Estate Planning for the Family Vacation Home

Many families enjoy owning a vacation home, where generations gather, and memories are made. The second home is part of the family’s legacy, and the hope is that it will continue over many years. Making this happen is the subject of a recent article, “Legal East: Legacy planning for your shore house,” from Daily Local News.

Let’s say the house is to be left to more than one heir. How will the expenses for maintenance be paid? How will the heirs devise a schedule for all owners to use the house? What would happen if the house needs major work and only one owner has the money to pay for it?

Discussing how to structure the ownership of the home with an experienced estate planning attorney is important, as there are many options. The home could be owned in a trust, as a business entity like an LLC, or owned outright by one or more family members. Determining which type of ownership to use becomes important as the owner’s age.

If one of the vacation homeowners is elderly and needs long-term care, the home’s ownership may become problematic if they need to apply for Medicaid. Most people don’t think about this until they are faced with the problem. The vacation property will be a countable resource unless ownership is structured correctly before applying for Medicaid. Transferring ownership to a Medicaid Asset Protection Trust may make sense.

Another question is raised when considering applying for Medicaid: is there a primary residence, and is it exempt from being considered a countable asset? Most primary homes are, but this should also be explored with an estate planning attorney.

A Medicaid Asset Protection Trust is an irrevocable trust, but in this case, it’s created with certain features to allow someone to qualify for long-term benefits from Medicaid. A grantor establishes the trust, so the trust itself owns the home (or other assets placed in the trust), and the trustee manages the assets in the trust. The person creating the trust determines the trustee and successor trustees. In most cases, the trust terminates at the grantor’s death, and the trust’s assets are distributed to beneficiaries.

The MAPT is still subject to Medicaid’s five-year look-back. If the vacation home is transferred into the trust and an application is made to Medicaid within five years, the person won’t be eligible.

An elder law attorney can help you plan to protect your assets from the cost of long-term care through Medicaid, insurance, and trusts. Many strategies exist, but they all take some time to create and execute and need to be crafted for your unique situation.

Reference: Daily Local News (Sep. 4, 2024) “Legal East: Legacy planning for your shore house”

Role of Estate Planning for the Great Wealth Transfer

The “Great Wealth Transfer” refers to the significant shift of wealth expected to occur over the next decade. According to a recent report by Altrata, individuals with a net worth of over $5 million are set to pass on nearly $31 trillion to the next generation. This monumental transfer of wealth will impact various sectors, including family offices, financial services, luxury goods and nonprofits.

What Is the Importance of Estate Planning to the Great Wealth Transfer?

Estate planning is essential to ensure that your wealth is transferred according to your wishes. Your assets could be subject to legal disputes, taxes and other complications without a proper plan. Estate planning provides clarity and security for your loved ones, helping to preserve and protect your legacy.

Who Benefits from the Great Wealth Transfer?

While the media often focuses on Millennials and Gen Z, the Altrata report highlights that Generation X is first in line to inherit. Now in their mid-to-late 40s, these individuals are set to receive significant inheritances from their wealthy parents. Younger generations, including Millennials and Gen Z, are more likely to inherit from grandparents, typically resulting in smaller sums.

What Challenges Do Wealthy Families Face?

Wealthy families face unique challenges during the wealth transfer process. Some of these include:

Succession Planning: As families become more globalized, succession planning grows more complex. It’s crucial to have advisors who understand international laws and regulations.
Generational Differences: There can be a disparity between the values and aspirations of wealth holders and their younger benefactors. Clear communication and planning can bridge this gap.
Early Transfers: Wealth is increasingly being passed on during the lifetime of the head of the family. This requires early engagement and preparation to manage assets effectively.

Can Estate Planning Help?

Estate planning can address these challenges by providing a structured approach to wealth transfer. Here are some key benefits:

Minimize Taxes: Proper planning can help minimize estate taxes, ensuring that more wealth is passed on to your heirs.
Avoid Legal Disputes: Clear documentation of your wishes can prevent legal battles among family members.
Protect Beneficiaries: Estate planning can protect beneficiaries from potential creditors and other financial risks.

Key Estate Planning Steps to Take

First, consult an estate planning attorney to create a comprehensive plan tailored to your needs. Review your assets, including properties, investments and personal belongings. Set clear goals for how you want your assets distributed and who will manage them. Finally, update your estate plan regularly to ensure that it remains relevant as your life changes.

Take Control of Your Legacy Today

The Great Wealth Transfer is a significant event affecting millions of families and the US economy. If your family will be part of this wealth transfer, understand that proper estate planning is a must to reduce your tax burden and see your wishes go into effect.

If you haven’t developed an estate plan, now is the time. Contact our law firm to schedule a consultation and learn more about creating a plan that protects your wealth and provides for your loved ones.

Key Takeaways

Secure Your Legacy: Ensure that your wealth is transferred according to your wishes.
Minimize Taxes: Proper planning can reduce estate taxes, preserving more for your heirs.
Avoid Disputes: Clear documentation helps prevent legal battles among family members.
Adapt to Changes: Regularly update your plan to reflect life changes.

Reference: Altrata (Jun. 11, 2024) “Family Wealth Transfer 2024”

Estate Planning for Digital Assets

Almost every state has by now enacted laws giving executors the right to manage digital assets, including computer files, web domains and cryptocurrencies, reports a recent article from Forbes, “Smartphones, Email, Other Digital Assets And Your Estate Plan.” Another law, The Uniform Electronic Estate Planning Documents Act, is making its way through statehouses and would recognize electronic and digital signatures on trusts, wills and other estate planning documents, making paper and ink signatures a thing of the past.

Neither of these laws gives anyone, executor, spouse, or best friend, the legal right to access email, text messages, social media accounts and any other digital assets, unless the power to do so is given expressly in a will, trust, power of attorney, or court order. Without express permission, the digital door is permanently shut.

Making matters even more complicated, each digital platform has its own rules about allowing people other than the account owner to access digital assets, even if they have the username and password.

Another factor further complicating digital estate planning is the two-factor authentication many websites use today. This is done via biometrics, i.e., facial recognition or a code sent by text or email to the original owner’s cell phone or email address needed for access.

Cyber thieves are aware of the problems facing unskilled executors, and stealing the identities of recently deceased individuals has become a fast-growing crime. When identity theft occurs online, the assets are often compromised before executors and survivors can access the decedent’s assets.

There are steps to take that will prevent your executor from grappling with these problems.

First, create an inventory of devices, including cell phones, tablets, laptops and desktop computers. If you have old devices that you no longer use, delete your personal data and label them as not in use. A tech-savvy person could use an old device to access your accounts.

Next, create an inventory of all your digital accounts. This includes everything from social media to websites, photo storage, device access, shopping sites, subscriptions, video games, cryptocurrency, bank accounts, investment accounts, medical portals and frequent flier miles. Add notes regarding two-factor authentication: Will your texts need to be accessible to gain access to the account, or have you activated facial recognition?

Go through each item and decide who you want to access each item. Your will, trusts and POA should include notes on who should have access to each of the digital assets. Without it, your executor will take far longer to complete their task.

Some online services allow you to name a legacy contact and give someone you name access to your accounts and phone after your death. For now, Apple, Google, Facebook and Instagram have these features. Set them up and include them in your digital inventory.

Your will needs to state very clearly who you want access to which accounts. However, it should not include any details about the account, especially not your username and password. If you don’t want your executor to access everything, you’ll need to specify which ones you want them to access and which you don’t want them to access. If that’s the case, you’ll want to have whoever does have access to review emails and other accounts regularly and share any information needed with the executor.

Digital assets are still a relatively new asset class. However, they require as much care as traditional assets.

Reference: Forbes (June 19, 2024) “Smartphones, Email, Other Digital Assets And Your Estate Plan”

Estate Planning Blog Articles

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

Estate Planning for the Family Vacation Home

Role of Estate Planning for the Great Wealth Transfer

What Is the Importance of Estate Planning to the Great Wealth Transfer?

Who Benefits from the Great Wealth Transfer?

What Challenges Do Wealthy Families Face?

Can Estate Planning Help?

Key Estate Planning Steps to Take

Take Control of Your Legacy Today

Key Takeaways

Estate Planning for Digital Assets

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