Your Facebook Afterlife: Estate Planning for Digital Assets

Posted on May 14, 2019

Article written by Rhiannon M. Hartman, Esq.


Imagine that you have been named the Executor or Trustee to handle the estate of a distant relative and you know very little about its assets.  In 1980, acquiring this type of information would have been relatively straightforward.  Upon assuming your duties as Executor/Trustee, you could locate a file cabinet in the home and begin to review financial statements, tax returns, and regular household bills.  You could also have the post office begin forwarding the deceased’s mail, to ensure you receive additional financial documents which may not have been located in the home. 

What about in 2019?  Unfortunately, while serving as an Executor or Trustee has always been challenging, such responsibility can be difficult in unexpected ways in the modern world.  In this age, you may enter the home to find the decedent has fully embraced a minimalist aesthetic, minimizing paper and clutter by switching to paperless statements.  The file cabinet of 1980 may no longer exist at all.  And the mail won’t help you for those paperless accounts. 

As your trusted advisors, we ensure your legal documents reflect your wishes and are updated in light of family or legal changes.  However, the unique challenges your Executor or Trustee may face in carrying out your wishes means that we should take a more holistic approach.  It is not sufficient to prepare appropriate legal documents.  The success of the estate plan we prepare for you rests on its ability to be implemented by a fiduciary; therefore, we also counsel you to be mindful of storing and conveying critical information that your fiduciary will need. 

To allow for ease of administration of your estate, it has become important to employ the same focus on digital assets that has typically been placed on personal items.  The traditional model of estate planning has often included careful planning to ensure tangible personal property is distributed to intended individuals.  Without question, that traditional model is much simpler.  The collections of fine china, jewelry and Waterford crystal are usually located in the home, which needs to be cleaned out and sold.  It is easy to see what exists and valuation is possible.  Estate plans traditionally include a list of who should receive personal property.  Carrying out a deceased person’s wishes with regard to tangible personal property can usually be done without undue difficulty.

Digital Assets are unique.  Unlike tangible personal property, we tend to overlook our “collections” of digital assets.  Therefore, digital assets are at particular risk because they are intangible and exist in the ether.  It is immediately apparent what an individual’s physical possessions are.  However, it is unlikely that anyone knows the user names and passwords for every online account you access, other than you.  Maybe you have tried to organize this information into a typed word document on your computer.  However, what if no one else knows the password to your computer?  This example was illustrated in dramatic fashion earlier this year when the 30-year-old CEO of a cryptocurrency exchange died, leaving no one with the password to access $145 million of bitcoin and other digital assets.  Password records are important, but counsel is needed.  For example, passwords should never be written in a will, which must be recorded after death, and thus would mean the passwords would become publicly available.

It is also important to be mindful that some previously tangible possessions may now exist only in an online format. Where there used to be photo albums on the bookshelf, perhaps now the record of family memories and photographs are stored only in an online photo storage website.  Some digital assets may even have actual value, such as airline miles or credit card rewards points, which may be lost if the companies’ policies are not followed with regard to redemption or transfer of those assets after death.

The time has come to treat digital assets the way we have always treated tangible personal property and financial accounts.  If you have questions about how to ensure your trusted Agents, Executors or Trustees will have access to information about all assets, whether they are tangible or intangible, please do not hesitate to contact us.  Your digital assets are part of your estate, and every aspect of the estate needs a plan.

Posted in Estate Planning

Estate Planning Options for Pet Owners: Planning for a Crisis and after Death.

Posted on April 29, 2019

Article written by Bennie A. Wall, Esq.

As a pet owner, you should have plans in place ensuring your pet’s care for both your incapacity and your death.

Effective estate planning for pet owners will consider not only with whom you want to leave your beloved animal if orphaned, but also what should happen if you become incapacitated. This article will provide you with a quick outline of the many methods of to ensure your pet is well cared for when the unthinkable happens.

Planning for Incapacity

Relocation Planning, Incapacity, and the Power of Attorney

With a rapidly aging population and great advances in healthcare, many more Americans find that they may need skilled nursing care. While there are options to receive care in the home, many individuals are forced to consider other options and may have to move to a nursing home toward the end of life. Those who have pets have undoubtedly found that their furry companions have been a great source of company and comfort. Should the day come that the senior must leave the comfort and care of home, someone needs to ensure that their beloved companion has a place to go as well.

A little planning on your part can go a long way to ensure that if the time comes that you must transition to a new home that won’t allow your pet to come with you, then your pet will be well cared for by someone you trust. I suggest clients talk with family and friends about their openness for taking in pets. For a few considerations to keep in mind when deciding who to choose as your pet’s caregiver, check out our blog post: Six Considerations When Choosing a Pet’s Caregiver.

In case you are unable to transition your pet to a caregiver before you lose capacity, you should ensure that your Agent under your General Durable Power of Attorney has the powers he or she needs to properly care for your pet, to use funds for your pet’s care, and to transition your pet to a new home as needed. Some clients ask to have provisions for a committee (often consisting of their Agent, a family member, and a veterinarian) to assist with the transition of the pet. Regardless of the level of planning you choose, the end goal is your peace of mind that your pet will be cared for when you no longer can provide care.

Emergency Planning

Incapacity does not only strike the elderly. There may be a time that younger individuals experience periods of incapacity and, depending on the needs of their particular pets, they may find this brief period to be detrimental to their pet’s wellbeing. That is why it is important to have a plan in place to ensure that, in case of an emergency, someone can gain access to your animal and knows the level of care your pet needs. I suggest to clients that they keep a notebook about the pet’s care and routines—especially if the pet has any special dietary or medical needs. Let a trusted friend know where the notebook is located and how he or she can access your house.

Estate Planning and Pets

When a pet owner passes away, one often overlooked member of the family is the beloved animal. Just as an owner should have a plan in place in case of an emergency or in case of incapacity, the owner should also have a plan in place upon death. Many of the same considerations are relevant as with incapacity planning above. One of the key questions that I get as an Estate Planner is: “What tools are available for me to care for my pets when I pass away?”

Gifting the Pet to a Caregiver

If you have a caregiver in mind, you want to be sure that your estate planning documents—your Will or Revocable Living Trust—makes a specific gift of the animal to the caregiver. As much as your beloved pet feels like family, the laws consider animals personal property of the owner, and so animals can be gifted just like any other personal property. As with any effective estate plan, you will want to be sure that you incorporate a Plan B in case circumstances change for your nominated caregiver who may become unable to take in your pet when you pass away.

Gifting Money to the Caregiver

While you are under no obligation to do so, many of my clients choose to leave behind some funds to pass along with the pet. Many intend that this help the caregiver take care of the animal. If you intend to leave behind a cash gift to accompany your pet, you will want to make sure the language in your Estate Plan is clear regarding the circumstances of the gift. You do not want to say $5,000 and my dog, Turner, to Susie Que, because this language does not condition the cash gift to acceptance of the pet. So you must be careful with drafting to ensure your wishes are easily and effectively carried out. For those who want more assurance or to leave more detailed instructions, a Pet Trust can be an invaluable tool.

Using a Pet Trust

Pet Trusts are effective tools for leaving behind funds to ensure that your pet is cared for. You have undoubtedly heard famous cases of the ultra-wealthy leaving behind millions to beloved pets. These instances are extreme and often catch the media’s attention, but there is real value in incorporating pet trust planning into your own estate planning—especially when the continued care of your pet is a top priority.

I recently spoke on Pet Trusts on a local talk radio show, Raising The Bar. If you’re interested in hearing it, here is a link to the show. Put simply, on the most basic level a Pet Trust allows you to make sure your pet is taken care of by a trusted caregiver and that there are funds put aside exclusively for your pet’s care.

Some individuals, unfortunately, do not have a choice of caregiver who they can trust to manage the pet’s funds responsibly. While an individual may be a great caregiver for the pet’s wellbeing, that same individual may not be the most financially responsible. When you are thinking about leaving behind a larger sum of money carefully calculated to cover your pet’s care for the rest of its life, then you want to feel confident that the funds will last.

If that is the case, then, depending on the life expectancy of your pet, its annual care costs, and the resources to leave behind, you may choose to have Pet Trust funds remain with your trusted financial advisor. You could nominate a Trustee to ensure that the caregiver is taking good care of your beloved pet while leaving the financial management to those best suited for the job. In any event, with the great flexibility trust-based estate planning affords you, there are many more possibilities that can be addressed when planning for your estate.

We hope you found this information helpful. If you would like to learn more about how you can effectively plan your estate—including for any pets—then call today to set up a time to meet with one of our experienced estate planning attorneys. Check out our other valuable estate planning resources across our website and our Facebook page. To learn more about the basics, sign up for one of our free public seminars.

Posted in Estate Planning

Six Considerations When Choosing a Pet’s Caregiver

Posted on April 25, 2019

Article written by Bennie A. Wall, Esq.

Planning for pets can be one of the most important pieces of your estate planning, and choosing who will be the ideal caregiver to your beloved animal is a key component of any effective plan. Use these six questions to guide you in choosing your trusted caregiver. Then reach out to your trust and estate planning attorney to get your planning in place.

How many more years may your pet live?

When choosing a caregiver, keep in mind that some pets live longer than others. Having a firm understanding of your pet’s life expectancy is the first step in making a plan for your pet’s continued care—especially if your beloved animal may outlive you or your chosen caregiver. If this is a possibility, you may want to consider using a trust-based plan (Revocable Living Trust with Pet Care Provisions, or a Pet Trust) to ensure there is a successor caregiver in the event your beloved pet outlives your initial caregiver.

Who would make a good caregiver for your pet?

When deciding who can care for your pet, you will want to weigh the pros and cons among family, friends, and professionals. It is important that you talk with them about taking in your pet(s). After speaking with potential caregivers, you may learn that your son-in-law or daughter-in-law has an allergy and would not be able to welcome your pet into their home, or you may learn that your friend’s dog will not be friendly towards your fur baby.

What would you want in the event your first choice is unable to take in your animal?

Just because your first choice for a caregiver was able to care for your pet when you discussed the possibility, does not mean that circumstances will not change. Your first choice may be unable to take in the animal when the time comes. Health concerns, relocation, and a plethora of other possibilities may change the circumstances for your nominated caregiver. You will therefore want to have a backup caregiver to ensure you don’t leave your animal alone.

How much do you spend annually for the care of your pet?

Whether someone is caring for your pet because you have to relocate to a nursing home, or because you’ve departed this life, it is important to have an idea of how much it will cost your caregiver to maintain your beloved animal’s standard of living. Certain animals simply cost more to care for than others. Horses can be very expensive to care for, but so can cats and dogs who have special diets or medical needs. So track your annual average spending on all things related to your pet’s care, and then determine the bottom line needed to continue that care.

Does the proposed caregiver have the resources to care for your orphaned pet?

Once you have an idea of the annual costs to care for your pet and understand the average life expectancy, you need to ask yourself if the caregiver you have in mind has the financial resources to care for your pet and whether you want to saddle the perspective caregiver with those costs. Many people opt to leave at least some resources for the caregiver to use to care for their pets. Some go so far as to establish a Trust to fund their animal’s continued care. Consult with your local estate planning attorney to determine what level of planning is right for your pet’s care. There are many instances where a Trust may make sense for your needs.

If you are inclined to give a gift to the caregiver, are there any strings attached?

When a caregiver may have limited resources, or a pet owner simply wants to help out, it is common to leave a monetary gift to the caregiver. Whenever you are considering giving a gift to a potential caregiver, you want to make sure that the language drafted clearly outlines your intent. Is the gift conditioned on the caregiver accepting the animal? You would be surprised how many times I’ve seen a document that gives the cash and the animal separately without a condition that the funds only go to the caregiver if the animal is accepted. If you decide to leave funds to the caregiver, do you want any strings attached to their use? While you can just leave a cash amount for the animal’s care with no stipulations about how it should be spent, some clients are uncomfortable wondering what will happen to their pet if funds left behind are mismanaged and dry up long before the pet’s demise. If this is any concern of yours, I strongly advise you to consider using a trust-based estate plan to plan for your pet. To learn more about your options, call to meet with one of our experienced estate planning attorneys today, or check out resources on our website. Here is a link to an episode of Raising The Bar, covering the topic of Pet Planning. Stay up-to-date with helpful links posted regularly on our firm’s Facebook Page. Thanks for reading.  

Posted in Estate Planning

Cognitive Impairment A Long And Winding Road

Posted on March 26, 2019

Article written by Beth Ann Lawson, Esq.

As an attorney, I meet wonderful families in various stages of planning for the mental incapacity of a loved one.  Some families are struggling with a current crisis with more limited legal options and possible court action.  Some families are proactively forming a strategic life plan for future care of a loved while there are more plentiful solutions.   

Over 1 billion people worldwide are age 60 or above.  That number is expected to double within the next 30 years.  However, longevity in years is not always accompanied by excellent mental health.  Cognitive impairment, defined as a decreased ability to think and remember, can be a frustrating life situation as well as a very difficult legal situation for many families and caregivers.

Cognitive impairment is a thief.  It can appear slowly or overnight. Life becomes more difficult, expensive and often exhausting for both the affected individual and the individual’s family.   Cognitive decline can limit an individual’s ability to function in a way normally associated with increasing age.  Yet many families find they can’t do anything for their loved one because they lack the legal authority to act. 

Few family members are trained in dealing with unrestrained anger and emotional outbursts in a loved one. Dealing with delusions, psychosis, and other cognitive issues often skews a family’s hierarchies and interactions.  Children may have to begin parenting their parents. 

To effectively manage your loved one’s financial and medical affairs, written legal authority is imperative to avoid court intervention.  Early legal planning helps reduce the uncertainty during an incapacity.  While in good mental health, individuals and couples can implement legal documents to steward mental health care, thereby avoiding guardianships and conservatorships.

Powers of Attorney, Advance Medical Directives and Trusts, both Revocable and Irrevocable, can be put into place.  All these documents appoint an agent, i.e., a “manager of your rights” to act immediately or in the future when you are unable act. The appointed individuals then step into your legal shoes and medical shoes. You will not be legally silent.

It is important to choose the right individual as your agent in every legal document.  Your agents should see your money as what can make your life all that it was supposed to be rather than a “future inheritance.”  These documents will help your life stay on the course you wanted.

The Power of Attorney is a powerhouse.  It allows an agent to manage finances, and legal affairs.  This person speaks for you as needed in legal and financial matters.  Your bills will be paid.  Your finances will be protected.  And most importantly, the Power of Attorney will normally protect you from a guardianship and conservatorship.

The Advance Medical Directive allows a named individual to communicate with and manage medical processes for an incapacitated individual. A big plus in having an Advance Medical Directive is allowing contact with a doctor by your agent. If you are experiencing cognitive impairment, you may not be able to understand or recall the medical information given to you.  You may not follow up on treatment as you can’t remember what was said, or you may have an internal resistance to being told that you may no longer be capable of managing your affairs.  With your Advance Medical Directive, your agent can get first-hand medical information and create a comprehensive medical action plan. 

With Revocable Living Trusts, a Trustmaker can preplan for cognitive impairment and say who is to handle their assets and how they are to be used.  Your assets are not adrift during your incapacity.

With the Irrevocable Trusts, a family can do some strategic pre-planning to protect the home and other assets from the cost of a family member’s prolonged care.  Pre-planning with trusts is an important factor in preventing you and your spouse from going broke while one of you is in a long-term care facility.

Life without mental clarity is a long and winding road for individuals and their family.  Be prepared.  Pack your travel bag with a Power of Attorney, Advance Medical Directive, and Living Trust(s).  The trip will be better for you and the people who care so much about you.  Travel safely! Give us a call today if you have any further questions regarding your estate plan.

Posted in Estate Planning

Retirement Plan Trust

Posted on February 27, 2019

Article written by Jonathan B. Osler, Esq.

If you are reading this article, chances are good that you have done an excellent job socking away funds in an Individual Retirement Account (IRA) or in multiple IRAs.  Indeed your IRA may be the single largest asset in your investment portfolio, or even your entire estate.  Because IRAs are such valuable assets, it is therefore vital to plan for how your IRA will be distributed when you pass away.  The realm of IRAs can be tricky, however, as retirement plans are governed by a set of complex regulations.  Poor planning can lead to major tax consequences down the line for beneficiaries, or simply fail to meet your objectives.  If you have a large IRA—typically $250,000 or greater—then you should consider leaving your retirement account to a Standalone Retirement Plan Trust (RPT), rather than transferring it to your beneficiaries outright, or through a Revocable Living Trust.  This article explores the numerous advantages of using an RPT for the disposition of your retirement account—read on to learn more! 

Before we discuss the RPT, there are a few key characteristics of IRAs that everyone should keep in mind when doing IRA planning.  For example, although the tax code requires beneficiaries of an inherited IRA to withdraw a percentage of the IRA each year—this is called a required minimum distribution (RMD)—it allows the remainder of the principal to continue growing tax-deferred.  The RMD is determined by the beneficiary’s age and life expectancy, and the younger the beneficiary, the smaller the RMD that is required to be withdrawn each year.  Although the beneficiary of an inherited IRA must take out the RMD, the tax-deferred growth in the account can far surpass the amount that must be withdrawn, so the account actually becomes larger over time.  This concept is commonly referred to as the IRA “stretch-out,” and it is far better for the beneficiary from a tax perspective in comparison to cashing out the IRA in a lump-sum distribution.  If the beneficiary takes the lump sum, he or she will owe ordinary income tax on the entire balance of the IRA—resulting in the beneficiary losing up to 37% of the IRA in taxes right off the bat!  In addition to the stretch-out, it is important to know that your IRA is protected from creditors (up to an amount determined under federal bankruptcy laws and adjusted for inflation annually; for 2018 this number was just under $1.3 million).  However, due to a recent Supreme Court ruling, inherited IRAs received in an outright distribution do not enjoy the same creditor protections.  Finally, for those with Revocable Living Trusts, if the IRA pays out to your trust and the trust has multiple beneficiaries, the RMDs for all beneficiaries will be tied to the eldest beneficiary’s age.

Now to better appreciate the benefits of the RPT, it is important to understand the disadvantages of naming a beneficiary outright as the recipient of your IRA.  With an outright distribution, you have no control over the treatment of your IRA.  A beneficiary could squander a significant portion of the IRA in taxes alone by choosing to cash out the IRA immediately or by withdrawing it over five years.  Due to lack of guidance or financial immaturity (among other reasons) the beneficiary may sacrifice the stretch- out without comprehending the consequences.  Also an outright distribution leaves the IRA vulnerable to the beneficiary’s creditors, which can include a spouse in divorce or a plaintiff in a lawsuit.  Further, a distribution to a minor must be paid to a guardian, and if no guardian exists, the court will step in and manage the IRA through a custodial account.  Upon reaching the age of majority the beneficiary takes full control of the IRA, opening the door for mismanagement of the account as a result of the beneficiary’s age and financial irresponsibility.  Additionally, if the beneficiary predeceases you and no contingent beneficiary is named, the IRA becomes subject to the court’s probate process—and a deleterious consequence of probate is that the IRA must be cashed out, with all the taxes due immediately.  If a beneficiary is incapacitated, there is the risk that an outright distribution of the IRA will result in court interference and loss of government benefits.  Finally, if the beneficiary is your spouse, he or she can take the “spousal rollover” and name new beneficiaries, perhaps against your original wishes. A blended family this could mean disinheritance of your children from a prior relationship.

Thankfully, all the potential negative consequences of an outright distribution can be avoided with the Standalone Retirement Plan Trust.  By creating an RPT, you can control the disposition of the IRA through the terms of the trust.  The RPT can be set up to prevent the beneficiary from cashing out the IRA or taking distributions that exceed the annual RMD, thereby ensuring that the beneficiary receives the maximum stretch-out.  Moreover, by naming a trust as the primary beneficiary of the IRA, your beneficiary receives the benefit of asset protection, which keeps the IRA out of the hands of creditors or a spouse in divorce.  The trust also guarantees continuity in the event of the beneficiary’s death, as the terms provide for successor beneficiaries as well as Trustees to manage the RPT—a significant benefit if the next beneficiary in line is a minor.  By virtue of the IRA being held in trust, the asset cannot accidentally become subject to probate or court interference.  The RPT also can be designed to provide for an incapacitated beneficiary or a beneficiary with special needs, and to prevent the beneficiary from losing or failing to qualify for government assistance. Importantly, the RPT can protect against accidental or intentional disinheritance in blended families; for example, the trust’s terms could dictate that your spouse receives RMDs for life, with the remainder of the IRA passing to your children from a prior relationship.  And, if you already have a trust-based plan, such as a Revocable Living Trust, RPTs can be used to circumvent the rule that ties RMDs to the age of the eldest beneficiary.  The IRA can be subdivided and designated to multiple RPTs, each with its own beneficiary, and the beneficiary of each separate trust then takes RMDs based on his or her own life expectancy.  With this method, the IRA can be split between your child and a grandchild, for example, without the grandchild taking RMDs based on the life expectancy of the parent.  Thus, RPTs are an excellent complement to an existing trust-based plan, as both your specific goals for the IRA and general wishes for the disposition of your estate can be achieved through the coordinated use of separate trusts.

When conducting IRA planning, the RPT can be a superb tool for meeting your objectives.  If you have a large IRA, and you wish to maximize the tax-deferred stretch-out and to provide asset protection for your beneficiaries, then the RPT is an ideal vehicle for achieving your goals.  To learn more about how the Standalone Retirement Plan Trust can form an essential part of your estate plan, contact us today to schedule a conversation with one of our Estate Planning attorneys.

Posted in Estate Planning