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Mar 1 22

Protecting Your Digital Assets

by Webmaster Admin

In a world where a great deal of our personal and financial information is stored online, it is vitally important for you to have a Digital Estate Plan so that your family can access your digital assets in the event of your disability or death.

Today, there is a new kind of asset class requiring attention when creating or revising your estate plan: digital assets. 

So what needs to happen in order to protect your Digital Estate Plan and your assets?

Let’s start by defining a digital assetThese assets generally include social media, email accounts, online subscription services, personal images (photos and videos) stored online, blogs, online businesses, cryptocurrency, websites, web domains, gaming accounts and gambling websites.

Signing up for any of these accounts involves a lengthy terms of service agreement (TOSA), which we very often scroll past without reading and click “Agree.” What we do not realize is our agreement is a legally-binding contract with the platform or service provider, agreeing to all of the terms they have created. Many of these TOSAs include provisions which state that when the original account owner passes, the company may terminate their account, regardless of the value of the digital property or the wishes of the owner.

Most states have begun to adopt legislation for the specific purpose of addressing Digital Estate Plan assets after the owner of such property has passed away. Generally speaking, the company will allow the decedent’s executor or personal representative access to digital assets. 

Unfortunately, many tech companies stand by their contracts wherein protection of the original owner’s privacy is often cited as the reason contents cannot be shared with another person. Even if the executor knows the username and password of the deceased account owner, they may find that the account and all of its contents have been deleted. In some cases, the executor may only find a small portion of the online information available or be accused of committing fraud by logging on and using the decedent’s username and password.

Big tech companies often take the position the data and accounts were owned by the original account owner. As a result, they have a responsibility to protect the owner’s privacy. Therefore, they are not legally permitted to share data or content. 

The headlines of surviving family members trying to retrieve family photos, or police departments attempting to get evidence, represent a small portion of many individuals trying to access their loved one’s digital property. There are also millions lost in cryptocurrency from actual owners who forget their keys, or owners who never shared information with their loved ones about accessing crypto wallets.

What can you do to protect your Digital Estate Plan?

Our legal advice regarding your Digital Estate Plan is to:

1. Appoint a Digital Executor in your Last Will and Testament

2.  Provide your Digital Executor with the necessary documents and information to properly access your digital assets

3.  Create an inventory of your valuable digital assets

4.  Consider using an online program to keep track of your digital assets in order to establish a record of your digital assets. If you create a spreadsheet on your computer, you should encrypt it. Otherwise, in today’s digital world, your digital assets can be hacked and stolen. 

5.  Keep your inventory of Digital Estate Plan assets up-to-date every time you change a password or username, as well as acquire new digital assets.

6.  Decide what you want to happen to each of your digital assets after your death. For example, do you want your Facebook account changed to a “memorialized” account for a period of time? Or would you prefer this type of account to be shut down, immediately?

7.  Certain digital platforms have a process for assigning an executor—however, to date, not many have adopted specific rules. Therefore, it is important for you to find out what the policies are for all of your digital accounts.

8.  Do not share any of your digital asset information in your Last Will and Testament. Since your Will becomes a public document after your passing when it is filed with the probate court, anyone can gain access to the contents of your Will, jeopardizing the content and security your valuable digital accounts. Therefore, we highly recommend that you protect your digital assets in the same way that you would protect any of your traditional financial assets.

While digital assets are a relatively new asset class, your digital assets deserve the same level of protection as all other valuable assets which comprise your personal estate.

Feb 1 22

Double Your Gifts With Spousal Gift-Splitting

by Webmaster Admin
pile of gifts

It may be possible to double your gifting by using spousal “gift-splitting.” Spouses may elect to split gifts made to others. If they do so, they must split all the gifts made by the other spouse to others for that year. 

For example, let’s say John made gifts of $30,000 to each of his five siblings, Aaron, Betty, Charlie, Darlene, and Ed. Assuming these gifts qualify for the annual exclusion (because they are present interests gifts), if John makes the gifts alone, then each gift of $30,000 would be reduced by the annual exclusion of $16,000 and would result in use of $14,000 of his applicable exclusion ($12.06 million in 2022). So, he’d have used $14,000 x 5 = $70,000 for the gifts. 

However, if John’s spouse, Mary, desired to split the gifts, she may do so. However, she must split all the gifts or none of them. So, if Mary does not like Ed, she cannot choose to split the gifts to Aaron, Betty, Charlie, and Darlene, but not the gift to Ed. If she chooses to split all the gifts, she would be treated as making a gift of ½ of $30,000, or $15,000, to each of John’s siblings. 

As a result, Mary’s annual gift tax exclusion would cover her half of each of these gifts and neither John nor Mary would need to use any of their applicable exclusion amounts. Mary would consent to split the gifts by signifying such consent on John’s IRS Form 709 for the year of the gift, thus consenting to split all his gifts for the year.

Interestingly, gift-splitting is effective only for gift tax purposes, not for estate tax purposes. This can be quite important. For example, let’s say John made the gifts to his siblings in an irrevocable trust which included Mary as a beneficiary. If Mary made a gift to a trust of which she is a beneficiary, it could cause inclusion in her taxable estate under IRX Section 2036. However, if Mary merely splits the gift made by John, it would not cause inclusion in her taxable estate because she would only be considered to have split the gift for gift tax purposes and not estate tax purposes.

Spousal Gifting
Spousal gifting can be confusing. While U.S. citizen spouses can give an unlimited amount of money to each other, a gift to a non-U.S. citizen spouse does not qualify for the unlimited marital deduction. Instead, such a gift would need to qualify for the annual exclusion. In other words, it would need to be a gift of a present interest. There is also a limit for such gifts to a non-U.S. citizen spouse. In 2022 that limit is $164,000.

Spousal gift-splitting can be a useful wealth transfer planning technique to consider as you plan your gifting strategy for 2022!

Jan 1 22

Estate Planning Awareness Month: Don’t Let Your Clients Fall Victim to These Common Myths

by Webmaster Admin
Happy New Year 2022

Many people enjoy creating New Year’s Resolutions to tackle January with enthusiasm and the motivation that comes with the hope of a fresh start of bettering themselves in the New Year.

While New Year’s Resolutions are great in theory, they often seem to not stick as we get busy, and life gets in the way. Before you know it, March has rolled around, and those important New Year’s resolutions are no longer a priority.

Start Small
For me, it helps to start small. I have found that focusing in on how my daily habits can help me achieve my larger goals, creates traction for me. Knowing this, I decided to think about what I truly wanted for myself in 2022 and started on those habits now – in November. For example, eating more healthy and becoming more physical fit are now goals that I want to focus on as a part of my daily routine. 

For 2022, I am committing to working out at home or at the gym each day, which naturally leads me to want to eat healthier. I know that if I can get into a regular routine now, it will be much easy to keep my commitments going forward and stick to these modified habits consistently throughout the New Year.

While creating healthy habits are vitally important to achieving our goals, consistency is the key ingredient. This means I may need to remind myself why these daily habits are important to me.  

What helps to keep me on track is reading (or listening) to books, such as Atomic Habits by James Clear, and sharing with my family, friends, and colleagues about my goals to increase my motivation and accountability.

So why not start your New Year’s resolutions today? There is no time like the present!

Dec 1 21

Why Intestacy is Not a Good Option for Your Family

by Webmaster Admin
elderly couple walking

Passing away without an estate plan, or dying intestate, is not a good option for your family.

Although the pandemic encouraged people to consider what would happen at their death, many people believe that they “have time” or are overcome with feelings of superstition when considering planning for the end of their life, as if by planning for death, they invite it. The chilling truth is that nobody has a crystal ball capable of reading the future and most of us have no idea how much time we have before suffering an illness, incapacity, or death.

Unfortunately, an alarmingly high number of people die without an estate plan, which can lead to disastrous consequences for surviving family members.

The excuses for failing to create a plan run the gamut, from being young or childless to being single or refusing to face mortality. Many people believe that if their assets do not exceed a certain amount, then they need not be concerned about an estate plan. 

Whatever the reason, failing to create an estate plan causes chaos for survivors at death, leaving loved ones in the lurch. Inevitably, assets will need to be transferred and, without a clear set of instructions that a comprehensive estate plan provides, clients often leave a mess for those grieving the demise of their loved in.

Dying Without a Will or Trust

Dying without a will or trust is called dying intestate. It is so common that states have created statutes to address the issue of intestacy. 

Wills and trusts address numerous issues, such as who will care for minor children or pets, how and when assets will be distributed, who will oversee the distribution of those assets, and how taxes will be paid. 

If you die without any estate planning documents in place, state statutes will determine how and to whom your assets will be distributed, without any input from you or the loved ones you leave behind. Many states’ intestacy laws give only a portion of assets to the surviving spouse and give the remainder to descendants, without regard for the needs of individual recipients. This includes those who may have special needs, due to an emotional and/or physical disability and who may be receiving governmental benefits.

If you die intestate, then your estate will likely need to go through a court sanctioned probate proceeding. An individual will be required to petition a court to become appointed as the estate administrator, which will give that individual legal authority to collect and distribute your assets.

That individual likely will need to retain an attorney to understand and navigate the complex court system. A judge will need to oversee the many steps involved in this public probate process. The court will issue Letters of Administration that give the executor the legal authority to marshal the assets of a decedent’s estate. 

If disagreements occur among family members or beneficiaries regarding who should serve as personal representative, then the judge will make that decision and could appoint a person completely unrelated to the decedent. Imagine, a stranger and members of the public having full access to your personal financial affairs and that a stranger being paid out of your assets to give your property to people whom you did not select. There is something incredibly unsettling about that scenario.

Utilizing a Living Trust

By contacting a competent estate planning attorney, you can accomplish your wealth transfer planning goals, keep your estate out of probate, by utilizing a Living Trust. As part of the estate planning process, your attorney will guide you through the pitfalls of failing to plan, and provide you with suggestions and recommendations about the legal documents necessary to accomplish your estate planning goals. 

Most people feel a sense of accomplishment and relief after implementing their estate plan. Creating an estate plan allows you to determine who will care minor children, how and when your assets will be distributed to children, who will control those distributions, the criteria for making distributions of your assets, and the amount of distributions which you desire to make to specific individuals, charities, schools, or museums. 

A properly designed comprehensive estate plan can prevent disputes among beneficiaries and provide probate avoidance, and tax saving opportunities for your family. Working with an experienced estate planning attorney, you can determine who will care for your minor children and what will happen to your children, as well as who will be appointed to care for your pets, in the event of your passing.

Dying without a Will or a Trust can plague your family for many years after your demise. Therefore, it is vitally important to undertake the task of establishing your estate plan before it’s too late. 

Financial challenges, including delayed distribution of your assets, and unnecessary stress for your family, are just a few of the outcomes for your family if you die intestate. Avoid the tragedy of intestacy by creating a set of instructions to decide how you want your property to be distributed , upon your passing, otherwise known as an estate plan. 

Nov 1 21

Estate Planning Awareness Month: Don’t Let Your Clients Fall Victim to These Common Myths

by Webmaster Admin

This month’s Estate Planning Matters newsletter is to help you, as a professional advisor, gain awareness and understanding about the most common estate planning myths. Left unaddressed, these myths can create serious trouble for families and individuals, often leading to intrafamily conflict, permanently damaged relationships, and lengthy and expensive court battles.

Myth #1:  Estate planning is only for the wealthy.

When the topic of estate planning comes up, professional advisors often hear their clients respond with phrases like “Oh, estate planning is only for rich people,” or “Why do I need an estate plan? I plan to spend it all before I die.”

Unfortunately, this kind of response, perhaps subconsciously, allows the person making the statement to avoid having to expend any further energy thinking about the uncomfortable reality of their own mortality and the consequences of not having planned for their incapacity or death. 

As their professional advisor, consider whether you have a responsibility to gently push back on such responses from a client. Most things worth doing are going to involve some effort, and estate planning is no exception.

Incapacity Planning: 

Even individuals and couples of modest means may suddenly become incapacitated. When an individual cannot speak or make decisions during a period of incapacity, someone else will need to carry out that responsibility. 

Without estate planning documents in place (for example, a healthcare directive, trust, and financial power of attorney), a court will need to appoint a legal guardian to make decisions on behalf of the incapacitated client. Furthermore, the court will decide who will be placed in charge of your client’s financial assets and other property, resulting in additional expenses, delays, and significantly less privacy for your client. 

If the client wants to choose who will make financial and healthcare decisions for them, estate planning must be completed in advance which names the appropriate individuals to carry out those responsibilities. 

Planning with Trusts:

We have heard of professional advisors telling a client that only wealthy individuals need a trust. However, such advice is too simplistic. When an individual dies owning real estate, even if they are of modest means, the probate court will need to authorize the sale or transfer of that property, which can result in additional expenses, delays, and loss of privacy. 

Establishing a trust and titling real estate in the name of the trust can be an effective way to eliminate the need for probate. For many people, avoiding probate is an important estate planning goal, particularly when the client desires to keep the distribution of their accounts and property private and efficient, even if they have what most would consider modest wealth. Probate avoidance may actually be more important for those of modest means because probate is not the most cost-effective way to transfer property at death.

Myth #2:  Joint ownership of my property is sufficient.

A client may declare to you that they do not need to engage in estate planning because they have already added their children to their accounts or on the title to their property. At first impression, it can be tempting to agree that this is sufficient to avoid probate; and while this can be one method for avoiding probate at death, there are serious risks associated with joint ownership that are commonly overlooked. For example, adding children to an account or to the title of property can result in those accounts or property getting tangled up in that child’s divorce proceeding, lawsuit, or bankruptcy. 

Furthermore, there could be gift tax consequences when adding a child to the ownership of certain property, particularly if that child received instructions from the client to divide and distribute that property to others after the client has passed away. 

Additionally, the joint owner may be under no legal obligation to follow the client’s instructions on how to divide the accounts and property after the client’s death. The joint owner could decide to keep the money or property rather than follow your client’s instructions with no legal consequences.

Myth #3:  Avoiding taxes is the only reason to create an estate plan.

It can be easy to dismiss the need for an estate plan considering today’s historically high estate tax exemption ($11.7 million per person in 2021). Most Americans do not need to worry about estate taxes under current law.

However, tax avoidance is only one of the goals of estate planning, and in many cases it is not the most important goal. For example, planning for the orderly passing of your client’s treasured heirlooms to avoid family discord may be far more important than tax planning in the long run. 

Alternatively, your client may have children who are struggling financially or with substance abuse challenges, are in a rocky marriage, or work in high-liability professions. As a result, it may be crucial for your clients to ensure that whatever inheritance is left to those children is protected from loss to lawsuits, creditors, or divorcing spouses.

Myth #4:  I can just name my loved ones on beneficiary designations.

In most cases, accounts such as retirement accounts, life insurance, and bank accounts can be left to loved ones through beneficiary designations, while transfer-on-death deeds can be used to leave real property to loved ones. 

Utilizing such tools can avoid probate in many cases. However, when these types of accounts and property get transferred at death, they are direct transfers that cannot be protected from lawsuits, creditors, divorcing spouses, or other threats from third parties. 

In addition, if minor children are named as designated beneficiaries, a judicially appointed guardian must hold the property until the minor child reaches the age of majority (usually eighteen or twenty-one years old, depending upon state law). Once the child reaches that age, the accounts and property are transferred directly to the child, and a more mature loved one or financial manager will be unable to protect the funds for the child. 

In addition, beneficiary designations and transfer-on-death deeds are useless in the case of the client’s disability or incapacity. Should the client become incapacitated, a legal guardian must be appointed through the court system to manage the property for the client’s benefit until the client dies and the transfer-on-death deeds or beneficiary designations become operable.

What You Can Do to Help Your Clients:

Understanding these myths will put you in an excellent position to dispel them for your clients. By correcting these erroneous beliefs about estate planning, you can help your clients begin the estate planning process in a truly responsible and effective manner. 

As your clients begin to see the importance of establishing a comprehensive estate plan, your value to them as a professional advisor will undoubtedly grow. 

We would be pleased to help you and your clients better understand the value of creating an estate plan and how to avoid falling victim to these and many other estate planning myths.