You need to make a Plan for Digital Assets

June 14, 2023

What happens to digital assets when you die? There are state laws offering the executor of an estate or an estate planning attorney to obtain access to a person’s online accounts after incapacitation or death. These laws—including RUFADAA (Revised Uniform Fiduciary Access to Digital Assets Act)—will help to protect digital assets, but only if you have a digital estate plan, reports the article “How to Tackle Digital Estate Planning in Four Easy Steps” from Kiplinger. Whether or not your state has created these laws, you need to make a plan for your digital assets.

RUFADAA has a three-tier process for accessing digital assets:

Tier One: Some digital service platforms offer a way to designate what happens to digital assets after death. Yahoo has an inactive account manager to designate a friend, which guides what happens to digital assets.

Tier Two: If there is no such tool, the owner’s estate planning documents must dictate what should happen with the asset.

Tier Three: If neither of these tiers is in place, refer to the platform’s Terms of Service Agreement (TOSA) to see how the executor may access these accounts.

What makes up your digital estate? It includes all electronic and virtual accounts, passwords and assets, including:

Social media
Email
E-Commerce accounts
Photos saved in cloud-based storage
Cryptocurrency keys, wallet, and any related accounts
Cellphone and cellphone apps
Domain accounts
Text, graphic and audio files and any other intellectual property
Blogs and domains
Loyalty benefit programs, like credit card perks and frequent flier rewards programs
Utility accounts, including electricity and cable tv
Online banking
Gaming
Online shopping accounts

Electronic bank accounts are considered digital assets. However, the money in the bank account is not a digital asset. Likewise, cryptocurrency account access platforms, such as Coinbase, are digital assets, but the actual cryptocurrency, such as Ethereum or Bitcoin, is not a digital asset.

Here are the four steps to creating a digital estate plan:

Create a complete digital asset inventory. This should include all account names, usernames, passwords and the URL or address of the digital asset.

Decide how you want digital assets handled. List intentions for every account, so your executor knows what you want to happen. This is known as a “directive” and will likely be required by the platform to indicate your wishes. Some companies have conditions in the TOSA, so make sure your wishes can be followed. For example, Twitter and Google have “legacy” policies. Facebook lets family members memorialize your account.

Name a digital executor. This person doesn’t need to be the same as your executor. You’ll want to select someone familiar with the online world.

Store your digital estate plan in a secure place. Make sure that your digital executor knows where the information can be accessed. There are online platforms to help organize digital estate plans in the event of an emergency. Note that they are not the same as password managers, which store passwords. These platforms should include directives indicating what you want to happen with your digital assets.

The bottom line is this: you need to plan for your digital assets or your family may loose access to them. The digital estate plan is considered informal, if your state has not passed RUFADAA. Ask your estate planning attorney if you can formalize it by making it a codicil to your will. If you would like to learn more about digital assets, please visit our previous posts.

Reference: Kiplinger (May 16, 2023) “How to Tackle Digital Estate Planning in Four Easy Steps”

Estate Plans Require Preparation for Success

June 13, 2023

Making wishes clear to family members is never enough to satisfy legal standards, according to a recent article, “Preparation is essential part of estate plan” from The News-Enterprise. Quite the opposite occurs when family members refuse to follow verbal requests, especially when personal grievances come to the surface during times of grief. Estate plans require preparation for success.

A second misconception concerns the spouse or children being able to step in and take action for a loved one whose health is declining solely based on the family relationship.

Many parents have children who would make poor agents, so many don’t name their children to act on their behalf. Even if you want your spouse or child to act on your behalf, you have to name them in the proper legal documents.

A third frequent misconception is that documents can be created when needed. Not so! Documents like Power of Attorney, Health Care Power of Attorney, Living Will and others must be created well in advance. An incapacitated person cannot sign legal documents, so if no planning has been done, the family will have to petition the court to name a guardian—an expensive, time-consuming and complicated process.

Every adult should have three basic documents while they are in good health: a Health Care Power of Attorney, a Durable Power of Attorney and a Last Will and Testament.

The Health Care Power of Attorney gives another person the right to make healthcare decisions for you if you are unable to do so. It also gives another person the right to access protected health care information, including medical and health insurance records. It may also be used to authorize organ and/or tissue donation and set limitations for donation. Finally, the document may direct end-of-life decisions regarding artificial life support.

The Durable Power of Attorney allows another person to handle legal and financial matters. It can be effective upon signing or upon incapacity. Without correctly executed Powers of Attorney, the family will need to apply for guardianship.

The Last Will and Testament determines who should receive any specific property and how your property is to be divided and distributed. Wills are only effective upon death, so any property in the will continues to be yours until death. Wills are also used to name the executor who will be responsible for administering the estate. It can also be used to set up additional protections for disabled beneficiaries, minor children and others who are not good with finances.

Speak with an experienced estate planning attorney to be certain to have these essential documents to prepare for the times when life doesn’t go as expected. Preparation is required for the success of your estate plan and those you love. If you would like to learn more about drafting an estate plan, please visit our previous posts.

Reference: The News-Enterprise (May 13, 2023) “Preparation is essential part of estate plan”

Photo by Oană Andrei

Name a Successor Executor to avoid Problems

June 12, 2023

If the executor dies while the estate is being administered, it can create many complications, says a recent article, “What Happens If the Executor of My Will Dies?” from yahoo! finance. One solution is to name a successor executor to avoid some of the problems. Many people fail to do this. It’s a big mistake.

In estate planning, an executor is charged with settling the estate of a deceased person. The executor is named when your will is created. That is when you have the opportunity to name the person you trust to act as an executor. If you die without a will in place or your will fails to name an executor, any interested party can petition the probate court to become the executor.

You probably prefer to select the person to be your executor, rather than hoping the court names someone you trust to follow your wishes.

The executor has a number of tasks to complete, including but not limited to:

Creating an inventory of the decedent’s estate
Notifying creditors of the decedent’s passing
Liquidating estate assets to pay creditors
Distributing remaining assets among heirs according to the terms of the will

Executors have a fiduciary duty when settling estates, meaning they must always act in the best interest of the decedent’s heirs. If they fail to do this, they can be removed.

If the executor dies before the person who makes the will, a new one needs to be named. This is yet another reason why last wills need to be updated on a regular basis, especially if the executor is close in age to the testator, the person who created the will.

The court will name an executor if the testator fails to update their will or write a new one. Any interested person can petition the court, which may not be what you had in mind. Someone who is not qualified or doesn’t have the best interest of heirs could be appointed.

What if the executor dies during the probate process? If a successor executor is named in the will, they can step up to finish the estate settlement. However, this only happens if the testator names one or more successor executors. When there is no successor executor named, the court will name one.

The easiest way to avoid problems arising from the death of the executor is to name a successor executor. Another is to place most or all of your assets in a trust, which would allow them to bypass probate. For a trust, you’ll need to name a trustee who will manage assets on behalf of beneficiaries.

Placing assets in a trust avoids complications following the death of an executor as the trustee would be responsible for distributing the assets. Instead of waiting for probate to be included, the trust beneficiaries could receive their assets according to the terms of the trust. If you would like to learn more about the role of the executor, please visit our previous posts.

Reference: yahoo! finance (May 15, 2023) “What Happens If the Executor of My Will Dies?”

Image by Silvia from Pixabay

Who is Authorized to Amend a Trust?

June 7, 2023

Procrastination is the most common mistake in estate planning when people don’t create a will and trusts and when documents are not updated. For one family, a revocable trust created when both parents are living presents some complex problems now, when the surviving wife wants to make changes but is suffering from serious health issues. So who is authorized to amend a trust?

As described in the article “Estate Planning: Who can amend the trust” from NWI Times, this scenario requires a careful review of the trust document, which should contain instructions about how it can be amended and who has the authority to do so. An estate planning attorney must review the trust to ensure it can be amended.

If the trust allows the surviving settlor to amend the trust, the authority to amend it may only be given to the surviving settlor. The mother may be permitted to amend the trust. However, it can’t be anyone acting on her behalf.

If the language in the trust makes the power to amend personal, a guardian or an attorney-in-fact likely won’t be able to amend the trust. Likewise, if the mother is incapacitated and cannot do this herself, the trust may not be amendable while she is ill or disabled.

However, if the trust allows the surviving settlor to amend the trust and the power is not personal, a legal representative, such as a guardian or an attorney-in-fact, may be able to amend the documents for her, if they have the authority to do so under the terms of the trust.

Anyone contemplating this amendment must be aware of any “self-dealing” issues. The legal representative will be restricted to making changes only for the benefit of the beneficiaries and should be mindful before attempting to amend the trust.

Suppose the authority to amend doesn’t exist or other restrictions make it impossible, depending on the state’s laws. In that case, it may be possible to docket the trust with the court and obtain a court order authorizing the trustee to depart from the terms of the trust or even amend the document.

Accomplishing this is far easier if all involved agree with the changes to be made. Unfortunately, if any interested parties object, it may lead to litigation.

Depending upon the desired change, entering into a family settlement agreement may be possible after the mother dies. If everyone is willing to sign off, an agreement can be written authorizing the trustee to deviate from the terms of the trust. This will also require the guidance of an estate planning attorney to ensure that the agreement follows the state’s laws.

If family members disagree with the change, the trustee can refuse to accept the settlement agreement to protect themselves from potential liability. It is wise to sit down with your estate planning attorney and ensure you and your loved ones are familiar with who is authorized to amend a trust. If you would like to learn more about trusts, please visit our previous posts.

Reference: NWI Times (May 7, 2023) “Estate Planning: Who can amend the trust”

Photo by Karolina Grabowska

Lack of Will can be Devastating for families

June 6, 2023

According to a recent article, “The Confusing Fallout of Dying Without a Will,” from The Wall Street Journal, despite the consequences for their heirs and loved ones, millions of Americans still don’t have a will. The total wealth of American households has tripled over the past thirty years, according to the Congressional Budget Office. Still, more than half of Americans polled by Gallup said they didn’t have a will in 2021. Another survey showed that one in five Americans with investible assets of $1 million or more don’t have a will. The lack of a will can be devastating for families.

Dying without a will means the laws of your state will determine who gets your assets. In some cases, loved ones could end up with nothing. They could be evicted from the family home and even hit with massive tax bills.

This is especially problematic for unmarried couples. One example—after 18 years of living together, a couple had an appointment with an estate lawyer to create wills. However, the woman died in a horseback riding accident just before the appointment. Therefore, her partner had to get the woman’s sons, who lived overseas, to sign off, so he could be appointed her executor. The couple had agreed between themselves to let him have the home and SUV they’d purchased together. However, state law gave her sons her 50% interest. Therefore, he had to buy out her son’s interest to keep his home and car.

Dying without a will, or “intestate,” means you can’t name an executor to administer your estate, name a guardian for minor children, or distribute the property as you want.

Here’s what you need to know about having—or not having—a will:

State law governs property distribution. In some states, where there is a surviving spouse and children, the surviving spouse gets 100% of the estate, and the children get nothing. The surviving spouse gets 50% in other states, and the children divide the estate balance. For example, in Pennsylvania, if there are no children but there is a surviving parent, the surviving spouse gets the first $30,000, and the balance is split 50/50 with the parent. In Tennessee, a surviving spouse with two or more children receives a third of the estate, with the rest split between the children.

Check on all assets for beneficiary designations. Retirement accounts and life insurance policies typically pass to whoever is listed as the beneficiary. However, if you never named a beneficiary, the state’s laws will determine who receives the asset.

The lack of a will can be devastating for families. Ensure you have a basic will created at the very least. If you don’t have a will and want to be sure a partner gets these assets, you’ll need to speak with an experienced estate planning attorney to explore your options. For example, you might be able to use a transfer on death deed or a payable on death account. However, there may be better ways to accomplish this goal. If you would like to learn more about wills and probate, please visit our previous posts.

Reference: The Wall Street Journal (May 2, 2023) “The Confusing Fallout of Dying Without a Will”

You Need to File an Estate Tax Return

June 5, 2023

Even if your spouse has died and left all their assets to you and no estate tax is due, you still need to file an estate tax return. Doing so may save your family significant sums in estate taxes after your death, according to a recent article from Forbes, “5 Reasons You Must File An Estate Tax Return (Even When No Tax Is Due).”

The estate tax is a one-time tax due nine months after the date of death. The federal threshold in 2023 is $12,920,000 for an individual. Many states have their own estate taxes, with thresholds ranging from $1 million in Oregon and Massachusetts to $12,920,000 in Connecticut. Your estate planning attorney can advise which assets are included in calculating this amount. For example, many people are surprised to learn that proceeds from their life insurance policies are taxable on their death, unless the policy is owned in an irrevocable trust.

No estate tax is due if your assets are left to your surviving spouse because of the unlimited marital deduction. You get an unlimited deduction for the assets left to your spouse. Spouses can leave any amount to their surviving spouse tax-free, whether $2 or $2 million. However, there are reasons to file an estate tax return. The law requires it, even if the value of your estate assets is below the filing threshold.

If you’ve done estate planning, your spouse most likely has a trust that will break into various sub-trusts upon her death. As the surviving spouse, you’ll need to fund those trusts and apportion assets to them, which is done through the estate tax return. The estate tax return establishes the value of what those trusts are funded with.

Critical tax elections. When you file an estate tax return for your spouse, you’ll make certain elections to determine what assets are included in your estate when you die.

Tax savings for heirs. If your spouse has not used up all their $12,920,000 exemption, you can lock in their unused portion and port it to your estate tax return when you die. The portability of the deceased spouse’s unused exemption could potentially save your children millions of dollars in estate taxes in the future.

The combined exemption for two spouses is currently $25,840,000. The federal estate tax rate can be as high as 40%. By locking in the unused exemption, you could save more than $5 million in estate taxes that would otherwise be due on your death. Even if your assets are not in the $12 million to $25 million range, this is still smart because your assets could increase in value, and the estate tax thresholds are scheduled to drop to $5 million in 2026 (adjusted for inflation).

More tax savings for grandchildren. If your spouse has yet to use all of their general-skipping transfer tax (GST Tax) exemption, you can lock in their remaining GST Tax exemption. The GST Tax is a 40% tax on assets, if you “skip” your children and leave them directly to your grandchildren or in a trust that will eventually be distributed to them. The amount of GST Tax exemption is the same as the estate tax exemption, $12,920,000 per person in 2023. Therefore, the amount is the same, but they are different taxes.

You need to file an estate tax return to ensure that you have complied with tax law. Work with an estate planning attorney who has experience handling probate and trust administration. If you would like to learn more about the estate tax, please visit our previous posts.

Reference: Forbes (May 10, 2023) “5 Reasons You Must File An Estate Tax Return (Even When No Tax Is Due)”

Unmarried Couples must have Estate Planning Documents

June 1, 2023

Many couples make the choice not to wed, even after being together for decades, for personal or financial reasons. For example, some clients don’t marry so as not to impact their children’s inheritance, while others would rather not bother with the legalities, says a recent article, “Estate Planning for Unmarried Couples” from My Prime Time News. In some cases, marriage would cause the couple to lose pension or Social Security benefits, if they remarried. However, unmarried couples must take extra care to have estate planning documents in place to make their wishes clear and to protect each other in case of incapacity, serious illness and, ultimately, death.

From any statutory priority, a significant other does not have the legal rights granted to a spouse to serve as a personal representative or executor for their loved one’s estate. In addition, there is no statutory right to inherit property, including any family allowance or exempt property allowance.

The significant other also has no rights regarding acting as guardian or conservator for their partner and no ability to make medical decisions, if they become incapacitated or disabled.

All of these issues, however, can be resolved with the help of an estate planning attorney. Both partners should execute a will, health care power of attorney, general power of attorney and a living will to protect each other.

The last will and testament designates a personal representative or executor who will be in charge of the decedent’s estate and inherit the person’s assets. With no will, a partner will inherit no assets, unless they are owned jointly or the partner is a named beneficiary.

Having a health care power of attorney and a financial power of attorney gives a partner the power to make decisions if their loved one becomes incapacitated. In addition, these power of attorney documents are necessary for adult children to have priority in making these decisions, and guardianship proceedings will be required if there are no children or family members.

Disputes between the adult children of unmarried couples are common if a comprehensive estate plan still needs to be completed. For example, imagine a partner of many decades becoming too ill to communicate their end-of-life wishes. Even after a lifetime together, the adult children will have the legal upper hand, regardless of what the couple has discussed as their wishes for this situation.

It may be challenging for unmarried couples to discuss their living arrangements and family dynamics. However, the experienced estate planning attorney has met with and helped families of all kinds and will have the knowledge to prepare an estate plan to address all family dynamics.

Unmarried couples must have estate planning documents in place. Once this work is done, the couple can rest easy, knowing they have protected each other in the best and worst circumstances. If you would like to learn more about planning for unmarried couples, please visit our previous posts.

Reference: My Prime Time News (May 1, 2023) “Estate Planning for Unmarried Couples”

Durable Power of Attorney can Prevent Guardianship Issues

May 31, 2023

Guardianship or conservatorship documents are not easy to obtain and can take months to finalize, warns the article “Possible Guardianship Or Conservatorship in Your Future? Plan Ahead With A Durable Power of Attorney” from Idaho Senior Independent. However, there is a far easier way to plan for the future. A durable power of attorney can prevent guardianship issues.

Guardianship is a tool to solve the issue of a person who has become incapacitated and cannot make personal care, legal or financial decisions. With a durable power of attorney for health care decisions and a general durable power of attorney for financial matters, you can achieve the same level of control, with far less time, trouble and cost.

The ultimate goal is to gain the legal authority to make decisions for the incapacitated individual which will be honored by third parties, including financial institutions and health care providers and facilities.

Most estate planning attorneys advise married couples to give each other durable power of attorney (POA) for health care and finances. As long as the couple doesn’t die at the same time or become incapacitated at the same time, the well spouse can manage the couple’s health and assets. It may also be a good idea to give his legal authority to another person, usually one of their children.

Having an estate planning attorney create a comprehensive estate plan, which includes powers of attorney, health care powers of attorney, a last will and testament and other necessary legal documents, may seem like a lot to do. However, the alternative, pursuing guardianship or conservatorship, is just as lengthy, if not more so, and only solves one problem. A complete estate plan solves many, from care during incapacity to the distribution of assets after death.

Guardianship is needed if there is no durable health care POA for a loved one and they are unable to care for themselves or make medical decisions. This is especially true if they need some kind of housing assistance, such as assisted living or memory care. A conservatorship allows the named person to manage the loved one’s assets, including Social Security, investments and any property or vehicles they own. The POA also permits you to use their assets to pay for their care.

None of this can happen while going through the guardianship/conservatorship process, meaning you or someone else will have to pay the bills and time-sensitive decisions cannot be executed.

Achieving guardianship/conservatorship involves filing a petition with the court in the county where your loved one lives. In most cases, an estate planning attorney will advise the family member to obtain an appointment for their loved one with a physician who can evaluate the person’s ability to manage their life. A physician will need to provide a letter verifying the need for guardianship/conservatorship. The letter becomes part of the petition filed with the court.

The attorney will require a hearing based on the information provided.

Many courts require a different attorney to be retained to represent your loved one to avoid any conflict of interest. A different physician will, in many cases, also be required to evaluate the health of your relative. Courts also often require an assessment by a legal “visitor,” typically a licensed social worker who independently evaluates your relative and makes recommendations.

The visitor reports their findings to the court and to the attorneys. The guardianship/conservatorship applicant pays for the visit and subsequent reports, plus any attorney fees.

All of this takes time, although an attorney can request that the court grant temporary guardianship and conservatorship.

Having a legal, durable power of attorney for health and finances can prevent guardianship issues long before they will be needed. It is a far simpler way for you to care for loved ones, if and when they need it. If you would like to learn more about guardianship and elder law, please visit our previous posts.

Reference: Idaho Senior Independent (May 1, 2023) “Possible Guardianship Or Conservatorship in Your Future? Plan Ahead With A Durable Power of Attorney”

Intricacies to Consider when using a SLAT

May 30, 2023

Making plans for the events of the future not only saves your family time and money but will also provide peace of mind to you and your beneficiaries, advises the article “Learn about options for estate planning and wealth transfer” from The Tennessean. One of the tools used in estate planning is the Spousal Lifetime Access Trust (SLAT), an especially useful trust now that lifetime exemptions are set to decrease at the end of 2025. There are a number of intricacies to consider when using a SLAT in your estate planning.

No federal estate taxes are owed for individuals with assets up to $12.92 million and married couples with $25.84 million in 2023. However, federal estate taxes are owed at a maximum rate of 40% for any wealth above these amounts.

This is of particular interest right now. The Tax Cut and Jobs Act of 2017 (TCJA) doubled the federal gift and estate tax exemption per spouse, allowing a married couple to exempt up to $25.84 million and individuals $12.92 million. However, this exemption amount will expire on December 31, 2025, decreasing by about half.

It’s a “use it or lose it” proposition right now, so taxpayers who want to take advantage of these historically high exemption levels should consider taking action before the expiration date. One way to do that is with a Spousal Lifetime Access Trust.

A SLAT is an irrevocable trust where one spouse gifts assets to the other beneficiary spouse. The beneficiary spouse may receive distributions during their lifetime, while the SLAT is removed from the gross estate and isn’t subject to estate taxes upon the beneficiary’s death. It’s a valuable estate planning tool, as it permits taxpayers to gift assets while retaining limited access to the funds through their spouse.

If a person gifts assets to an irrevocable trust, they can’t take the assets back or change the terms of the trust. Therefore, they’ve given up control over the asset. However, a SLAT provides indirect access through the spouse, who may receive income and principal distributions from the trust during their lifetime.

A SLAT needs to be properly drafted by an experienced estate planning attorney, and they do come with some risks. For example, if the beneficiary spouse passes away suddenly, the spouse may lose access to their SLAT payouts. If the couple divorces, the spouse may lose access to assets, unless the trust includes a provision stating that the trust benefits current and future spouses, which allows indirect access to be regained after remarrying. In addition, assets held in a SLAT don’t receive a step-up in cost basis upon the donor spouse’s death. This might lead to increased capital gains tax liability for remainder beneficiaries.

There are a number of intricacies to consider when using a SLAT as part of your estate plan. To ensure that the SLAT is appropriate, consult an experienced estate planning attorney. If you would like to learn more about trusts, please visit our previous posts.

Reference: The Tennessean (May 7, 2023) “Learn about options for estate planning and wealth transfer”

The Estate of The Union Season 3|Episode 10

The Estate of The Union Season 2|Episode 8 is out now!

May 25, 2023

The Estate of The Union Season 2|Episode 8 is out now!

Homelessness is not going away. How we manage it can be frustrating and sometimes seems futile. It’s not. In Homeless But Not Hopeless, Brad and Alan Graham, the founder and CEO of Mobile Loaves and Fishes have a lively conversation on what he, Mobile Loaves and Fishes, and their Community First! Village program are doing to improve the lives of the homeless, and improve our city too.

If you’ve ever wondered about what to do when approached by a homeless person at an intersection, Alan has an answer for that too!

If you would like to learn more about how to volunteer or donate to Mobile Loaves and Fishes or Community First! Village, please visit mlf.org

In each episode of The Estate of The Union podcast, host and lawyer Brad Wiewel will give valuable insights into the confusing world of estate planning, making an often daunting subject easier to understand. It is Estate Planning Made Simple! The Estate of The Union Season 2|Episode 8 is out now! The episode can be found on Spotify, Apple podcasts, or anywhere you get your podcasts. If you would prefer to watch the video version, please visit our YouTube page. Please click on the links below to listen to or watch the new installment of The Estate of The Union podcast. We hope you enjoy it.

Texas Trust Law focuses its practice exclusively in the area of wills, probate, estate planning, asset protection, and special needs planning. Brad Wiewel is Board Certified in Estate Planning and Probate Law by the Texas Board of Legal Specialization. We provide estate planning services, asset protection planning, business planning, and retirement exit strategies.

Blog Articles

You need to make a Plan for Digital Assets

Estate Plans Require Preparation for Success

Name a Successor Executor to avoid Problems

Who is Authorized to Amend a Trust?

Lack of Will can be Devastating for families

You Need to File an Estate Tax Return

Unmarried Couples must have Estate Planning Documents

Durable Power of Attorney can Prevent Guardianship Issues

Intricacies to Consider when using a SLAT

The Estate of The Union Season 2|Episode 8 is out now!

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