP provides a monthly income to eligible survivors after a servicemember’s passing, helping to replace lost retirement income. This benefit can extend to spouses, children, and other dependents, offering long-term financial support.

Enrolling in the SBP is crucial for families who rely on a military pension. Without it, pension payments stop upon the servicemember’s death, leaving dependents without a vital income source. The cost of the SBP is typically based on a small percentage of the servicemember’s retired pay, making it an affordable option for most families.

In addition to the SBP, surviving spouses and dependents may qualify for VA pensions, which offer financial assistance to low-income family members of deceased veterans. VA pensions have income and net worth limits, and eligibility depends on the servicemember’s discharge status and active-duty service length. Surviving family members may also need to meet additional requirements.

The VA offers two primary types of survivor pensions:

Dependency and Indemnity Compensation (DIC): This tax-free monthly benefit is for surviving spouses, children, or parents of servicemembers who passed away in the line of duty or due to a service-related condition.
Survivors Pension: A need-based benefit for eligible low-income surviving spouses and children of deceased veterans who served during wartime.

These programs provide essential financial support, helping to cover daily expenses and maintain the family’s quality of life.

A will remains essential to any estate plan, allowing servicemembers to specify how assets will be distributed. For military families, it’s important to outline these details in a will to protect assets and avoid potential family disputes. Creating a living will also provide instructions regarding healthcare decisions if the servicemember becomes incapacitated, ensuring that medical treatment aligns with their wishes.

A durable power of attorney (POA) allows a trusted individual to make financial or legal decisions on behalf of a servicemember if the servicemember cannot do so. During deployments or other periods of absence, the designated person can exercise authority over financial matters such as paying bills, managing property and accessing bank accounts.

Servicemembers often have life insurance through the Servicemembers’ Group Life Insurance (SGLI) program. Designating beneficiaries for this policy and Thrift Savings Plan (TSP) accounts ensures that these assets pass to loved ones immediately. Regularly updating beneficiary designations helps prevent misunderstandings and ensures that funds go directly to the intended recipients.

Military families may also access free legal assistance and financial counseling through military legal offices and organizations, like Military OneSource. These resources can provide personalized guidance on estate planning, ensuring that families understand the legal documents needed and the benefits available to them. Seeking assistance early can simplify estate planning and reduce potential stress for loved ones.

Navigating estate planning as a military family can be complex, especially when considering specific military benefits and regulations. If you would like to learn more about planning for military families,

Reference: Military OneSource (Sept. 19, 2024) “What Is Estate Planning?”

Don’t Risk the Complications of a DIY Will

December 4, 2024

Ensuring that your wishes are carried out after passing is essential. However, the risk involved in creating a DIY Will can lead to unexpected complications. While DIY wills might seem like a quick and cost-effective solution, these documents come with risks that can create costly issues for your loved ones.

The price tag associated with a professional will is often a barrier. Preparing an essential will with a lawyer can range from $100 to several hundred dollars, with more complex cases costing even more. On the other hand, DIY will kits are available online for as little as $20. It’s no wonder the cheaper option tempts some people. It seems like a cost-saving measure. However, it often turns out to be anything but that.

Creating a will seems simple enough. However, legal standards must be followed. DIY kits often leave too much room for error, especially regarding proper witnessing, explicit language and meeting legal requirements.

One of the most frequent mistakes is failure to witness the will properly. Many people are unaware that two independent witnesses who do not benefit from the will must be present. Errors like misspelled names, incorrect property descriptions, or even failing to sign the document correctly are all common. These mistakes can invalidate the will, leading to additional expenses and complications.

The complications of an invalid or poorly crafted DIY will are not worth the risk. When a will is ruled invalid, a person’s estate is divided based on state laws rather than the deceased’s wishes, which could mean loved ones miss out on what was intended for them. Legal battles often arise among family members, leading to strained relationships and high legal fees.

A report from Co-operative Legal Services found that over 38,000 families face extended probate issues each year due to poorly prepared DIY wills. In many cases, legal fees drain a large portion of the estate, reducing the inheritance the deceased intended to pass on.

A DIY will seem sufficient if you have a straightforward estate, like leaving everything to one person. However, DIY will often fall short as soon as there are additional complexities, such as children from previous relationships, business ownership, or property in multiple locations.

These kits don’t cover complex issues like inheritance tax planning, specifying conditions, or accounting for family changes like marriage or divorce. A basic DIY will also lacks flexibility; if your situation changes, such as remarrying or having additional children, it may not account for these changes unless it’s entirely redone.

Although a DIY will initially seem cost-effective, many families discover the hidden costs once probate begins. If the will is invalid or unclear, family members may face extended probate processes, which increase legal fees and administrative expenses.

As noted in an article from The Guardian, the complications from an ineffective will can eat away as much as 10% of an estate’s value. For an estate worth $160,000, this means $16,000 lost to fees that could have been avoided.

Using a qualified estate planning attorney is the best way to ensure that your will is comprehensive and legally sound. These professionals can provide the legal guidance needed to meet state standards and to incorporate any specific wishes or complex situations into your will. They can also offer peace of mind by drafting a will that remains valid as your life circumstances change.

Some organizations offer cheaper will-drafting options. However, it is essential to ensure that any service you choose is regulated. If you work with a lawyer, look for someone accredited with the appropriate legal organization for added security.

When drafting a will with an attorney, you gain access to their knowledge and experience handling the legal requirements that a DIY kit might miss. Lawyers are well-versed in laws that can affect your will and estate, such as rules on estate taxes, property division and inheritance rights for unmarried partners. They can help structure a will that protects your loved ones from potential legal disputes or lengthy probate processes.

Creating a will with an estate planning attorney can make all the difference for your loved ones. Don’t risk the complications of a DIY will. If you would like to learn more about wills and trusts, please visit our previous posts.

Reference: The Guardian (Feb. 9, 2015) “The dangers of DIY wills”

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Pour-Over Will is a Safety Net for Assets not in a Revocable Trust

December 2, 2024

Estate planning can sometimes feel daunting, especially when it comes to ensuring that your assets go to the right people without hassle. The pour-over will, especially when paired with a revocable trust, can provide peace of mind. A pour-over will is like a safety net for assets that are not in a revocable trust.

This type of will allows any remaining assets you hadn’t transferred to your trust during your lifetime to “pour over” into the trust when you pass away. This ensures that everything is gathered into one place—the trust you created—so it can be distributed according to your wishes.

Even though pour-over will still need to go through probate, they streamline the process by consolidating everything into your trust, making it easier for the appointed trustee to handle everything in one place. According to Investopedia, pour-over wills cover any assets left outside the trust at death.

A revocable or living trust is a legal arrangement you create while alive. It allows you to transfer your assets into the trust’s ownership, and you can continue to control these assets, making adjustments or even dissolving the trust if you choose. This type of trust is often used to help avoid the probate process for assets placed within it.

When you set up a pour-over will alongside a revocable trust, the will is a backup for any assets that might not make it into the trust before you pass away. Let’s say, for instance, you acquire a new property but forget to transfer it to your trust. A pour-over will ensure that property eventually lands in your trust, keeping your wishes intact.

While the assets already placed in a revocable trust bypass probate, any assets that transfer via a pour-over will still go through this legal process. However, since the pour-over will usually contain fewer assets or smaller items, the probate process can be more straightforward and less expensive than it might be for a standard will covering all your assets. Probate rules vary by state, but having a pour-over will simplify things since it consolidates your assets into your trust, making it easier to administer your estate.

Not everyone needs a pour-over will. However, it’s a valuable tool in certain circumstances. Here are some situations where this combination might make sense:

You Have a Complex or Changing Asset Portfolio: If you often acquire new assets , it can be easy to overlook transferring something to your trust. A pour-over will capture anything not moved to the trust, ensuring that nothing gets left behind in the probate process.
You Want Flexibility and Control During Your Lifetime: A revocable trust allows you to control your assets and adjust as your needs change. Pairing this with a pour-over will ensure that any missed items are still distributed according to your intentions.
You’re Concerned About Privacy for Your Beneficiaries: Probate records are typically public, so any details in a standard will might be open to view. However, funneling your assets into a trust through a pour-over will add privacy.

A pour-over will pair with a revocable trust can offer several benefits:

Simplicity: Consolidating everything into a single trust makes it easier for your beneficiaries and trustee to manage your estate.
Reduced Legal Complications: This setup can help avoid disputes over assets, since everything is eventually directed to the trust where your wishes are clear.
Peace of Mind: Knowing that your assets will end up in the right hands, even if you forget to transfer something to your trust, can provide significant reassurance.

While a pour-over will is like a safety net for assets that are not in a revocable trust, be aware of a few drawbacks. Assets undergoing a pour-over must still undergo probate, meaning they aren’t entirely shielded from court proceedings. However, this may be a minor inconvenience if the peace of mind it provides outweighs the potential cost of probate.

A pour-over will also slow down the distribution of assets since probate can take time. This is worth considering for families or beneficiaries needing a quicker transition.

Setting up a pour-over will and revocable trust usually involves some paperwork and the help of an estate planning attorney. An attorney can guide you through drafting both documents, ensuring that your assets are accounted for and that any remaining assets will flow smoothly into your trust upon your passing.

Are you thinking about a pour-over will and revocable trust? It’s never too early to start planning. If you would like to learn more about trusts, please visit our previous posts.

Reference: Investopedia (April 1, 2024) “Pour-Over Will Definition and How It Works With a Trust”

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Creating a Comprehensive Estate Plan for Cryptocurrency is Essential

November 18, 2024

Creating a comprehensive estate plan for cryptocurrency is essential. Cryptocurrency is no longer just for tech enthusiasts. With the growing popularity of Bitcoin, Ethereum and other digital currencies, estate planning now involves accounting for these unique assets. Cryptocurrency brings new challenges, unlike traditional investments, such as real estate or bank accounts. There’s no customer service to help recover your funds, and if you don’t have the proper protection in place, your digital wealth could be lost forever.

One of the main differences with cryptocurrency is how it’s stored. Digital wallets protect your crypto holdings, and private keys control access to those wallets. A common phrase in the crypto world is “Not my key, not my coin,” which means that you don’t have access to the funds if you don’t have the private key.

If you don’t create a secure plan to transfer these keys to your beneficiaries, your cryptocurrency could be lost forever after your passing. Imagine losing a loved one and knowing they invested in Bitcoin without knowing where to find it or how to access it. There are no bank statements or account numbers to check, and without a clear estate plan, their digital wealth may disappear for good.

According to ACTEC, you must establish a secure plan for transferring these digital assets. One option is to use a third-party custodian to manage and store your cryptocurrency’s private keys. This minimizes the risk of losing your digital wealth through theft or mismanagement.

Some people prefer to store their private keys on physical items like a metal plate or a secure USB drive. While this method gives you direct control, keeping these items safe and ensuring that your heirs know where to find them is crucial. If these physical keys are lost, so is your crypto.

Another approach is to transfer your cryptocurrency into a corporate entity. This can simplify managing and passing down your crypto holdings, reducing the burden on your heirs to figure out how to handle the technical aspects of private keys.

Cryptocurrency is decentralized, which means there’s no central authority or institution to recover your assets if things go wrong. If you don’t create a clear plan for your crypto, it can easily be lost forever, leaving your family with nothing.

Creating a comprehensive estate plan for cryptocurrency is essential. This plan should clearly outline where your private keys are stored, how to access them and who will manage them after you’re gone.

If you’ve named a fiduciary, such as an executor or trustee, to manage your cryptocurrency, they may face unique difficulties. Cryptocurrencies are known for their volatility, with values fluctuating rapidly. Most fiduciaries are tasked with preserving the value of assets, and managing such volatile investments can be particularly challenging.

There’s also the issue of security. Fiduciaries may not be equipped to handle cryptocurrency’s technical requirements. They could accidentally lose access to these assets if unfamiliar with how digital wallets and private keys work. Selecting a fiduciary who understands these complexities or can seek help from those experienced in cryptocurrency management is essential.

Regarding taxes, the IRS treats cryptocurrency like any other property. You’ll owe capital gains tax if you sell your cryptocurrency for more than you paid. If you’ve held the cryptocurrency for over a year, you’ll pay long-term capital gains tax, which generally has a lower rate.

Cryptocurrency also plays a role in estate and gift taxes. Timing is essential here. If you transfer your crypto during a market downturn, you could lower the tax burden on your estate. Once the value goes back up, your heirs will benefit from the appreciation without the estate being taxed on the total amount.

Without a detailed estate plan, your cryptocurrency could be lost, mismanaged, or subject to excessive taxes. As digital assets become more common, it’s essential to account for them in your estate plan, just like any other investment. Estate planning lawyers can help you navigate these digital challenges and ensure that your cryptocurrency is adequately passed down to your heirs.

Don’t wait until it’s too late to secure your cryptocurrency. Speak with an estate planning lawyer today to create a solid plan for passing down your digital wealth. If you would like to learn more about managing cryptocurrency in your estate planning, please visit our previous posts.

Key Takeaways:

Protect your cryptocurrency: Digital wealth could be lost forever without proper estate planning.
Secure transfer of assets: Create a clear plan to ensure that your loved ones can access your cryptocurrency after your passing.
Reduce tax burden: Plan strategically to minimize capital gains and transfer taxes on your cryptocurrency.
Choose the right fiduciary: Select someone knowledgeable about cryptocurrency to manage your digital assets securely.

Reference: The American College of Trust and Estate Counsel (ACTEC) (Sep. 8, 2022) “Understanding Cryptocurrency in Estate Planning”

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Estate Planning for a Child with Addiction

November 6, 2024

Estate planning for a child with addiction is not just about leaving them an inheritance — it’s about ensuring that the inheritance supports their recovery and future well-being. Parents often find themselves facing tough decisions when their child struggles with substance abuse. However, creating a plan with clear goals can provide a sense of control and security for everyone involved, as per Kiplinger.

When a child has an addiction, direct access to their inheritance can do more harm than good. A well-structured trust can help protect the child and their financial future, especially when the trustee has clear instructions and guidance on handling distributions.

What kind of trust should you set up for a child with addiction? Trusts designed for minors or those with intellectual disabilities may not be appropriate in this case, since the goals are very different. For children struggling with substance use, a trust must account for their unique needs and the challenges they may face in their recovery journey.

A trust for a child with a substance use disorder can either play an active or passive role in their recovery. Some parents may prefer a trust focusing solely on the child’s basic needs — housing, food and healthcare. Others may want a more proactive approach, where the trustee is involved in the child’s treatment plan, helping to pay for rehabilitation, therapy and ongoing support.

Parents should discuss with their estate planning attorney how they want the trust to work. Should it fund recovery efforts? Should distributions only be allowed if the child is making progress toward recovery? Having these conversations ahead of time ensures that the trust aligns with the parents’ goals and the child’s long-term needs.

Understanding the recovery process is essential to structuring estate planning for a child with addiction. Recovery doesn’t happen overnight. Many children go through several stages before they reach a place of stability, and setbacks are common. In fact, relapses are often part of the process.

One model of behavioral change, known as the Transtheoretical Model, suggests that recovery involves several stages, including:

Precontemplation: The child is not yet ready to address their addiction.
Contemplation: They recognize the problem but feel conflicted about taking action.
Preparation: The child begins making small changes and planning more significant steps.
Action: The child actively works to change their behavior and engage in recovery.
Maintenance: They develop coping strategies to maintain sobriety.
Relapse: Relapse is common but can be seen as part of the learning process.

A trust designed to support recovery should not penalize the child for relapsing. It should instead provide resources to help them get back on track and continue their journey toward a healthier future.

Incentives can be a helpful tool in encouraging a child with addiction to stick to their recovery plan. However, offering cash as an incentive is generally not recommended, as it can lead to a greater risk of relapses.

Incentives should instead be non-monetary, such as paying for a vacation, using a vehicle, or covering the cost of a fitness membership. The trustee should be able to decide when the child has met the goals necessary to earn these incentives. This approach helps ensure that rewards begin with genuine recovery progress.

When planning for a child with addiction, the right estate plan can make a significant difference in their recovery and long-term well-being. By setting up a specialized trust, you can offer them the support they need without the risk of enabling harmful behavior.

Don’t leave your child’s future to chance—take control by working with an experienced estate planning attorney who can help you structure a plan that aligns with your goals and safeguards your child’s inheritance. If you would like to learn more about estate planning for complicated family histories, please visit our previous posts.

Reference: Kiplinger (Mar. 8, 2019) “Designing Trusts for Substance Abuse Problems“

Testamentary Trust can Protect your Intellectual Property

November 4, 2024

When managing your estate, people often overlook intellectual property (IP). If you are an artist, inventor, or business owner, your IP can be one of your most valuable assets. Incorporating IP into your estate plan is crucial to ensure that it benefits your heirs, primarily through a testamentary trust. A testamentary trust can protect your intellectual property.

A testamentary trust is created as part of your will and only takes effect after you pass away. It allows you to name a trustee who will manage the trust’s assets, including your intellectual property, to benefit your chosen beneficiaries. According to Forbes, by establishing a testamentary trust, you choose how to handle your IP and ease the burden on heirs.

For those with valuable intellectual property—such as copyrights, trademarks, patents and trade secrets—a testamentary trust can effectively safeguard and distribute these assets after you’re gone.

Intellectual property is often complex and requires ongoing management. Here are a few reasons why a testamentary trust can help:

Ongoing Management Needs: IP may need someone with knowledge of the field to manage it properly. Your beneficiaries might not be familiar with your creations’ legal rights or value, so appointing a trustee ensures that someone experienced handles these responsibilities.
Protecting Financial Interests: If your IP continues to generate revenue (e.g., royalties from books, music, or inventions), a trustee can distribute these funds according to your instructions.
Avoiding Probate Delays: By placing your IP in a trust, the assets can bypass probate, ensuring that they are handled efficiently without long delays or court involvement.

According to Charles Schwab, it’s essential to identify the types of intellectual property you own. Some common forms of IP you might place in a testamentary trust include:

Copyrights: If you’ve created original works, like books, music, or artwork, a copyright allows you to control their use and distribution. These assets can be precious and may need careful management to ensure continued profitability.
Patents: For inventors, patents provide exclusive rights to their creations. By placing them in a trust, you ensure that they are protected and passed on to your heirs in a controlled manner.
Trademarks: Your brand’s name, logo, or symbols may be essential for business success. A testamentary trust can keep these assets intact and help manage any ongoing legal protections they require.
Trade Secrets: If you’ve developed formulas, customer lists, or other confidential business information, you can protect them with a trust. A trustee can make sure they remain confidential and continue to benefit your heirs.

Appointing a knowledgeable trustee is critical to the success of managing your IP. This person or organization will be responsible for protecting your intellectual property, ensuring registrations are maintained and continuing to enforce your rights. They will also distribute any income from the IP according to the terms laid out in the trust.

When setting up a testamentary trust for your intellectual property, you can specify how long the trust will last. For instance, if you own copyrights, these can last for 70 years after your death, which means the trust may need to remain in effect for decades.

Carefully think about the future value of your IP and when it might be best for your heirs to take complete control of the assets. You can set specific milestones, such as when your children reach a certain age or achieve educational goals.

Intellectual property can be a critical asset in your estate plan. However, it requires careful management to ensure that it benefits your loved ones. Using a testamentary trust, you can protect and leverage your intellectual property in ways that align with your values. If you would like to learn more about testamentary trusts, please visit our previous posts.

References: Forbes (Jan. 24, 2024) “What Is A Testamentary Trust?” and Charles Schwab (Jun. 14, 2024) “4 Steps to Help Protect Your Intellectual Property“

Photo by Jadson Thomas

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