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

Could Your Estate Plan Be a Disaster?

You may think your estate plan is all set.However, it might not be. If you met with your attorney when your children were small, and your children are now grown and have children of their own, your estate could be a disaster waiting to happen, says a recent article “Today’s Business: Your estate plan—what could go wrong?” from the New Haven Register.

Most estate planning attorneys encourage their clients to revisit their estate plan every three to five years, with good reason. The size of your estate may have changed, you may have experienced a health issue, or you may have a new child or a grandchild. There may be tax law changes, statutes may have been updated and the plan you had three to five years ago may not accomplish what you want it to.

Many people say they “have nothing” and their estate is “simple.” They might also think “my spouse will get everything anyway.” This is wrong 99% of the time. There are unintended consequences of not having a will—accounts long forgotten, an untimely death of a joint owner, or a 40-year-old car with a higher value than anyone ever expected.

Your last will and testament designates who receives your assets and provides for any minors. A will can also help protect your wishes from a challenge by unwanted heirs after your passing.

The federal estate tax exemption today is $12.6 million, but if your will was created to minimize estate taxes when the exemption was $675,000, there may be unnecessary provisions in your plan. Heirs may be forced to set up inherited trusts or even sub-trusts. With today’s current exemption level, your plan may include trusts that no longer serve any purpose.

When was the last time you reviewed your will to see whether you still want the same people listed to serve as guardians for minor children, executors, or trustees? If those people are no longer in your family, or if the named person is now your ex, or if they’ve died, you have an ineffective estate plan.

Many adults believe they are too young to need an estate plan, or they’ve set up all of their assets to be owned jointly and, therefore, don’t need an estate plan. If one of the joint owners suffers a disability and is receiving government benefits, an inheritance could put all of their benefits at risk. Minor children might inherit your estate. However, the law does not permit minors to inherit assets, so someone needs to be named to serve as their conservator. If you don’t name someone, the court will, and it may not be the person you would choose.

What about using a template from an online website? Estate planning attorneys are called in to set things right from online wills with increasing frequency. The terms of a will are governed by state law and often these websites don’t explain how the document must be aligned with the statutes of the state where it is signed. Estate plans are not one-size-fits-all documents and a will deemed invalid by the court is the same as if there were no will at all.

If you don’t have an estate plan, if your estate plan is outdated, or if your estate plan was created using an online solution, your heirs may inherit a legal quagmire, in addition to your coin collection. Give yourself and them the peace of mind of knowing you’ve done the right thing and have your will updated or created with an experienced estate planning attorney.

Reference: New Haven Register (Oct. 29, 2022) “Today’s Business: Your estate plan—what could go wrong?”

Problems Created When No Will Is Available

Ask any estate planning attorney how much material they have for a book, or a movie based on the drama they see from family squabbles when someone dies without a will. There’s plenty—but a legal requirement of confidentiality and professionalism keeps those stories from circulating as widely as they might. This may be why more people aren’t as aware as they should be of how badly things go for loved ones when there’s no will, or the will is improperly drafted.

Disputes range from one parent favoring one child or children engaged in fierce fighting over personal possessions when there’s no will specifying who should get what, or providing a system for distribution, according to a recent article titled “Estate planning: 68% of Americans lack a will” from New Orleans City Business.

People don’t consider estate planning as an urgent matter. The pace of life has become so hectic as to push estate planning appointments to the next week, and the next. They also don’t believe their estates have enough value to need to have a will, but without a will, a modest estate could evaporate far faster than if an estate plan were in place.

The number of people having a will has actually decreased in the last twenty years. A few sources report the number keeps dipping from 50% in 2005, 44% in 2016 and 32% in 2022. In 2020, more Americans searched the term “online will” than in any other time since 2011.

Younger people seem to be making changes. Before the pandemic, only 16% of Americans ages 18-34 had a will. Today caring.com reports 24% of these young adults have a will. Maybe they know something their elders don’t!

One thing to be considered when having a will drafted is the “no contest clause.” Anyone who challenges the will is immediately cut out of the will. While this may not deter the person who is bound and determined to fight, it presents a reason to think twice before engaging in litigation.

Many people don’t know they can include trust provisions in their wills to manage family inheritances. Trusts are not just for super wealthy families but are good planning tools used to protect assets. They are used to control distributions, including setting terms and conditions for when heirs receive bequests.

Today’s will must also address digital assets. The transfer and administration of digital assets includes emails, electronic access to bank accounts, retirement accounts, credit cards, cryptocurrency, reward program accounts, streaming services and more. Even if the executor has access to log-in information, they may be precluded from accessing digital accounts because of federal or state laws. Wills are evolving to address these concerns and plan for the practicalities of digital assets.

Reference: New Orleans City Business (Sep. 8, 2022) “Estate planning: 68% of Americans lack a will”

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”

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 Plan” from 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 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”

Can Grandchildren Receive Inheritances?

Wanting to take care of the youngest and most vulnerable members of our families is a loving gesture from grandparents. However, minor children are not legally allowed to own property.  With the right strategies and tools, your estate plan can include grandchildren, says a recent article titled “Elder Care: How to provide for your youngest heirs” from the Longview News-Journal.

If a beneficiary designation on a will, insurance policy or other account lists the name of a minor child, your estate will take longer to settle. A person will need to be named as a guardian of the estate of the minor child, which takes time. The guardian may not be the child’s parent.

The parent of a minor child may not invest and grow any funds, which in some states are required to be deposited in a federally insured account. Periodic reports must be submitted to the court, and audits will need to be done annually. Guardianship requires extensive reporting and any monies spent must be accounted for.

When the child becomes of legal age, usually 18, the entire amount is then distributed to the child. Few children are mature enough at age 18, even though they think they are, to manage large sums of money. Neither the guardian nor the parent nor the court has any say in what happens to the funds after they are transferred to the child.

There are many other ways to transfer assets to a minor child to provide more control over how the money is managed and how and when it is distributed.

One option is to leave it to the child’s parent. This takes out the issue of court involvement but may has a few drawbacks: the parent has full control of the asset, with no obligation for it to be set aside for the child’s needs. If the parents divorce or have debt, the money is not protected.

Many states have Uniform Transfers to Minors Accounts. In Pennsylvania, it is PUTMA, in New York, UTMA and in California, CUTMA. Gifts placed in these accounts are held in custodianship until the child reaches 18 (or 21, depending on state law) and the custodian has a duty to manage the property prudently. Some states have limits on the amount in the accounts, and if the designated custodian passes away before the child reaches legal age, court proceedings may be necessary to name a new custodian. A creditor could file a petition with the court if there is a debt.

For most people, a trust is the best option for placing funds aside for a minor child. The trust can be established during the grandparent’s lifetime or through a testamentary trust after probate of their will is complete. The trust contains directions as to how the money is to be spent: higher education, summer camp, etc. A trustee is named to manage the trust, which may or may not be a parent. If a parent is named trustee, it is important to ensure that they follow the directions of the trust and do not use the property as if it were their own.

A trust allows the assets to be restricted until a child reaches an age of maturity, setting up distributions for a portion of the account at staggered ages, or maintaining the trust with limited distributions throughout their lives. A trust is better to protect the assets from creditors, more so than any other method.

A trust for a grandchild can be designed to anticipate the possibility of the child becoming disabled, in which case government benefits would be at risk in the event of a lump sum payment.

There are many options for leaving money to a minor, depending upon the family’s circumstances. In all cases, a conversation with an experienced estate planning attorney will help to ensure any type of gift is protected and works with the rest of the estate plan.

Reference: Longview News-Journal (Feb. 25, 2022) “Elder Care: How to provide for your youngest heirs”

Storing Passwords in Case of Death

Despite having the resources to hire IT forensic experts to help access accounts, including her husband’s IRA, it’s been three years and Deborah Placet still hasn’t been able to gain access to her husband’s Bitcoin account. Placet and her late husband were financial planners and should have known better. However, they didn’t have a digital estate plan. Her situation, according to the Barron’s article “How to Ensure Heirs Avoid a Password-Protected Nightmare” offers cautionary tale.

Our digital footprint keeps expanding. As a result, there’s no paper trail to follow when a loved one dies. In the past, an executor or estate administrator could simply have mail forwarded and figure out accounts, assets and values. Not only don’t we have a paper trail, but digital accounts are protected by passwords, multifactor authentication processes, fingerprints, facial recognition systems and federal data privacy laws.

The starting point is to create a list of digital accounts. Instructions on how to gain access to the accounts must be very specific, because a password alone may not be enough information. Explain what you want to happen to the account: should ownership be transferred to someone else, who has permission to retrieve and save the data and whether you want the account to be shut down and no data saved, etc.

The account list should include:

  • Social media platforms
  • Traditional bank, retirement and investment accounts
  • PayPal, Venmo and similar payment accounts
  • Cryptocurrency wallets, nonfungible token (NFT) assets
  • Home and utilities accounts, like mortgage, electric, gas, cable, internet
  • Insurance, including home, auto, flood, health, life, disability, long-term care.
  • Smart phone accounts
  • Online storage accounts
  • Photo, music and video accounts
  • Subscription services
  • Loyalty/rewards programs
  • Gaming accounts

Some accounts may be accessed by using a username and password. However, others are more secure and require biometric protection. This information should all be included in a document, but the document should not be included in the Last Will, since the Last Will becomes public information through probate and is accessible to anyone who wants to see it.

Certain platforms have created a process to allow heirs to access assets. Typically, death certificates, a Last Will or probate documents, a valid photo ID of the deceased and a letter signed by those named in the probate records outlining what is to be done with assets are required. However, not every platform has addressed this issue.

Compiling a list of digital assets is about as much fun as preparing for tax season. However, without a plan, digital assets are likely to be lost. Identity theft and fraud occurs when assets are unprotected and unused.

Just as a traditional estate plan protects heirs to avoid further stress and expense, a digital estate plan helps to protect the family and loved ones. Speak with your estate planning attorney as you are working on your estate plan to create a digital estate plan.

Reference: Barron’s (Dec. 15, 2021) “How to Ensure Heirs Avoid a Password-Protected Nightmare”

What Is Elder Law?

WAGM’s recent article entitled “A Closer Look at Elder Law“ takes a look at what goes into estate planning and elder law.

Wills and estate planning may not be the most exciting things to talk about. However, in this day and age, they can be one of the most vital tools to ensure your wishes are carried out after you’re gone.

People often don’t know what they should do, or what direction they should take.

The earlier you get going and consider your senior years, the better off you’re going to be. For many, it seems to be around 55 when it comes to starting to think about long term care issues.

However, you can start your homework long before that.

Elder law attorneys focus their practice on issues that concern older people. However, it’s not exclusively for older people, since these lawyers counsel other family members of the elderly about their concerns.

A big concern for many families is how do I get started and how much planning do I have to do ahead of time?

If you’re talking about an estate plan, what’s stored just in your head is usually enough preparation to get the ball rolling and speak with an experienced estate planning or elder law attorney.

They can create an estate plan that may consists of a basic will, a financial power of attorney, a medical power of attorney and a living will.

For long term care planning, people will frequently wait too long to start their preparations, and they’re faced with a crisis. That can entail finding care for a loved one immediately, either at home or in a facility, such as an assisted living home or nursing home. Waiting until a crisis also makes it harder to find specific information about financial holdings.

Some people also have concerns about the estate or death taxes with which their families may be saddled with after they pass away. For the most part, that’s not an issue because the federal estate tax only applies if your estate is worth more than $12.06 million in 2022. However, you should know that a number of states have their own estate tax. This includes Connecticut, Hawaii, Illinois, Maine, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont and Washington, plus Washington, D.C.

Iowa, Kentucky, Nebraska, New Jersey, and Pennsylvania have only an inheritance tax, which is a tax on what you receive as the beneficiary of an estate. Maryland has both.

Therefore, the first thing to do is to recognize that we have two stages. The first is where we may need care during life, and the second is to distribute our assets after death. Make certain that you have both in place.

Reference: WAGM (Dec. 8, 2021) “A Closer Look at Elder Law“

Can You Refuse an Inheritance?

No one can be forced to accept an inheritance they don’t want. However, what happens to the inheritance after they reject, or “disclaim” the inheritance depends on a number of things, says the recent article “Estate Planning: Disclaimers” from NWI Times.

A disclaimer is a legal document used to disclaim the property. To be valid, the disclaimer must be irrevocable, in writing and executed within nine months of the death of the decedent. You can’t have accepted any of the assets or received any of the benefits of the assets and then change your mind later on.

Once you accept an inheritance, it’s yours. If you know you intend to disclaim the inheritance, have an estate planning attorney create the disclaimer to protect yourself.

If the disclaimer is valid and properly prepared, you simply won’t receive the inheritance. It may or may not go to the decedent’s children.

After a valid qualified disclaimer has been executed and submitted, you as the “disclaimor” are treated as if you died before the decedent. Whoever receives the inheritance instead depends upon what the last will or trust provides, or the intestate laws of the state where the decedent lived.

In most cases, the last will or trust has instructions in the case of an heir disclaiming. It may have been written to give the disclaimed property to the children of the disclaimor, or go to someone else or be given to a charity. It all depends on how the will or trust was prepared.

Once you disclaim an inheritance, it’s permanent and you can’t ask for it to be given to you. If you fail to execute the disclaimer after the nine-month period, the disclaimer is considered invalid. The disclaimed property might then be treated as a gift, not an inheritance, which could have an impact on your tax liability.

If you execute a non-qualified disclaimer relating to a $100,000 inheritance and it ends up going to your offspring, you may have inadvertently given them a gift according to the IRS. You’ll then need to know who needs to report the gift and what, if any, taxes are due on the gift.

Persons with Special Needs who receive means-tested government benefits should never accept an inheritance, since they can lose eligibility for benefits.

A Special Needs Trust might be able to receive an inheritance, but there are limitations regarding how much can be accepted. An estate planning attorney will need to be consulted to ensure that the person with Special Needs will not have their benefits jeopardized by an inheritance.

The high level of federal exemption for estates has led to fewer disclaimers than in the past, but in a few short years—January 1, 2026—the exemption will drop down to a much lower level, and it’s likely inheritance disclaimers will return.

Reference: NWI Times (Nov. 14, 2021) “Estate Planning: Disclaimers”

How Do I Stop Heirs from Foolishly Wasting Inheritance?

This is a problem solved by a trust—a “spendthrift” trust. With a spendthrift provision in a testamentary trust created under a will or an inheritance trust created under a revocable living trust, the trustee makes all decisions about distributions. This can be an effective means of controlling the flow of money.

A spendthrift trust, according to the article “Possible to spendthrift-proof a trust” from Record Courier, is created for the benefit and protection of a financially irresponsible person.

For a spendthrift trust, it may be better not to choose a family member or trusted friend to serve as the trustee. Such person might not live long enough or have the capacity to serve as trustee for as long as required, especially if the heir is a young adult. Conflicts among family members are common, when money is involved. An independent and well-established trust company or bank may be a better choice as a trustee. Large estates often go this route, since their services can be expensive. However, some retail banks do have a private wealth division. All options need to be explored.

Another benefit to a spendthrift trust—funds are protected against current or future creditors of the beneficiary. Let’s say a parent wants to leave money to a child, but knows the child has credit card debt already. Unless they are co-signers, the parent and their estate do not have a duty to pay an adult child’s debts. The spendthrift trust will not be accessible to the credit card company.

It is difficult to set up a spendthrift trust to protect one’s own money from creditors. This is something that must be approached only with an experienced estate planning attorney. This is because the rules are complex and there are significant limitations. If you wanted to create a spendthrift trust for yourself, you would have to completely give over control of assets to the trustee. There is no way to predict whether a court will consider the person to have relinquished enough control to make the trust valid.

This type of spendthrift trust may not be created with an intent to defraud, delay or hinder creditors. Doing so may make the trust invalid and any possible protection will be lost.

A spendthrift provision in a will is a clause used to protect a beneficiary from a creditor attaching prior debts against the beneficiary’s future inheritance. This means that the creditor may not force an heir or the estate’s executor to pay the beneficiary’s inheritance to the creditor, instead of the beneficiary. It also prevents the beneficiary from procuring a debt based on a future inheritance.

It is important to be aware that a spendthrift provision in a will or a spendthrift trust has limitations. The assets are only protected when they are in the trust or in the estate. Once a distribution is received, creditors can seek payment from the assets owned by the beneficiary.

Another qualifying factor: the spendthrift provision in the will must prevent both the voluntary and involuntary transfer of a beneficiary’s interest. The beneficiary may not transfer their interest to someone else.

The spendthrift trust and clause are mainly intended to protect a beneficiary’s interests from present and future creditors. They are not valid if their intent is to defraud others and may not be created to avoid paying any IRS debts.

Reference: Record Courier (July 10, 2021) “Possible to spendthrift-proof a trust”

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