Estate Planning Blog Articles

Estate & Business Planning Law Firm Serving the Providence & Cranston, RI Areas

Some Seniors Getting Estate Plans Completed More Quickly after COVID

Indiana Lawyer’s recent article entitled “New urgency: COVID prompts seniors to be more proactive with estate planning” says that, after roughly two years, many Americans appear to finally be emerging from the strictest phases of the pandemic.

As many middle-aged and young people move back into what somewhat resembles a pre-pandemic normalcy, older citizens continue to feel the heavy impact of the virus.

As COVID’s threat to the elderly quickly became apparent, some estate planning attorneys have seen a major increase in older clients scrambling to get their affairs in order.

People aged 65 and older account for nearly 75% of U.S. COVID-related deaths. More often than not, estate planning lawyers say people don’t have their end-of-life and estate planning documents together until it’s too late.

For some, estate planning is almost taboo in the sense that if someone gets their affairs taken care of, older generations tend to think they’ll die the next day. As if, “I’m going to have an impending death sometime soon if I do this.”

However, by doing the estate planning, it helps that stigma to be diminished.

Some say people had to die, in order to motivate people to do what they needed to do.

However, more people seem willing to get up and get an estate plan because of COVID.

Visit an estate planning attorney and set up your plan right away. Ask about the basic documents:

  • A will
  • Powers of Attorney
  • A Living Will
  • An Advance Medical Directive; and perhaps
  • A Revocable Living Trust

Everyone’s situation is different, so you should sit down with an experienced attorney who can customize an estate plan to your family and situation.

Reference: Indiana Lawyer (May 25, 2022) “New urgency: COVID prompts seniors to be more proactive with estate planning”

What are the Most Important Estate Planning Documents for Seniors?

Thinking about death is unpleasant. However, when it comes to guarantees in life, it’s one of the few. A properly prepared estate plan can take some of the uncertainty out of your money’s future.

Estate planning needs differ a lot between individuals. However, most Americans can benefit from having these four documents in place, says The Ascent’s recent article entitled “4 Estate Planning Documents Everyone Should Have.”

  1. Last will and testament. A will directs the disposition of your assets and allows for specific bequests, such as a gift of sentimental value. For those with minor children, guardianship is established in the will in the event both parents die.
  2. Financial power of attorney. Powers of attorney typically spring into effect upon incapacitation. This document lets someone represent an incapacitated person in certain financial matters. For example, just because you are incapacitated does not mean you get out of filing your tax return!
  3. Healthcare power of attorney. This document gives an attorney-in-fact the right to make healthcare-related decisions for you, in case you become incapacitated. Rights given to an attorney-in-fact through a healthcare power of attorney include speaking to medical professionals about your care, deciding on treatment—even deciding to stop your treatment in a vegetative state. Appointing an attorney-in-fact is a big decision, and a large responsibility for the attorney-in-fact. As a result, it’s important to establish a living will to guide their decision making.
  4. Living will. This is also called an advance directive. This document provides guidance to both healthcare professionals and those appointed as attorneys-in-fact. Supplementing an estate plan with a living will can ensure that your final wishes are known and executed and can prevent a great deal of agony for those making decisions regarding your health care.

Some states allow individuals to draft and execute estate documents. However, it’s still always advisable to hire a legal professional.

An experienced attorney will speak with you about your personal and financial circumstances and draft a will in accordance with your wishes.

Reference: The Ascent (May 13, 2022) “4 Estate Planning Documents Everyone Should Have”

My Children Really Don’t Want My Stuff?

Next Avenue’s recent article entitled “Your Top 10 Objects Your Kids Don’t Want” gives us a list of these items and what to do with them.

Books. Unless your grown children are professors, they don’t want your books. If you think the book is rare, call a book antiquarian.

Paper Ephemera. Snapshots, old greeting cards and postcards are called paper ephemera. Did you know that? Me neither. Old photos are not worth anything, unless the subject is a celebrity or linked with an important historical event. Old greeting cards are not valuable, unless handmade by a famous artist or sent by a celebrity. Postcards are valued mainly for the stamps. Take all your family snapshots and have them made into digital files. The other option is to sell those old snapshots to greeting card publishers who use them on funny cards or give family photos to image archive businesses, like Getty. If the archive is a not-for-profit, take the donation write-off.

Steamer Trunks, Sewing Machines and Film Projectors. Thrift stores are full of these items. Therefore, unless your family member was a professional and the item is top-notch, yours can go there as well.

Porcelain Figurine Collections and Bradford Exchange Pieces. Your collections of frogs, shoes, flowers, and trolls, as well your Hummel’s, and Precious Moments won’t be wanted by the children. See if you can find a retirement home that does a gift exchange at Christmas and donate the figurines. If you want to hold on to a memory of your mom’s collection, have a professional photographer take a photo for your wall. Collector’s plates won’t sell. Donate these as well.

Silver-Plated Stuff. Your children won’t polish silverplate, so if you give them platters, serving bowls, tea services and candelabra, you won’t enhance your standing. The exception may be silver-plated items from Tiffany or Cartier but give these away to any place or person who will take it.

Heavy, Dark, Antique Furniture. There’s still a market for this sort of furniture at secondhand shops. However, you’ll get less than a quarter of purchase price, if you sell on consignment. Unless your furniture is mid-century modern, there’s a good chance you will have to pay someone to take it off your hands. Instead, donate it and take a non-cash charitable contribution using fair market valuation.

Persian Rugs. No, these aren’t really in vogue for younger adults. However, the high-end market is still collecting in certain parts of the country, like Martha’s Vineyard. However, unless the rug is rare, it’s one of the hardest things to sell these days. If you think the value of the rug is below $2,000, it will be a hard sell. Like antique furniture, it may be best to donate these.

Linens. No, they don’t want them. They might not even own an iron or ironing board, and they definitely don’t set that kind of table. Give these to needlewomen who make handmade Christening clothes, wedding dresses and quinceañera gowns. You may also donate linens to costume shops of theaters and deduct the donation. A site like P4a.com has auction results to establish the fair market value of such objects.

Sterling Silver Flatware and Crystal Wine Services. Matching sets of sterling flatware are tough to sell because they rarely go for “antique” value. Do the children do a lot of formal entertaining? The same is true for crystal. These sets are too precious, and the wine they hold is too small a portion. Sites like Replacements.com offer matching services for people who do enjoy silver flatware and have recognized patterns. Because they sell per piece, and therefore buy per piece, sellers get a rather good price.

Fine Porcelain Dinnerware. Your grown children may not want to store four sets of fancy porcelain dinnerware and won’t see the benefit of unpacking it once a year for a holiday or event. China is something to consider selling. Know your pattern to get a quote. Some replacement companies buy per piece, so the aggregate of the selling price is always more than a bulk sale at a consignment store, which might be the only other option.

Reference: Next Avenue (March 1, 2018) “Your Top 10 Objects Your Kids Don’t Want”

Is Your Incapacity Plan in Place?

Wise incapacity planning usually includes the execution of a power of attorney.

This is a document that appoints an agent who can legally sign checks, pay bills and make other financial decisions on your behalf, as the principal, in the event you become incapacitated by illness or an accident.

A power of attorney is also used when the principal is unable to be present to sign necessary documents.

The designated agent can be given broad legal authority or limited authority to make decisions about the principal’s property, finances, or medical care.

FedWeek’s recent article entitled “Putting an Incapacity Plan in Place” suggests that, rather than a “regular” power of attorney, you may prefer one of the following:

A durable power of attorney can name a trusted friend, relative, or advisor to sign papers, if you are unable to make knowledgeable decisions.

These documents remain in effect if you become incapacitated.

Springing power is a durable power of attorney that will go into effect only if one or more doctors declare that you are incompetent or that you cannot perform some “activities of daily living,” such as being able to get dressed and go to the bathroom.

A springing power will not go into effect as long as you are competent.

Some financial institutions also may not accept your power of attorney because they require the use of their own forms.

Send a copy of your power to each of your banks, brokers and other accounts to see if there is an issue. Some companies will also not recognize old powers.

Add an expiration date on the document and update it every year or two, so it expresses your current wishes.

A power of attorney can also end for a number of reasons, such as when the principal revokes the agreement or dies, when a court invalidates it, or when the agent can no longer carry out the responsibilities outlined.

In the case of a married couple, the authorization may be invalidated if the principal and the agent divorce.

Reference: FedWeek (Feb. 1, 2022) “Putting an Incapacity Plan in Place”

What If an Estate Owes Back Taxes?

If grandma did not finish up all of her duties as the executor of her husband’s estate before she passed away, it would be wise to speak with an experienced estate planning attorney.

An estate planning attorney can help with the issues with estate administration, says nj.com’s recent article entitled “My grandmother’s estate owes back taxes. What next?”

The fiduciary appointed to administer an estate—called an executor or personal representative—is responsible to make certain that all creditors are paid before making distribution of estate assets.

An executor of an estate is the person designated to administer the last will and testament of the decedent. His or her primary duty is to carry out the instructions to manage the affairs and wishes of the decedent.

An executor is appointed either by the testator of the will (the one who makes the will) or by a court, in situations where there is no will (also known as intestacy).

If there is a probate proceeding, the executor is required to officially notify creditors of it pursuant to the state probate statutes.

If there are not enough assets to pay all creditors, state statutes give a priority regarding how creditors are paid.

Funeral expenses and taxes are typically paid first.

Note that if the creditors are not paid, and money is distributed to beneficiaries, the creditors may seek the return of those distributions from the beneficiaries.

However, the executor’s individual assets would not be responsible for payment of estate debts. It is just the assets that are received from the decedent.

As far as taxes, the IRS is still legally entitled to the money owed by the decedent. The federal government will usually go to great lengths to collect it, even if the will instructs the remaining assets to be distributed elsewhere.

Reference: nj.com (Feb. 3, 2022) “My grandmother’s estate owes back taxes. What next?”

What’s Elder Law and Do I Need It?

Yahoo News  says in its recent article entitled “What Is Elder Law?” that the growing number of elderly in the U.S. has created a need for lawyers trained to serve clients with the distinct needs of seniors.

The National Elder Law Foundation defines elder law as “the legal practice of counseling and representing older persons and persons with special needs, their representatives about the legal aspects of health and long-term care planning, public benefits, surrogate decision-making, legal capacity, the conservation, disposition and administration of estates and the implementation of their decisions concerning such matters, giving due consideration to the applicable tax consequences of the action, or the need for more sophisticated tax expertise.”

The goal of elder law is to ensure that the elderly client’s wishes are honored. It also seeks to protect an elderly client from abuse, neglect and any illegal or unethical violation of their plans and preferences.

Baby boomers, the largest generation in history, have entered retirement age in recent years.  Roughly 17% of the country is now over the age of 65. The Census estimates that about one out of every five Americans will be elderly by 2040.

Today’s asset management concerns are much sophisticated and consequential than those of the past. Medical care has not only managed to extend life and physical ability but has itself also grown more sophisticated. Let’s look at some of the most common elder law topics:

Estate Planning. This is an area of law that governs how to manage your assets after death. The term “estate” refers to all of your assets and debts, once you have passed. When a person dies, their estate is everything they own and owe. The estate’s debts are then paid from its assets and anything remaining is distributed among your heirs.

Another part of estate planning in elder law concerns powers of attorney. This may arise as a voluntary form of conservatorship. This power can be limited, such as assigning your accountant the authority to file your taxes on your behalf. It can also be very broad, such as assigning a family member the authority to make medical decisions on your behalf while you are unconscious. A power of attorney can also allow a trusted agent to purchase and sell property, sign contracts and other tasks on your behalf.

Disability and Conservatorship. As you grow older, your body or mind may fail. It is a condition known as incapacitation and legally defined as when an individual is either physically unable to express their wishes (such as being unconscious) or mentally unable to understand the nature and quality of their actions. If this happens, you need someone to help you with activities of daily living. Declaring someone mentally unfit, or mentally incapacitated, is a complicated legal and medical issue. If a physician and the court agree that a person cannot take care of themselves, a third party is placed in charge of their affairs. This is known as a conservatorship or guardianship. In most cases, the conservator will have broad authority over the adult’s financial, medical and personal life.

Government programs. Everyone over 65 will, most likely, interact with Medicare. This program provides no- or low-cost healthcare. Social Security is the retirement benefits program. For seniors, understanding how these programs work is critical.

Healthcare. As we get older, health care is an increasingly important part of our financial and personal life. Elder law can entail helping a senior understand their rights and responsibilities when it comes to healthcare, such as long-term care planning and transitioning to a long-term care facility.

Reference: Yahoo News (Jan. 26, 2020) “What Is Elder Law?”

What are the Negatives of Investing in Cryptocurrency?

When Matthew Mellon died suddenly in 2018, he was worth almost $200 million. He owned nine sports cars, a watch worth more than most American’s annual income and left one daughter the priceless collection of Mellon family silver. However, he also left an estate mess for heirs, according to a recent article “How a cryptocurrency fortune crippled a deceased billionaire’s estate” from the daily dot.

Aside from the sports cars, watch and the family silver, most of Mellon’s assets, estimated at more than $193 million, were in a cryptocurrency known as XRP, managed by the company Ripple. One court document noted the cryptocurrency made up 97% of the entire estate. Mellon’s estate disaster was unlike most situations when assets can’t be accounted for. His multi-million cryptocurrency assets were secured by digital keys in a digital wallet. No one in the family knew where any of this was.

The online community and attorneys assumed the XRP assets were lost forever. However, there were a few twists to the story.

Matthew Mellon was a member of two powerful banking families, the Mellons and the Drexels. He reportedly inherited $25 million as a young man and served as chair of the New York Republican Party Finance Committee, to which he’d made a six-figure donation. He was married to Tamara Mellon, founder of the Jimmy Choo shoe brand. The marriage was one of two, both ending in divorce.

His investment in cryptocurrency began with a $2 million investment in XRP in late 2017, after testing the cryptocurrency concept with Bitcoin. He became a global “ambassador” for XRP. According to Forbes, at one point his investment was worth nearly $1 billion, but the rally ended, and the currency depreciated rapidly during 2018.

The family was doubtful about his involvement in XRP because Mellon struggled with substance abuse. The day he died of a heart attack, was the day he was scheduled to check into a drug rehabilitation facility to treat an OxyContin addition.

Left behind after his death were two ex-wives, three young children and an outdated will. There was no mention of the estimated $193 million in XRP. The keys to the cryptocurrency were allegedly kept on devices under other people’s names in locations across the country. This secrecy led estate lawyers scrambling to gain control of his XRP, which fluctuated up and down by as much as 30% in the weeks after his death. Every day they did not have the ability to sell, increased the risk of not being able to liquidate his biggest asset.

Based on his relationship with Ripple, his attorneys were able to get in contact with the right people at the company and gain access to his XRP. However, this does not happen for regular people, no matter how much the cryptocurrency is worth.

Gaining access to the digital currency was just the start. Mellon had an agreement with Ripple that he could only sell off a small amount of XRP daily. The attorneys were able to negotiate a slightly higher number but could not move fast enough to generate the cash needed to pay off the estate’s debts. This made sense for Ripple—a big sell-off would have an extremely negative impact on XRP’s value, just as wide-scale dumping of a stock would cut its value.

Mellon was also years behind on income tax returns, and the IRS wanted a piece of his multi-million dollar estate. In addition, two dozen entities, mostly private individuals, claimed he owed them money, ranging from a few hundred to nearly six million. There was a posthumous sexual harassment claim filed against him by a housekeeper. The estate paid $60 million in federal estate tax, and debts were settled in January 2021, almost three years after his death because of the inability to sell the cryptocurrency.

Most people don’t lead such a complicated personal or financial life. However, in this case, an updated will would have spared the family all the drama and stress of a high-stakes estate disaster. Proper estate planning could have protected the estate from a big tax bite and kept the Mellon’s family business private.

Reference: daily dot (Dec. 23, 2021) “How a cryptocurrency fortune crippled a deceased billionaire’s estate”

What are Digital Assets in an Estate?

Planning for what would happen to our intangible, digital assets in the event of incapacity or death is now as important as planning for traditional assets, like real property, IRAs, and investment accounts. How to accomplish estate planning for digital assets is explained in the article, aptly named, “Estate planning for your digital assets” from the Baltimore Business Journal.

Digital asset is the term used to describe all electronically stored information and online accounts. Some digital assets have monetary value, like cryptocurrency and accounts with gaming or gambling winnings, and some may be transferrable to heirs. These include bank accounts, domains, event tickets, airline miles, etc.

Ownership issues are part of the confusion about digital assets. Your social media accounts, family photos, emails and even business records, may be on platforms where the content itself is considered to belong to you, but the platform strictly controls access and may not permit anyone but the original owner to gain control.

Until recently, there was little legal guidance in managing a person digital files and accounts in the event of incapacity and death. Accessing accounts, managing contents and understanding the owner, user and licensing agreements have become complex issues.

In 2014, the Uniform Law Commission proposed the Uniform Fiduciary Access to Digital Assets Act (UFADAA) to provide fiduciaries with some clarity and direction. The law, which was revised in 2015 and is now referred to as RUFADAA (Revised UFADAA) was created as a guideline for states and almost every state has adopted these laws, providing estate planning attorneys with the legal guidelines to help create a digital estate plan.

A digital estate plan starts with considering how many digital accounts you actually own—everything from online banking, music files, books, businesses, emails, apps, utility and bill payment programs. What would happen if you were incapacitated? Would a trusted person have the credentials and technical knowledge to access and manage your digital accounts? What would you want them to do with them? In case of your demise, who would you want to have ownership or access to your digital assets?

Once you have created a comprehensive list of all of your assets—digital and otherwise—an estate planning attorney will be able to update your estate planning documents to include your digital assets. You may need only a will, or you may need any of the many planning tools and strategies available, depending upon the type, location and value of your assets.

Not having a digital asset estate plan leaves your estate vulnerable to many problems, including costs. Identity theft against deceased people is rampant, once their death is noted online. The ability to pay bills to keep a household running may take hours of detective work on your surviving spouse’s part. If your executor doesn’t know about accounts with automatic payments, your estate could give up hundreds or thousands in charges without anyone’s knowledge.

There are more complex digital assets, including cryptocurrency and NFTs (Non-Fungible Tokens) with values from a few hundred dollars to millions of dollars. The rules on the valuation, sale and transfers of these assets are as yet largely undefined. There are also many reports of people who lose large sums because of a lack of planning for these assets.

Speak with your estate planning attorney about your state’s laws concerning digital assets and protect them with an estate plan that includes this new asset class.

Reference: Baltimore Business Journal (Sep. 16, 2021) “Estate planning for your digital assets”

What Is a Power of Attorney?

Any responsible adult can act as your agent. South Florida Reporter’s recent article entitled “Everything You Should Know About Power of Attorney” says this is an important decision that shouldn’t be handled lightly.

A power of attorney or “POA” is a legal document that authorizes a trusted person (the “agent” or “attorney-in-fact”) to make decisions on your behalf (the “donor” or “grantor”).

The authority can be broad, or it can be narrow for only specific actions.

There are two basic types of powers of attorney: one for finances and another for medical decisions.

A financial POA provides your agent with the authority to make financial and property decisions on your behalf. This may include handling your bank or building society accounts, collecting a pension or benefits, paying bills, or selling your house. Once registered, you can use it right away or keep it till you lose your mental capacity.

A medical POA lets your agent make decisions about your medical care and placement in a care facility, including life-sustaining medical care. It should only be used if you’re incapable of making your own decisions, and you must agree to it while you are still capable of doing so.

These specifics may vary, but the following are general guidelines that typically apply:

  • Write it down
  • Determine the parties
  • Delegate the authority
  • Define the term “durability”; and
  • Get the POA notarized.

Appoint a person as your representative who’s both trustworthy and capable.

Reference: South Florida Reporter (July 18, 2021) “Everything You Should Know About Power of Attorney”

What Your Need to Know about 529 College Savings Plans

You might think that tax-deferred savings is the main benefit, along with tax-free withdrawals for qualifying higher education expenses. However, there are also state tax incentives, such as tax deductions, credits, grants, or exemption from financial aid consideration from in-state schools in certain states .

Forbes’ recent article entitled “7 Benefits You Didn’t Know About 529 College Savings Plans (But Should)” says there are many more advantages to the college savings programs than simple tax benefits.

1) Registered Apprenticeship Programs Qualify. You can make qualified withdrawals from a 529 plan for registered apprenticeship programs. These programs cover a wide range of areas with an average annual salary for those that complete their apprenticeship of $70,000.

2) International Schools Usually Qualify. More than 400 schools outside of the US are considered to be qualified higher education institutions. You can, therefore, make tax-free withdrawals from a 529 plan for qualifying expenses at those colleges.

3) Gap Year and College Credit Classes for High School. Some gap year programs have partnered with higher education institutions to qualify for funding from 529 accounts. This includes some international and domestic gap year, outdoor education, study-abroad, wilderness survival, sustainable living trades and art programs. Primary school students over 14 can also use 529 funds for college credit classes, where available.

4) Get Your Money Back if Not Going to College. If your beneficiary meets certain criteria, it’s possible to avoid a 10% penalty and changing the plan from tax-free to tax-deferred. For this to happen, the beneficiary must:

  • Receive a tax-free scholarship or grant
  • Attend a US military academy
  • Die or become disabled; or
  • Get assistance through a qualifying employer-assisted college savings program.

Note that 529 plans are technically revocable. Therefore, you can rescind the gift and pull the assets back into the estate of the account owner. However, there are tax consequences, including tax on earnings plus a 10% penalty tax.

5) Private K–12 Tuition Is Qualified. 529 withdrawals can be used for up to $10,000 of tuition expenses at private K–12 schools. However, other expenses, such as computers, supplies, travel and other costs are not qualified.

6) Pay Off Your Student Loans. If you graduate with some money leftover in a 529 account, it can be used for up to $10,000 in certain student loan repayments.

7) Estate Planning. Contributions to a 529 plan are completed gifts to the beneficiary. These can be “superfunded” for up to $75,000 per beneficiary in a single year, effectively using five years’ worth of annual gift tax exemption up front. For retirees with significant RMDs (required minimum distributions) from qualified accounts, such as 401(k)s and traditional IRAs, the 529 plan offers high contribution limits across multiple beneficiaries, while retaining control of the assets during the lifetime of the account owner. Assets also pass by contract upon death, avoiding probate and estate tax.

Reference: Forbes (July 15, 2021) “7 Benefits You Didn’t Know About 529 College Savings Plans (But Should)”