Estate Planning Blog Articles

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What Happens to Investment Accounts when Someone Dies?

Taking responsibility for a decedent’s probate or trust estate often involves managing significant amounts of wealth, whether they are brokerage accounts or cash assets. Today’s volatile markets add another level of complexity to this responsibility. The article “Estate Planning: Investments during administration of decedent’s estate” from Lake County News explains what estate administrators, executors and trustees need to know as they take on these tasks.

Investment account values are in a constant state of change and may include assets now considered too risky because they are owned by the estate and not the individual. The administrator will need to evaluate the accounts in light of debts owed by the decedent, the costs in administering the estate and any gifts to be made before the estate will be closed.

At the same time, too much cash on hand could mean unproductive assets earning less than they could, losing value to inflation. If there is a long time between the death of the owner and the date of distribution, depending on markets and interest rates, having too much cash could be detrimental to the beneficiaries.

The personal representative or trustee, as relevant, may determine that the cash should be invested, shift how existing investments are managed, or decide to sell investments to generate cash needed for debts, expenses and distributions to beneficiaries.

A personal representative is not expected or required to be a stock market expert. Their duties are to manage estate assets as a person making prudent decisions for the betterment of the estate and heirs. They must put the interest of the estate above their own and not make any speculative investments. With the exception of checking accounts, the expectation is for estate accounts to earn something, even if it is only interest.

If the personal representative has the authority to do so, they may invest in very low-risk debt assets. If the will includes investment powers and if certain conditions safeguarding payment of the decedent’s debts and expenses are satisfied, the personal representatives may invest using those powers. In some instances, a court order may be needed. An estate planning attorney will be able to advise based on the laws of the state in which the decedent resided.

For a trust, the trustee has a fiduciary duty to invest and manage trust assets for beneficiaries. Assets should be made productive, unless the trust includes specific directions for the use of assets prior to distribution. The longer the trust administration takes and the larger the value of the trust, the more important this becomes.

In all scenarios, investment decisions, including balancing risk and reward, must be made in the context of an overall investment strategy for the benefit of heirs. Investments may be delegated to a professional investment advisor, but the selection of the advisor must be made cautiously. The advisor must be selected prudently and the scope and terms of the selection of the advisor must be consistent with the purposes and terms of the trust. The trustee or executor must personally monitor the advisor’s performance and compliance with the overall strategy.

Reference: Lake County News (June 11, 2022) “Estate Planning: Investments during administration of decedent’s estate”

Do I Need an Estate Plan If I’m 25?

Florida Today’s recent article entitled “No matter your age, income or crushing debt, you should have an estate plan” explains that the purpose of a good estate plan is that it allows you to maintain control over how your assets are distributed if you die.

It names someone to make decisions for you, if you can no longer act for yourself. Let’s look at the different documents that are necessary.

Power of attorney: If you become incapacitated, someone still needs to pay your bills and handle your finances. A POA names the person you’d want to have that responsibility.

Health care surrogate: This document is used if you become incapacitated and appoints the individual whom you want to make health care decisions on your behalf.

Last will and testament: This document designates both who oversees your estate, who gets your assets and how they should be transferred.

Beneficiary designations: Part of your planning is to name who should receive money from life insurance policies, annuities, retirement accounts and other financial accounts.

HIPAA Waiver: This is a legal document that allows an individual’s health information to be used or disclosed to a third party. Without this, loved ones may not be able to be a part of decisions and treatment.

Trust. A trust can facilitate passing property to your heirs and potentially provide tax benefits for both you and your beneficiaries.

As you can see, there are a number of reasons to have an estate plan.

Estate planning isn’t only for the rich, and it doesn’t have to be overly complicated.

An experienced estate planning lawyer, also called a trusts and estates attorney, can work with you to create an estate plan customized to your needs, financial affairs and family situation.

Putting your wishes in writing will make certain that your affairs are in order for now and in the future and help your family.

Reference: Florida Today (May 28, 2022) “No matter your age, income or crushing debt, you should have an estate plan”

Your Cryptocurrency and NFTs Need to Be Included in Your Estate Plan

As more people continue to purchase cryptocurrencies and non-fungible tokens (NFTs), digital assets are becoming a bigger part of the investment world and of people’s estate plans. If you want to pass these assets to loved ones upon death, you’ll need to plan for it, says the article “Got Cryptocurrency or NFTs? They Need to Be in Your Estate Planfrom Kiplinger. Otherwise, securing, transferring and gifting crypto and NFTs can create unsolvable problems and lost assets.

There are many different kinds of crypto and NFTs, with Bitcoin, Ethereum, Binance Coin, Thether among them. An NFT is a unique, collectable, and tradable digital asset, like digital art or a photo. NFTs are purchased through a bidding process in this universe and in the metaverse, an online world where people are buying homes, real estate and more in the shape of NFTs. Sales of NFTs are estimated to have reached more than $17 billion in 2021. For better or worse, the future is here.

Cryptocurrency is accessed through a private key. This is a series of alphanumeric characters known only to the owner and stored in cold storage or a digital wallet. Whoever has possession of the key can buy, sell and spend the digital currency. If you have crypto, your family or fiduciary needs to know what you have, where to find the assets and what to do with them.

One option is to share the private key or place crypto assets and NFTs in custody, using a software application or a hardware wallet. There are a number of companies now offering these services. An old-school option for this new world asset is to create a secure spreadsheet of your digital assets and list the login protocols for each account.

For now, it is difficult to open crypto accounts and NFTs in the name of a revocable or irrevocable trust. However, digital wallets allowing you to open an account in the name of a trust do exist, if the company handling the digital asset permits. This is a very new, rapidly evolving asset class. Beneficiaries may not yet be named for crypto accounts. However, this may change in the future.

With no trust account and no named beneficiary, what happens to your crypto and NFTs when you die? For now, they must pass through your probate estate under the will. Your estate planning attorney will make sure your estate plan includes the correct way to give digital asset powers for the fiduciary handling your estate and include digital asset powers in your will, trust, and durable power of attorney.

If your state has adopted the Uniform Fiduciary Access to Digital Assets Act (UFADAA) or the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA)—46 states have—then it will be easier for loved ones to manage digital assets in case of incapacity or when you pass, as long as your estate plan addresses them.

Reference: Kiplinger (May 23, 2022) “Got Cryptocurrency or NFTs? They Need to Be in Your Estate Plan

What Exactly Is a Prenup?

There are some important financial decisions that need to be made before you get hitched. One of them is whether you should get a prenuptial agreement (“prenup”). This isn’t the most romantic issue to discuss, especially because these agreements usually focus on what will happen in the event of the marriage ending. However, in many cases, having tough conversations about the practical side of marriage can actually bring you and your spouse closer together.

JP Morgan’s recent article entitled “What to know about prenups before getting married” explains that being prepared with a prenup that makes both people in a marriage feel comfortable can be a great foundation for building a financially healthy and emotionally healthy marriage.

A prenup is a contract that two people enter before getting married. The terms outlined in a prenup supersede default marital laws, which would otherwise determine what happens if a couple gets divorced or one person dies. Prenups can cover:

  • How property, retirement benefits and savings will be divided if a marriage ends;
  • If and how one person in the couple is allowed to seek alimony (financial support from a spouse); and
  • If one person in a couple goes bankrupt.

Prenups can be useful for people in many different income brackets. If you or your future spouse has a significant amount of debt or assets, it’s probably wise to have a prenup. They can also be useful if you (or your spouse) have a stake in a business, have children from another marriage, or have financial agreements with an ex-spouse.

First, have an open and honest conversation with your spouse-to-be. Next, talk to an attorney, and make sure he or she understands you and your fiancé’s unique goals for your prenup. You and your partner will then compile your financial information, your attorney will negotiate and draft your prenup, you’ll review it and sign it.

Remember that a prenup can be a useful resource for couples in many different circumstances.

It might feel overwhelming to discuss a prenup with your fiancé, but doing this in a non-emotional, organized way can save a lot of strife in the future and could help bring you closer together ahead of your big day.

Reference: JP Morgan (April 4, 2022) “What to know about prenups before getting married”

How Did Rock Star’s Estate Planning Help Future Musicians?

The Mr. Holland’s Opus Foundation, a nonprofit supporting music education in at-risk public schools, announced it had received a “transformative donation” from the late Eddie Van Halen.

MSN’s recent article on this is entitled “Eddie Van Halen left a huge donation in his will to support music education for kids”

Before his death in October 2020, Van Halen was involved with the foundation and supported the nonprofit over the years.

He made numerous appearances at the organization’s events and took part in various opportunities helping teach music to kids. As part of his will, Van Halen made a considerable donation that will have a profound effect on the foundation for many years.

The Mr. Holland’s Opus Foundation was inspired by the movie titled Mr. Holland’s Opus. It is the story of the profound effect a dedicated music teacher had on generations of students. Michael Kamen, who wrote the score for the film, started the foundation in 1996 as his commitment to the future of music education.

The foundation says that Van Halen’s donation “will enable MHOF to fulfill requests from a greater number of schools, add employees to its staff, improve the foundation’s technology and more.”

“Eddie’s support and friendship over the years meant the world to us and to his fans. His passion for music and our work created a strong bond, which is evident in his extraordinary bequest,” Felice Mancini, President and CEO of MHOF said in a statement.

“To know how much our foundation meant to Eddie is intensely humbling and gratifying to all of us – and we know that Eddie’s family is confident that his powerful legacy and values live on through our efforts.”

Van Halen’s son, Wolfgang Van Halen, will continue the family’s involvement and support of the organization. He has donated proceeds from his single “Distance” to the foundation in support of school music programs across the country and as a dedication to his father.

“Mr. Holland’s Opus Foundation and the work they do for music education was always something that was important to my father,” Van Halen said in a statement. “I am incredibly proud to help facilitate this donation as he wished. Mr. Holland’s Opus are champions for our musicians of the future, and it is my privilege to continue supporting that mission and carrying on my pop’s legacy.”

Reference: MSN (April 21, 2022) “Eddie Van Halen left a huge donation in his will to support music education for kids”

How to Find a Great Estate Planning Attorney

With so many law firms, it can be challenging to find the right one for your estate planning, says Diving Daily’s recent article entitled “5 Factors to Consider When Choosing an Estate Planning Law Firm.”

The article lists the following factors you should consider when choosing an estate planning law firm.

  1. Your Specific Needs. Before you look for an estate planning lawyer, first determine what it is you need from the lawyer. Consider the intricacies of your estate and whether it has any complexities and special considerations. This will help you narrow down the list of legal professionals who can help you plan your estate.
  2. Experience. Working with an inexperienced law firm or attorney will only work to your detriment. You typically want to look for a lawyer with at least five years of experience in estate planning.
  3. Fees. The expense shouldn’t be your primary consideration when selecting an estate planning attorney, but it’s still worth mentioning. Make certain that you find an attorney that you can afford. However, this doesn’t mean you should hire the cheapest lawyer you can find. In most cases, you’ll end up getting what you pay for. Instead, find a lawyer with reasonable rates.
  4. Reputation. You want an estate planning attorney who has made a name for his or herself in estate planning law. Look at reviews and testimonials online. These are first-hand accounts of previous clients’ experiences with the law firm. They’ll help you decide whether the lawyer is worth your time and money.
  5. Attitude. Make an in-person appointment with the attorney before making your decision and learn about the lawyer’s attitude and demeanor. You’ll want an attorney that’s friendly and easy to talk to. You should note his or her professionalism and knowledge of estate planning.

Make sure you do your due diligence to find the best people to help you plan your estate.

Reference: Diving Daily (April 26, 2022) “5 Factors to Consider When Choosing an Estate Planning Law Firm”

How Do I Conduct an Estate Inventory?

When a loved one dies, it may be necessary for their estate to go through probate—a court-supervised process in which his or her estate is settled, outstanding debts are paid and assets are distributed to the deceased person’s heirs. An executor is tasked with overseeing the probate process. An important task for an executor is submitting a detailed inventory of the estate to the probate court.

Yahoo Finance’s recent article entitled “What Is Included in an Estate Inventory?” looks at the estate inventory. During probate, the executor is charged with several duties, including collecting assets, estimating the fair market value of all assets in the estate, ascertaining the ownership status of each asset and liquidating assets to pay off outstanding debts, if needed. The probate court will need to see an inventory of the estate’s assets before distributing those assets to the deceased’s heirs.

An estate inventory includes all the assets of an estate belonging to the individual who’s passed away. It can also include a listing of the person’s liabilities or debts. In terms of assets, this would include:

  • Bank accounts, checking accounts, savings accounts, money market accounts and CDs
  • Investment accounts
  • Business interests
  • Real estate
  • Pension plans and workplace retirement accounts, such as 401(k)s, 403(b)s and 457 plans
  • Life insurance, disability insurance, annuities and long-term care insurance
  • Intellectual property, such as copyrights, trademarks and patents
  • Household items
  • Personal effects; and

Here’s what’s included in an estate inventory on the liabilities side:

  • Home mortgages;
  • Outstanding business loans, personal loans and private student loans;
  • Auto loans associated with a vehicle included on the asset side of the inventory
  • Credit cards and open lines of credit
  • Any unpaid medical bills
  • Unpaid taxes; and
  • Any other outstanding debts, including unpaid court judgments.

There is usually no asset or liability that’s too small to be included in the estate inventory.

Reference: Yahoo Finance (Feb. 15, 2022) “What Is Included in an Estate Inventory?”

What about House Contents when Someone Dies?

Probate law does not allow anyone to take items from a loved ones’ home after they die, until the will has been probated. Learning about probate, what it entails and how to prepare for it may make it a little easier when a family member dies, says a recent article titled “Can you empty a house before probate? from Augusta Free Press. Knowing what to expect can avoid common pitfalls and mistakes, some of which often lead to family fights and even litigation.

Probate is a court-supervised period when the estate of the decedent is on pause. Assets may not be distributed, including personal items in the home. The goal is to ensure that assets are distributed only after the will has been ruled valid by the court and following the instructions in the will.

Probate includes the legal appointment of the executor, who is named in the will with specific statutory responsibilities, to include ultimately distributing assets.

For many people, estate planning includes preparing assets to avoid the probate process. An estate plan includes a review of the entire estate to see which assets are best suited to be taken out of the estate. Living trusts, joint ownership, transfer-on-death (TOD) and many other estate planning strategies can be used, depending on the person’s finances.

Certain tasks can be accomplished during probate relating to the home and other property. This includes changing the locks on the home to protect it from criminals and unauthorized people who have keys. The decedent’s mail can be forwarded to the executor or another family member’s address. A review of the decedent’s bills, especially monthly payments, can take place. If there’s a mortgage on the home, the mortgage company needs to be contacted and the payments need to be made.

As the end of the probate period nears, it may be time to contact an appraiser to get an unbiased, professional appraisal of the home’s value. This will be needed if the home is to be sold, or if the estate plan needs a valuation of the home.

Probate is often a necessary process. It can create challenges for the family, especially if no estate planning has been done. In some jurisdictions, probate is quick and painless, while in others it is a long and expensive process. Prior planning by an experienced estate planning attorney prevents many of the issues presented by probate.

After probate has been completed, the executor distributes the assets, including the personal property in the home. Personal property with sentimental value often sparks more family fights than assets of greater value. Administering an estate when emotions are running high is a challenge for all concerned.

Another reason to have an estate plan in place is to delineate very specifically what you want to occur after your death. That way there is no room for family members to stake a claim and do something contrary to your wishes.

Reference: Augusta Free Press (May 13, 2022) “Can you empty a house before probate?

What Should I Know about Estate Planning before ‘I Do’?

Romance is in the air. Spring is the time for marriages, and with America coming out of the pandemic, wedding calendars will be filled.

AZ Big Media’s recent article entitled “5 estate planning tips for newlyweds” gives those ready to walk down the aisle a few things to consider.

  1. Prenuptial Agreement. Commonly referred to as a prenup, this is a written contract that you and your spouse enter into before getting legally married. It provides details on what happens to finances and assets during your marriage and, of course, in the event of divorce. A prenup is particularly important if one of the spouses already has significant assets and earnings and wishes to protect them in the event of divorce or death.
  2. Review you restate plan. Even if you come into a marriage with an existing plan, it’s out of date as soon as you’re wed.
  3. Update your beneficiary designations. Much of an individual’s estate plan takes place by beneficiary designations. Decide if you want your future spouse to be a beneficiary of life insurance, IRAs, or other pay on death accounts.
  4. Consider real estate. A married couple frequently opts to live in the residence of one of the spouses. This should be covered in the prenup. However, in a greater picture, decide in the event of the death of the owner, if you’d want this real estate to pass to the survivor, or would you want the survivor simply to have the right to live in the property for a specified period of time.
  5. Life insurance. You want to be sure that one spouse is taken care of in the event of your death. A married couple often relies on the incomes of both spouses, but death will wreck that plan. Think about life insurance as a substitute for a spouse’s earning capacity.

If you are soon-to-be-married or recently married and want to discuss it with an expert, make an appointment with a skilled estate planning attorney.

Reference:  AZ Big Media (March 23, 2022) “5 estate planning tips for newlyweds”

Is Putting a Home in Trust a Good Estate Planning Move?

A typical estate at death will include a personal residence. It’s common for a large estate to also include a vacation home, or family retreat. Leaving real property in trust is common.

Estate plans that include a revocable trust will fund the trust by a pour-over, says Kiplinger’s recent article entitled “Should You Own Your Home in Your Trust?”

A settlor (the person establishing a trust) often will title their home to the revocable trust, which becomes irrevocable at death.

Another option is a Qualified Personal Residence Trust, which is irrevocable, to gift a valuable home to a trust for the settlor’s children. With a QPRT, the house is passed over a term of years while the original owner continues to live there, so the gift passes with little or no gift or estate tax.

Some trusts arising from a decedent estate will hold the home belonging to the settlor without any instructions for its disposal or retention. Outside of very large trusts, a requirement to actually purchase homes for beneficiaries in the trust is far less common.

It is more common in a large trust to have terms that let the trustee buy a home for a beneficiary outside the trust or keep the settlor’s home in the trust for a beneficiary’s use, including purchasing a replacement home when requested.

The trustee will hopefully propose a plan that will satisfy the beneficiary without undue risk to the trust estate or exceeding the trustee’s powers. The most relevant considerations for homeownership in a trust are:

  • The competing needs of other trust beneficiaries
  • The purchase price and costs of maintaining the home
  • The size of the trust as compared to those costs
  • Other sources of income and resources available to the beneficiary; and
  • The interests of the remaindermen (beneficiaries who will take from the trust when the current beneficiaries’ interests terminate).

The terms of the trust may require the trustee to ignore some of these considerations.

Each situation requires a number of decisions that could expose the trustee to a charge that it has acted imprudently.

Those who want to create a trust should work with an experienced estate planning attorney to avoid any issues.

Reference: Kiplinger (Feb. 8, 2022) “Should You Own Your Home in Your Trust?”