Estate Planning Blog Articles

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Cryptocurrency and Estate Planning: What Executors Need to Know

Millennials are not the only ones investing in cryptocurrency. In a recent article titled “Help! My dad is investing in cryptocurrency” from Monterey Herald, a woman is worried about her elderly father investing in this new type of money. She is concerned for both his financial well-being and for what she may have to address when it is time to distribute his estate to her siblings.

Crypto, or cryptocurrency, is more than a passing fad. It has become an alternative purchasing and investment tool, with more than 8,000 different types of crypto available, representing billions in assets. You can use crypto to buy a Tesla automobile, an airplane or real estate. Regulations have recently been issued to permit banks to take custody of digital currency. One credit card company is even developing a card to allow consumers to spend digital cash using a credit or debit card.

Perhaps the ultimate recognition of this new currency comes from the IRS, which now requires owners to report income and capital gains earned on the sale of crypto and assess taxes on it, the same as other traditional types of investments.

As the executor of her father’s will, the woman mentioned above will be responsible for distributing her father’s entire estate, including the cryptocurrency. As a fiduciary, she will have to learn what it is and how to manage it.

When people buy crypto, they receive a digital key. This is usually a string of numbers, symbols and letters representing the asset on a secure ledger. The key cannot be replaced, and if it is lost, so are the crypto holdings. There are many different ways to store this key, so the daughter needs to know where the key is stored and how to access it.

The best way forward would be for the daughter to spend time with her father learning about cryptocurrency, what types he owns and how they are secured. Their conversation should also address his wishes for the investment. Does he want his grandchildren to receive it as crypto, or would he prefer to liquidate it before he dies and place it in a trust? Does he want her to liquidate it after he dies, and have it become part of his estate?

When it is time to settle the estate, if the crypto has not been liquidated into cash, she will need to value the assets at his date of death, like any other investment and may either sell the currency or distribute it to his beneficiaries. If the estate is valued at more than $12.06 million, federal estate taxes will need to be paid on all assets, including the cryptocurrency. There may also be state estate taxes due.

She should also speak with an estate planning attorney about cryptocurrency, and also read his will to learn if the cryptocurrency is included. If he does not have a will or an estate plan, now is the time to make an appointment with an estate planning attorney and get that in order.

Being an executor used to require learning about possessions like art or jewelry collections or fine rugs. Today, the executor needs to add a cryptocurrency education to their task list.

Reference: Monterey Herald (Feb. 19, 2022) “Help! My dad is investing in cryptocurrency”

Can Elder Financial Abuse Be Stopped?

The numbers are chilling. One in ten Americans age 60+ has experienced elder abuse. One of the most common forms of elder abuse is financial, says a recent article from Forbes titled “What Is Elder Financial Abuse—And How Do We Prevent It?”

Financial elder abuse is defined as when someone illegally or improperly uses an elderly person’s money for their own use. Elderly people are easy victims for obvious reasons. They may be mentally vulnerable, suffering from Alzheimer’s or other form of dementia. They may also be lonely and find the company of a new “friend” is so delightful that it impairs their judgement.

Financial elder abuse occurs most often from adult children, but also in nursing homes and assisted living facilities. Be on the watch for those new friends who enter senior’s lives, especially if they seek to limit contact with family members.

Caregivers or nursing staff have access to resident’s possessions, including checkbooks, ATM cards and credit cards. Monitoring an aging parent’s bank accounts on a regular basis should be part of caregiving by adult children. Unusual transactions, large withdrawals or unlikely purchases by credit card should immediately be reported to their bank or credit card company.

Less obvious and harder to track, is when someone forces a nursing home resident to sign legal documents transferring ownership of homes, cars, bank accounts and even investment accounts. They may also be pressured into creating a new will.

Here are some red flags to watch for:

  • New names being added to bank accounts or on credit cards.
  • Finding unpaid bills, letters from collection agencies or past due notices from creditors, especially when the person has sufficient funds.
  • Relatives who suddenly show up and want to be involved with an aging senior, including estranged children.
  • The unexpected transfer of any kind of asset to someone who is not a family member.
  • Any change in habits concerning money, including someone who was never worried about money suddenly being concerned about paying bills.

The elderly are often scared to report being victimized. They may fear further loss of control over their lives or be embarrassed to have been scammed. If a caregiver is stealing, they may also be physically threatened, or frightened of losing their familiar care provider.

Talk to your estate planning attorney, speak with the local Adult Protective Services office, or contact the National Elder Fraud Hotline, if you are concerned about a loved one being financially exploited.  If you believe a loved one is in physical danger, contact the local police. Don’t hesitate to ask for help.

Reference: Forbes (Nov. 9, 2021) “What Is Elder Financial Abuse—And How Do We Prevent It?”

How Do I Cancel a Loved One’s Credit Cards and Manage Their Points, After They Die?

First, you should get legal advice before you start delving into the deceased person’s estate. Contact an experienced estate planning attorney. Typically, the executor of the deceased’s estate will be in charge of these tasks.

Insider’s recent article entitled “How to cancel a loved one’s credit cards and manage their points after they die” provides some general tips on the steps to take to cancel credit cards and manage loyalty points, after a family member or close friend passes away.

Review the situation and gather documents. After a death, there’s a lot to do. Once you receive a death certificate, the executor must begin managing the deceased’s finances.

First, you want the credit bureaus to note the death in the deceased’s credit report and to get a list of all credit cards they owned. You can contact one of the three nationwide credit bureaus (Equifax, Experian, or TransUnion) to tell them about the death and get a copy of their credit report. The Social Security Administration usually notifies the credit bureaus of the death. However, personally contacting them will make certain that a death notice is entered in their credit report. This will decrease the risk of identity theft. When noted, lenders will see that the individual is dead and won’t issue credit. You only need to contact one bureau because they will automatically notify the others.

How to close the deceased’s credit cards. After you get the credit report, identify all open credit cards and contact each one to notify them of the death. Each issuer will have a different procedure for closing the card, but most will ask you to send a copy of the death certificate. Lenders may also automatically close cards when they see the death notice on the credit bureau report.

Paying off credit card debt after death. The CARD Act of 2009 set the rules for credit card debt after death. Once the lender is notified, it will close the credit card and provide a final bill to the estate within 30 days. While the estate is being settled, they can’t impose additional late fees, annual fees, or over-limit fees. However, the interest on the debt continues to accrue. Note that if the estate pays the debt within 30 days of receiving the final bill, there’s no additional interest charged.

Credit card rewards after death. Every credit card has its own rules for managing points after death. For instance, American Express Membership Rewards has a process to take ownership of an account, and Chase Ultimate Rewards terms state that “If we’re notified of your death, your points will be automatically redeemed for cash in the form of an account statement credit.” The miles and points earned with an airline or hotel are subject to the terms of that program. Review the rules of each credit card, airline and hotel loyalty program to understand how points will be managed.

How to simplify life for your family. You can make things easier for your loved ones, if you make a plan to handle your points, miles and credit card rewards. Similar to other assets, you should explain how you want your points to be used in your will. Ask an experienced estate planning attorney to help you.

Reference: Insider (Feb. 1, 2021) “How to cancel a loved one’s credit cards and manage their points after they die”

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