How Do I Write a Will?

A poorly written or out-of-date will can be costly and ruin an otherwise well-planned estate. Yahoo Entertainment’s recent article entitled “11 Steps to Writing a Will” tells you how to get started and complete your will in 10 simple steps:

Hire an Estate Planning Attorney. Individuals or families with relatively simple financial situations may be able to use an online, reputable software program to complete their wills. However, many situations require an estate planning attorney, such as blended families.
Choose your Beneficiaries. A big mistake people make when planning their estate is failing to name or update beneficiaries on key accounts that work with the plans outlined in their wills. The beneficiary designation on an account supersedes the will, but it’s good to be consistent.
Name an Executor. The executor is responsible for carrying out the wishes expressed in your will.
Select a Guardian for Your Minor Children. It’s common to name multiple guardians, in case one of them named isn’t able to accept the responsibility of guardianship.
Be Specific About Your Bequests. One of the most time-consuming aspects of creating a will can be deciding which assets to include and determining who will get what.
Be Realistic About your Bequests. Practically consider how assets will be distributed. A big reason children stop speaking after a parent’s death is because of boilerplate language directing tangible assets, such as artwork or jewelry, to be divided equally among children.
Attach a Letter of Last Instruction. You can attach an explanatory letter to your will that can serve as a personal way to say goodbye and also provide additional details about certain wishes.
Sign the Will Properly. If you don’t, a will may be declared invalid. Witnesses must sign your will, and in many states, the witnesses can’t be under 18 and those who stand to inherit (“interested parties”).
Keep Your Will in a Safe and Accessible Spot. Make certain that someone you trust knows where to find your will and other important papers and passwords to financial institutions.
Review and Keep Your Up-to-date. Wills should be updated every five years or so, or sooner if you have a major life event, such as the birth or adoption of a new child or grandchild, a divorce, or the death of a spouse or parent.
Add Other Important Estate Planning Documents. A will by itself may not meet all of your estate planning needs. A trust is another estate planning tool that lets you transfer assets when and how you want. A living will communicates your desires for medical treatment or a power of attorney that allows a third party to make financial and legal decisions, along with the will and should be your next step after writing your will.

Reference: Yahoo Entertainment (Jan. 4, 2022) “11 Steps to Writing a Will”

What Power Does an Executor Have?

Being asked to serve as an executor is a big compliment with potential pitfalls, advises the recent article “How to Prepare to Be an Executor of an Estate” from U.S. News & World Report. You are being asked because you are considered trustworthy and able to handle complex tasks. That’s flattering, of course, but there’s a lot to know before making a final decision about taking on the job.

An executor of an estate helps file paperwork, close accounts, distribute assets of the deceased, deal with probate and any court filings and navigate family dynamics. Some of the tasks include:

Locating critical documents, like the will, any trusts, deeds, vehicle titles, etc.
Obtaining death certificates.
Overseeing funeral arrangements and memorial services, if any.
Filing the will in probate court.
Creating an estate bank account, after obtaining an estate tax number (EIN).
Notifying organizations, including Social Security, pension accounts, etc.
Paying creditors.
Distributing assets.
Overseeing the sale or transfer of real estate
Filing estate tax returns and final tax returns.

If you are asked to become the executor of an estate for a loved one, it’s a good idea to gather as much information as possible while the person is still living. It will be far easier to tackle the tasks, if you have been set up to succeed. Find out where their estate planning documents are and read the documents to make sure you understand them. If you don’t understand, ask, and keep asking until you do. Similarly, obtain information about all assets, including joint assets. Find out if there are any family members who may pose a challenge to the estate.

Today’s assets include digital assets. Ask for a complete list of the person’s online accounts, usernames and passwords. You will also need access to their devices: desktop computer, laptop, tablet, phone and smart watch. Discuss what they want to happen to each account and see if there is an option for you to become a co-owner of the account or a legacy contact.

Many opt to have an estate planning attorney manage some or all of these tasks, as they can be very overwhelming. Frankly, it’s hard to administer an estate at the same time you’re grieving the loss of a loved one.

As executor, you are a fiduciary, meaning you’re legally required to put the deceased’s interests above your own. This includes managing the estate’s assets. If the person owned a home, you would need to secure the property, pay the mortgage and/or property taxes and maintain the property until it is sold or transferred to an heir. Financial accounts need to be managed, including investment accounts.

The amount of time this process will take, depends on the complexity and size of the estate. Most estates take at least twelve months to complete all of the administrative work. It is a big commitment and can feel like a second job.

A few things vary by state. Convicted felons are never permitted to serve as executors, regardless of what the will says. A sole executor must be a U.S. citizen, although a non-citizen can be a co-executor, if the other co-executor is a citizen. Rules also vary from state to state regarding being paid for your time. Most states permit a percentage of the size of the estate, which must be considered earned income and reported on tax returns.

Be very thorough and careful in documenting every decision made as the executor to protect yourself from any future challenges. This is one job where trying to do it on your own could have long-term effects on your relationship with the family and financial liability, so take it seriously. If it’s too much, an estate planning attorney can help.

Reference: U.S. News & World Report (Dec. 22, 2021) “How to Prepare to Be an Executor of an Estate”

What are Digital Assets in a Will?

Most of us overlook the amount of information and assets we have online, from social media to networking websites, frequent flier miles, online bank accounts, subscriptions, photos, websites, etc. The list of most people’s digital assets has grown considerably in recent years, and yet most have no plan for what should happen to those assets when their owner dies.

This is a growing problem, says msn money, in an article making the case clear: “From Facebook to iTunes to Amazon, You Need A Digital Will!” Every website has its own legal requirements for dealing with the original owner’s death, almost aways hidden deep within the Terms of Service Agreement we all click on without reading. Some have created processes for executors, while others have not. What can you do to make it easier for your executor?

Make a list of everything you access online. Be prepared to be surprised at just how much your life occurs online. Compile a list of all online accounts, usernames and passwords. You probably have to do this bit by bit, as a marathon session might take a long time. Use either a password manager with top-notch security or a password-protected spreadsheet you update around once every three months.

This is especially important for accounts with monetary value. But sentimental value counts too. A side note: all those playlists you’ve created on iTunes? They are non-transferrable and when you die, they are deleted.

What do you want to have happen to each account? You’ll need to decide what you want to happen to each account and, depending on the account, state it clearly in what’s known as a directive. You may want to preserve some, or you may want to shut down others. Some free email accounts are automatically shut down, if they are not used for a certain period of time. Others should be down immediately to prevent fraud. Scammers prefer accounts where the owners have died, since they are often an easy entry to the person’s online identity.

Facebook is one of the platforms allowing you to designate a Legacy contact, so the person can memorialize the account, allowing only friends to see the page and removing some information. If you want to have the page deleted on death, Facebook provides directions.

Each platform has its own rules. Most rely on provisions regarding privacy protection: only the original owner is authorized to access the account. There are now federal and state laws prohibiting accessing private online data, which have created significant obstacles for loved ones to access digital assets. Don’t expect anyone to resolve your digital accounts after you pass, unless you have a digital will. Even with one, there might be issues.

Your estate planning attorney will help you add the correct language to your estate documents as to what you want to happen to each account. It’s important to ensure that your estate plan gives your executor or other fiduciary authorization to access your digital assets and what you want to happen to them. Remember—don’t put account names, usernames, or passwords in a will, as it becomes a public document during the probate process.

Without an inventory of digital assets, it may be simply impossible to ascertain where digital assets are located and how to access them. Looking at credit card statements for autopayments may be a place to start, or at least to stop the autopayments.

This is a relatively new asset class, with laws varying from state to state. Speak with your estate planning attorney to ensure your digital assets are protected, as well as traditional assets when creating or reviewing your estate plan.

Reference: msn money (Dec. 19, 2021) “From Facebook to iTunes to Amazon, You Need A Digital Will!”

What Taxes Have to Be Paid When Someone Dies?

The last thing families want to think about after a loved one has passed are taxes, but they must be dealt with, deadlines must be met and challenges along the way need to be addressed. The article “Elder Care: Death and taxes, Part 1: Tax guidance for administering a loved one’s estate” from The Sentinel offers a useful overview, and recommends speaking with an estate planning attorney to be sure all tasks are completed in a timely manner.

Final income tax returns must be filed after a person passes. This is the tax return on income received during their last year of life, up to the date of death. When a final return is filed, this alerts federal and state taxing authorities to close out the decedent’s tax accounts. If a final return is not filed, these agencies will expect to receive annual tax payments and may audit the deceased. Even if the person didn’t have enough income to need to pay taxes, a final return still needs to be filed so tax accounts are closed out. The surviving spouse or executor typically files the final tax return. If there is a surviving spouse, the final income tax return is the last joint return.

Any tax liabilities should be paid by the estate, not by the executor. If a refund is due, the IRS will only release it to the personal representative of the estate. An estate planning attorney will know the required IRS form, which is to be sent with an original of the order appointing the person to represent the estate.

Depending on the decedent’s state of residence, heirs may have to pay an Inheritance Tax Return. This is usually based on the relationship of the heirs. The estate planning attorney will know who needs to pay this tax, how much needs to be paid and how it is done.

Income received by the estate after the decedent’s death may be taxable. This may be minimal, depending upon how much income the estate has earned after the date of death. In complex cases, there may be significant income and complex tax filings may be required.

If a Fiduciary Return needs to be filed, there will be strict filing deadline, often based on the date when the executor applied for the EIN, or the tax identification number for the estate.

The estate’s executor needs to know of any trusts that exist, even though they pass outside of probate. Currently existing trusts need to be administered. If there is a trust provision in the will, a new trust may need to be started after the date of death. Depending on how they are structured, trust income and distributions need to be reported to the IRS. The estate planning attorney will be able to help with making sure this is managed correctly, as long as they have access to the information.

The decedent’s tax returns may have a lot of information, but probably don’t include trust information. If the person had a Grantor Trust, you’ll need an experienced estate planning attorney to help. During the Grantor’s lifetime, the trust income is reported on the Grantor’s 1040 personal income tax return, as if there was no trust. However, when the Grantor dies, the tax treatment of the trust changes. The Trustee is now required to file Fiduciary Returns for the trust each year it exists and generates income.

An experienced estate planning attorney can analyze the trust and understand reporting and taxes that need to be paid, avoiding any unnecessary additional stress on the family.

Reference: The Sentinel (Dec. 3, 2021) “Elder Care: Death and taxes, Part 1: Tax guidance for administering a loved one’s estate”

How Can I Clean Up My Estate Plan?

Chicago Business Journal’s recent article entitled “8 steps to tidy up your estate plan now” gives you some items to think about when working through your affairs.

Make certain that your plan is accurate and up to date. Your basic documents, which include your will, health care directive and power of attorney, should be in place and up-to-date. Review them to confirm that they’re consistent with your wishes and the current laws.

Review your named beneficiaries and fiduciaries. Confirm that the names of designated beneficiaries and fiduciaries are accurate. Most assets will pass under your will or through trusts, other accounts such as retirement, or life insurance may pass directly to a named (or contingent) beneficiary. If your planning circumstances have changed since creating these designations, update them.

Review your life and property insurance coverage. Be sure that these policies offer adequate coverage and meet their intended purpose. As your wealth increases, the planning purposes behind a term policy for risk mitigation purposes or a whole life policy to ensure ample liquidity upon death may become unnecessary. However, if your assets’ value has grown, you may need to re-examine if the current property coverage is sufficient to minimize your increased potential liability.

Ensure that your beneficiaries have enough liquidity. The estate administration process can be slow and tiresome. It’s possible that a person may not have immediate access to liquidity after a spouse’s death, depending on how assets are titled. A temporary (but major) burden can be avoided, by confirming at least some liquidity will be titled in or directly available to your spouse after you have passed.

Locate and compile important information and account identification. A difficult step in estate administration is locating a decedent’s assets. Make this process easier for loved ones, by creating a list of your accounts, property of significant value, liabilities and contacts at each financial institution. Make the list easily accessible to your family or executor, and update it whenever opening or closing an account.

Review digital assets and online accounts. These assets are frequently overlooked as to access and ownership after death. Instead of divulging passwords or allowing account access, you can add a “digital assets clause” to your planning documents. This lets named parties access specific items within the bounds of accepted legal standards.

Draft a letter of wishes. This document allows you to fully express your intentions and hopes, as well as any explanations or instructions you want to impart to your loved ones.

Plan to review. Repeat the review process regularly and calendar a reminder to give yourself an annual financial and planning checkup.

Reference: Chicago Business Journal (Dec. 2, 2021) “8 steps to tidy up your estate plan now”

Why Should I Update My Estate Plan?

The majority of Americans don’t have an updated estate plan in place. This can create a major headache for their families, in the event that anything happens to them.

Fox 43’s recent article entitled “Majority of Americans have outdated estate plans” explains that estate planning is making some decisions now for what you want to happen in the future, if you’re unable to make decisions then.

It’s important that every adult has an estate plan in place. Moreover, as you get older and you have a family, an estate plan becomes even more important.

These decisions can impact your family. It involves deciding who will care for your children. If you’re a parent with children under the age of 18, your estate plan can name the guardians of those children.

This is accomplished by having a clause in your will that states which person(s) will have the responsibility of caring for your minor children, in the event that you and your spouse pass away unexpectantly.

In your will, you’ll also name an executor who will carry out your wishes after your death.

You may ask an experienced estate planning attorney about whether you should have a trust to protect some of your assets.

You also should have your attorney draft a power of attorney, healthcare directive, living will and HIPAA waiver.

Many people don’t know where to get started. However, the good thing is ultimately it’s your decisions about what you want to happen, if you are unable to care for your loved ones.

Talk to an experienced estate planning attorney and do this sooner rather than later.

Reference: Fox 43 (Oct. 27, 2021) “Majority of Americans have outdated estate plans”

Is There More to Estate Planning Than Writing My Will?

Having a will is especially important if you have minor children. That’s because you can nominate guardians for your minor children in your will. Guardians are the people you want to raise your children, in the event that neither you or your spouse can do so.

Fed Week’s article entitled “Estate Planning: It’s Not Just about Making a Will” explains that when designating guardians, a person should be practical.

Closet relatives—such as a brother and his wife—may not necessarily be the best choice. They may be busy raising their own family and have plenty to look after, without adding your children to the equation.

You’re acting in the interests of your children, so be certain that you obtain the consent of your chosen guardians before nominating them in your will.

In addition, make sure you have sufficient life insurance in place, so the guardians can comfortably afford to raise your children.

However, your estate planning shouldn’t stop with a will and guardians. There are a number of other components to include:

Powers of attorney. A power of attorney allows a person you name to act on your behalf regarding financial matters.
Health care proxy. This authorizes another person to make medical decisions for you, if you are unable to do so yourself.
Living will. This document states your wishes on life-sustaining efforts.
HIPAA Waiver. This document allows healthcare professionals to provide information on a patient’s health to third parties, such as family members.
Letter of Last Instruction. This personal document is an organized way for you to give your family important information about your finances and perhaps your reasons for your choices in your will or trust. This letter isn’t a will or a substitute for one.
This is a way to avoid assets going through probate. The assets in trust can provide funds for your heirs under the rules you set up.

Ask an experienced estate planning attorney about developing a comprehensive estate plan.

Reference: Fed Week (September 28, 2021) “Estate Planning: It’s Not Just About Making a Will”

Can Cryptocurrency Be Inherited?

Cryptocurrency accounts are not like any traditional investment accounts. However, their growing prevalence and value means they need to be considered for more and more estate plans, especially when they take an enormous leap in value. These accounts are more vulnerable, according to the recent article “Millennial Money: What happens to your crypto if you die?” from The Indiana Gazette, and in most cases, there’s no way to name a beneficiary for your crypto accounts.

If you store your cryptocurrency on a physical device at home and a few friends know your key—the crypto password that grants access to a crypto wallet—one of those friends could very easily wander into your home and steal your crypto without you even noticing.

On the flip side, if you don’t share your key with anyone and become incapacitated or die, your crypto assets could be lost forever. Knowing how to store these assets safely and communicate your wishes for loved ones is extremely important, more so than for traditional assets.

How is crypto stored? Crypto “wallets” are digital wallets, managed on an app or a website, or kept on a thumb drive (also known as a memory stick). How you store crypto depends in part on how you intend to use it.

A “Hot Wallet” is used to buy and sell crypto. They are usually free and convenient but may not be as secure as other methods because they are always connected to the internet.

“Cold Wallets” are used to store crypto for a longer period of time, like a deep freezer.

The Hot Wallet is more like a checking account, with money moving in and out. The Cold Wallet is like a savings account, where money is kept for a longer period of time. You can have both, just as you probably have both a checking and savings account.

Whoever holds the “keys” to the wallets—whoever has custody of the password, which is a series of randomly generated numbers and letters—has access to your cryptocurrency. It might be just you, a third-party crypto exchange, or a hybrid of the two. Consider the third-party exchange a temporary and risky solution, as you don’t have control of the keys and exchanges do get hacked.

Naming a beneficiary in your will and adding a document to your estate plan containing an inventory of cryptocurrency and any passwords, PINs, keys and instructions to find your cold wallet is part of an estate plan addressing this new digital asset class.

Do not under any circumstances include any of the crypto information in your will. This document becomes part of the public record when filed in court and giving this information is the same as sharing your checking, saving and investment account information with the general public.

Some platforms, like Coinbase, have a process in place for next of kin, when an owner dies. Others do not, so it’s up to the crypto owner to make plans, if they want assets to be preserved and passed to another family member.

Preparing for cryptocurrency is much the same as preparing for the rest of your estate plan. Keep the plan updated, especially after big life events, like marriage, divorce, birth, or death. Keep instructions up to date, so the executor and beneficiaries know what to do. Bear in mind that crypto wallets need occasional updates, like every other kind of digital platform.

Reference: The Indiana Gazette (Nov. 7, 2021) “Millennial Money: What happens to your crypto if you die?”

Don’t Follow Queen of Soul: Think about Estate Planning

The Albuquerque Journal’s recent article entitled “Learn from Aretha’s estate mess and ‘Think’” talks about the new bio pic called “Respect” that traces 20 years of the life of Aretha Franklin, the Queen of Soul and the number one singer of all time in a Rolling Stone ranking from 2010.

Aretha died in 2018. She had four sons from either three or four fathers. Their ages spanned 15 years. The oldest, born when Aretha was 12, has special needs and lives in a group home. When she passed, all evidence pointed to the fact that she had no will. The sons – in birth order, Clarence, Edward, Ted, and Kecalf – agreed to a friendly and equal split of the estate. Michigan law supported this. They designated a cousin, Sabrina, as the executor.

This was good, until Sabrina started finding wills. There were two from 2010 and one from 2014. They were all in Aretha’s handwriting, the last one in a spiral notebook found under cushions of a sofa.

Michigan law permits an entirely handwritten will and even allows a will to be unsigned, if it clearly shows the decedent’s wishes. Her 2014 will first named the three younger sons as co-executors. Aretha then crossed out all names but Kecalf. Ted and an attorney appointed to represent Clarence challenged Kecalf’s competence to serve as Aretha’s executor.

But wait! A fourth will was found. That one was actually typed and established a trust for Clarence. Aretha initialed some pages, but she didn’t sign it.

At that point, Sabrina gave up and resigned as Aretha’s executor.

The probating of Aretha’s estate went from a friendly division of assets to a hot mess.

The sons were now “playing games that they can score,” and wondering if Aretha stopped to think what she was trying to do to them.

The Probate Court judge appointed Aretha’s friend Reginald Turner, who recently was named President of the American Bar Association, as temporary estate representative.

The sons’ fighting is ongoing.

Aretha’s estate has a lot of issues. Don’t be like the Queen. Get your estate plan set and revise it, as needed, with the help of an experienced estate planning attorney.

Reference: Albuquerque Journal (Sep. 12, 2021) “Learn from Aretha’s estate mess and ‘Think’“

How Does Cryptocurrency Work in an Estate Plan?

Crypto-assets, including cryptocurrencies and non-currency blockchain tokens, hold significant family wealth today and present challenges to securing, transferring, protecting and gifting, as explained in the article “What Holding Crypto Means for Your Estate Plan” from U.S. News & World Report.

Traditional estate planning is evolving to include this new asset class, as digital asset investors embrace a market worth more than $1 trillion. Experienced investors who use digital assets to expand their asset diversification are more likely to understand the importance of protecting their investment through estate planning. However, first time investors who own a small amount of cryptocurrency or the early adapters who bought Bitcoins at the very start and now are worth millions, may not be as aware of the importance of digital asset estate planning.

Unlike traditional bank accounts, controlled through a centralized banking system and a legacy system of reporting, digital assets are by their very nature decentralized. An owner has access through a private key, usually a series of numbers and letters known only to the asset’s owner and stored in a digital wallet. Unless an executor knows about digital wallets and what a private key is and how to use them, the assets can and often do evaporate.

It can be challenging for executors to obtain access to traditional accounts, like 401(k)s or brokerage accounts. Mistakes are made and documents go astray, even in straightforward estates. In a new asset class, with new words like private keys, seed phrases, hardware wallets and more, the likelihood of a catastrophic loss increases.

A last will and testament is necessary for every estate. It’s needed to name an executor, a guardian for minor children and to set forth wishes for wealth distribution. However, a will becomes part of the public record during court proceedings after death, so it should never include detailed information, like bank account numbers. The same goes for information about cryptocurrency. Specific information in a will can be used to steal digital assets.

Loved ones need to know the crypto-assets exist, where to find them and what to do with them. Depending on the amount of the assets and what kind of assets are held, such information needs to be included and addressed in the estate plan.

If the assets are relatively small and owned through an exchange (Coinbase, Biance, or Kraken are a few examples), it is possible to list the crypto asset on a schedule of trust assets and ensure that the trustee has all the login information and knows how to access them.

For complex cases with significant wealth in digital assets, establishing a custodian and trustee may be necessary. A plan must be created that establishes both a custodian and trustee of digital assets. Steps include sharing private keys with a family member or trusted friend or splintering the private keys among multiple trusted individuals, so no one person has complete control.

This new asset class is here for the foreseeable future, and as more investors get involved with cryptocurrency, their estate plan needs to address and protect it.

Reference: U.S. News & World Report (Oct. 5, 2021) “What Holding Crypto Means for Your Estate Plan”

Estate Planning Blog Articles

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

How Do I Write a Will?

What Taxes Have to Be Paid When Someone Dies?

How Can I Clean Up My Estate Plan?

Why Should I Update My Estate Plan?

Is There More to Estate Planning Than Writing My Will?

Can Cryptocurrency Be Inherited?

Don’t Follow Queen of Soul: Think about Estate Planning

How Does Cryptocurrency Work in an Estate Plan?

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How Do I Write a Will?

What Taxes Have to Be Paid When Someone Dies?

How Can I Clean Up My Estate Plan?

Why Should I Update My Estate Plan?

Is There More to Estate Planning Than Writing My Will?

Can Cryptocurrency Be Inherited?

Don’t Follow Queen of Soul: Think about Estate Planning

How Does Cryptocurrency Work in an Estate Plan?

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