What Should I Know about Cryptocurrency and Estate Planning? – Annapolis and Towson Estate Planning

Cryptocurrency is a digital currency that can be used to buy online goods and services, explains Forbes’ recent article entitled “Cryptocurrency And Estate Planning: What Digital Investors Should Know.” Part of cryptocurrency’s appeal is the technology that backs it. Blockchain is a decentralized system that records and manages transactions across many computers and is very secure.

As of June 24, the total value of all cryptocurrencies was $1.35 trillion, according to CoinMarketCap. There are many available cryptocurrencies. However, the most popular ones include Bitcoin, Ethereum, Binance Coin and Dogecoin. Many believe cryptocurrency will be a main currency in the future, and they are opting to buy it now. They also like the fact that central banks are not involved in the process, so they cannot interfere with its value.

In addition, NFTs or non-fungible tokens, are also gaining in popularity. Each token is one of a kind and they are also supported by blockchain technology. They can be anything digital, such as artwork or music files. NFTs are currently being used primarily as a way to buy and sell digital art. An artist could sell their original digital artwork to a buyer. The buyer is the owner of the exclusive original, but the artist might retain proprietary rights to feature the artwork or make copies of it. The popularity of NFTs is centered around the social value of fine art collecting in the digital space.

Here are three reasons to have an estate plan, if you buy bitcoin:

  1. No probate. Even if your loved ones knew you had cryptocurrency, and even if they knew where you stored your password, that would not be enough for them to get access to it. Without a proper estate plan, your digital assets may be put through a lengthy and expensive probate process.
  2. Blockchain technology. You must have a private key to access each of your assets. It is usually a long passcode. A comprehensive estate plan that includes this can help you have peace of mind knowing that your investments can be passed on to loved ones’ if anything were to happen to you unexpectedly.
  3. Again, central banks do not play any part in the process, and it is secure because its processing and recording are spread across many different computers. However, there is no governing body overseeing the affairs of cryptocurrency.

Reference: Forbes (July 21, 2021) “Cryptocurrency And Estate Planning: What Digital Investors Should Know”

 

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What’s an Enhanced Life Estate? – Annapolis and Towson Estate Planning

First Coast News’ recent article entitled “Deed named for former first lady could be key to planning your estate” explains that a strategy that is available in Florida and a few other states is called an enhanced life estate or a “Lady Bird” deed, named after former First Lady, Lady Bird Johnson.

This deed states that when I die, you get the property, but until then, I reserve all rights to do whatever I want with it. That contrasts with a traditional life estate where a property owner can plan for one or more others to inherit their house.

Typically, the person with a life estate has a lot less control over what happens in the future, including potentially being thwarted by the very person you are tapping to receive your property at your death, in case you decide you no longer want the house while you are still alive.

The problem is, now you want to sell the property, but since they are a co-owner, they can refuse. And there is nothing you can do about it.

Enhanced life estates are also about protecting property and its eventual recipient from creditors after the death of the owner. That is the benefit of avoiding probate. Medicaid or any other creditor may become a creditor in probate.

A Lady Bird deed supersedes a will.

But there are downsides to the Lady Bird deed. A big drawback is if you change your mind. You have to now record another deed in the public record to remove that, and every deed that you record creates one thing that could go wrong.

However, this can be true of any change made in hope of overriding an earlier estate decision, and Lady Bird deeds are fairly straightforward.

Ask an experienced estate planning attorney if this type of arrangement is available in your state.

Reference: First Coast News (July 19, 2021) “Deed named for former first lady could be key to planning your estate”

 

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No Kids? What Happens to My Estate? – Annapolis and Towson Estate Planning

Just because you do not have children or heirs does not mean you should not write a will. If you decide to have children later on, a will can help protect their financial future. However, even if you die with no children, a will can help you ensure that your assets will go to the people, institutions, or organizations of your own choosing. As a result, estate planning is necessary for everyone.

Claremont Portside’s recent article entitled “What Happens to Your Estate If You Die With No Children” says that your estate will go to your spouse or common-law partner, unless stated otherwise in your will. If you do not have any children or a spouse or common-law partner, your estate will go to your living parents. Typically, your estate will be divided equally between them. If you do not have children, a spouse, or living parents, your estate will go to your siblings. If there are any deceased siblings, their share will go to their children.

The best way to make certain your estate goes to the right people, and that your loved ones can divide your assets as easily as possible, is to write a will. Ask an experienced estate planning attorney to help you. As part of this process, you must name an executor. This is a person you appoint who will have the responsibility of administering your estate after you die.

It is not uncommon for people to appoint one of their children as the executor of their will. But if you do not have children, you can appoint another family member or a friend. Select someone who is trustworthy, responsible, impartial and has the mental and emotional resources to take on this responsibility while mourning your death.

You should also be sure to update your will after every major event in your life, like a marriage, the death of one of your intended beneficiaries and divorce. In addition, specifically designating beneficiaries and indicating what they will receive from your estate will help prevent any disputes or contests after your death. If you have no children, you might leave a part (or your entire) estate to friends, and you can also name charities and other organizations as beneficiaries.

It is important to name who should receive items of sentimental value, such as family heirlooms, and it is a good idea to discuss this with your loved ones, in case there are any disputes in the future.

Even without children, estate planning can be complicated, so plan your estate well in advance. That way, when something happens to you, your assets will pass to the right people and your last wishes will be carried out. Ask an experienced estate planning attorney for assistance in creating a comprehensive estate plan.

Reference: Claremont Portside “What Happens to Your Estate If You Die with No Children”

 

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What Happens If You Don’t Name Beneficiaries? – Annapolis and Towson Estate Planning

It is always good to check into your retirement accounts and consider if you are saving enough and if your investments are properly balanced. However, what is just as important is whether you have reviewed named beneficiaries for these and other accounts. The recommendation comes from the article titled “Review your IRA, 401(k) beneficiaries” from Idaho State Business Journal, and it’s sound advice.

In more cases than you might think, people overlook this detail, and their loved ones are left with the consequences. After all, you opened those accounts long ago, and who even remembers? Does it really matter?

In a word, yes. What if your family circumstances have changed since you named a beneficiary? If divorce and remarriage occurred, do you want your former spouse to receive your IRA, 401(k) and life insurance proceeds?

It is important to understand that beneficiary designations supersede anything in your last will and testament. Therefore, while you have been dutifully updating your estate plans whenever life changes occur and neglecting beneficiary designations, your ex or someone else who is no longer in your life could receive a surprise windfall.

Here is another detail often overlooked: retirement plans, and insurance policies may need more than one beneficiary. Any time there is an opportunity to name a contingent beneficiary, take advantage of it. If the primary beneficiary dies or refuses the inheritance and there is no contingent or secondary beneficiary, the proceeds could end up back into your estate. Depending on the laws of your state, they might end up being taxable, in addition to not going to your intended heir.

This is an easy thing to fix, but it takes diligence and in some cases, a fair amount of time.

Start by gathering information on all your accounts, including retirement, checking and savings accounts, 401(k)s, pension plans, insurance policies and any accounts containing assets you want to pass to loved ones. If you see anything incorrect or outdated, immediately contact the financial institution, your company’s benefits manager or your insurance representative to request a change-of-beneficiary form.

Once you receive the form, immediately address making the changes. Request a printed confirmation from the financial organization to confirm the change has been made. Do not accept a verbal acknowledgement by a call center employee—this is too important to leave to chance.

To be on the safe side, it would be wise to have your estate planning attorney work with you on documenting your beneficiary designations as part of your estate plan. You may also pick up some smart pointers on other suggestions for dealing with beneficiaries.

For example, children are not permitted to control assets until they reach the age of majority. But when most children reach age 18 or 21, they are not ready to manage substantial sums of money. Your will names a guardian for minor children, but it is also wise to create a trust for the benefit of a minor that controls when distributions are made when they are older.

Most people want to leave something behind for those they love. Make sure to do it in the right way—including paying attention to beneficiary designations.

Reference: Idaho State Business Journal (July 27, 2021) “Review your IRA, 401(k) beneficiaries”

 

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How Important Is a Power of Attorney? – Annapolis and Towson Estate Planning

People are often surprised to learn a power of attorney is one of the most urgently needed estate planning documents to have, with a last will and health care proxy close behind in order of importance. Everyone over age 18 should have these documents, explains a recent article titled “The dangers of not having a power of attorney” from the Rome Sentinel. The reason is simple: if you have a short- or long-term health problem and cannot manage your own assets or even medical decisions and have not given anyone the ability to do so, you may spend your rehabilitation period dealing with an easily avoidable nightmare.

Here are other problems that may result from not having your incapacity legal planning in place:

A guardianship proceeding might be needed. If you are incapacitated without this planning, loved ones may have to petition the court to apply for guardianship so they can make fundamental decisions for you. Even if you are married, your spouse is not automatically empowered to manage your financial affairs, except perhaps for assets that are jointly owned. It can take months to obtain guardianship and costs far more than the legal documents in the first place. If there are family issues, guardianship might lead to litigation and family fights.

The cost of not being able to pay bills in a timely manner adds up quickly. The world keeps moving while you are incapacitated. Mortgage payments and car loans need to be paid, as do utilities and healthcare bills. Lapses of insurance for your home, auto or life, could turn a health crisis into a financial crisis, if no one can act on your behalf.

Nursing home bills and Medicaid eligibility denials. Even one month of paying for a nursing home out of pocket, when you would otherwise qualify for Medicaid, could take a large bite out of savings. The Medicaid application process requires a responsible person to gather a lot of medical records, sign numerous documents and follow through with the appropriate government authorities.

Getting medical records in a HIPAA world. Your power of attorney should include an authorization for your representative to take care of all health care billing and payments and to access your medical records. If a spouse or family member is denied access to review records, your treatment and care may suffer. If your health crisis is the result of an accident or medical malpractice, this could jeopardize your defense.

Transferring assets. It may be necessary to transfer assets, like a home, or other assets, out of your immediate control. You may be in a final stage of life. As a result, transferring assets while you are still living will avoid costly and time-consuming probate proceedings. If a power of attorney is up to date and includes a fully executed “Statutory Gift” authorization, your loved ones will be able to manage your assets for the best possible outcome.

The power of attorney is a uniquely flexible estate planning document. It can be broad and permit someone you trust to manage all of your financial and legal matters, or it can be narrow in scope. Your estate planning attorney will be able to craft an appropriate power of attorney that is best suited for your needs and family. The most important thing: do not delay having a new or updated power of attorney created. If you have a power of attorney, but it was created more than four or five years ago, it may not be recognized by financial institutions.

Reference: Rome Sentinel (July 25, 2021) “The dangers of not having a power of attorney”

 

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Checklist for Estate Plan’s Success – Annapolis and Towson Estate Planning

We know why estate planning for your assets, family and legacy falls through the cracks.  It is not the thing a new parent wants to think about while cuddling a newborn, or a grandparent wants to think about as they prepare for a family get-together. However, this is an important thing to take care of, advises a recent article from Kiplinger titled “2021 Estate Planning Checkup: Is Your Estate Plan Up to Date?

Every four years, or every time a trigger event occurs—birth, death, marriage, divorce, relocation—the estate plan needs to be reviewed. Reviewing an estate plan is a relatively straightforward matter and neglecting it could lead to undoing strategic tax plans and unnecessary costs.

Moving to a new state? Estate laws are different from state to state, so what works in one state may not be considered valid in another. You will also want to update your address, and make sure that family and advisors know where your last will can be found in your new home.

Changes in the law. The last five years have seen an inordinate number of changes to laws that impact retirement accounts and taxes. One big example is the SECURE Act, which eliminated the Stretch IRA, requiring heirs to empty inherited IRA accounts in ten years, instead of over their lifetimes. A strategy that worked great a few years ago no longer works. However, there are other means of protecting your heirs and retirement accounts.

Do you have a Power of Attorney? A Power of Attorney (“POA”) gives a person you authorize the ability to manage your financial, business, personal and legal affairs, if you become incapacitated. If the POA is old, a bank or investment company may balk at allowing your representative to act on your behalf. If you have one, make sure it is up to date and the person you named is still the person you want. If you need to make a change, it is very important that you put it in writing and notify the proper parties.

Health Care Power of Attorney needs to be updated as well. Marriage does not automatically authorize your spouse to speak with doctors, obtain medical records or make medical decisions on your behalf. If you have strong opinions about what procedures you do and do not want, the Health Care POA can document your wishes.

Last Will and Testament is Essential. Your last will needs regular review throughout your lifetime. Has the person you named as an executor four years ago remained in your life, or moved to another state? A last will also names an executor for your property and a guardian for minor children. It also needs to have trust provisions to pay for your children’s upbringing and to protect their inheritance.

Speaking of Trusts. If your estate plan includes trusts, review trustee and successor appointments to be sure they are still appropriate. You should also check on estate and inheritance taxes to ensure that the estate will be able to cover these costs. If you have an irrevocable trust, confirm that the trustee is still ready and able to carry out the duties, including administration, management and tax returns.

Gifting in the Estate Plan. Laws concerning charitable giving also change, so be sure your gifting strategies are still appropriate for your estate. An estate plan review is also a good time to review the organizations you wish to support.

Reference: Kiplinger (July 28, 2021) “2021 Estate Planning Checkup: Is Your Estate Plan Up to Date?

 

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Does a Married Couple without Children Need a Will? – Annapolis and Towson Estate Planning

While estate planning for couples with no children seems like it would be very simple, the opposite is almost always the case, according to this informative article titled “Three keys to estate planning for couples without children” from The News-Enterprise.

If there is no last will, intestate succession laws dictate who will receive property.

There are three relatively simple ways for couples to be sure their wishes will be followed, and property distributed as they want.

A secondary level of beneficiaries. Couples do not always die at the same time, although it does happen. For the most part, upon one spouse’s death, assets owned together, including Payable on Death, or POD accounts, remain in the possession of the surviving spouse. If all of the assets are owned jointly, the surviving spouse may be able to avoid probate altogether. However, they should check with an estate planning attorney to be sure their state will accept this.

There should be provisions in the last will, in case of a simultaneous death. This lets the more important provisions focus on the beneficiaries. While property may pass easily outside of probate to the survivor, the same will not be true if property is to pass to beneficiaries. The estate will go through probate.

If at all possible, couples should have the same designated beneficiaries. If the couple intends to leave everything to the surviving spouse, they will need to decide who will receive joint property after both have died.

Last wills for each spouse must be created to work together. Designating separate lists of beneficiaries in each spouse’s last will and testament ultimately results in the marital property being left only to one spouse’s loved ones. The result: the other spouse’s family can end up being disinherited.

One way to address this is to create marital shares of property. Couples generally divide marital property in equal shares, although couples in blended families may choose to use a different fractional share.

For each fractional share, each spouse should write out their own list of beneficiaries, being sure that the total ends up being 100%.

Another point to be determined: will survivors within the group receive a larger share pro rata, or will children of the deceased beneficiaries receive their shares? This needs to be clarified when the estate plan is created to avoid potential problems for beneficiaries.

Beneficiaries could potentially be changed after the death of the first spouse, so if the couple wants to prevent anyone from being disinherited, they can use a revocable living trust. This can lock up the deceased spouse’s shares in a manner to allow the property to remain available for the survivor, but the survivor cannot change beneficiaries for the deceased spouse’s share.

Estate planning for couples with no children can have its own pitfalls, so consult with an experienced estate planning attorney, who will know how to protect all members of the family.

Reference: The News-Enterprise (July 27, 2021) “Three keys to estate planning for couples without children”

 

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What are Top ‘To-Dos’ in Estate Planning? – Annapolis and Towson Estate Planning

Spotlight News’ recent article entitled “Estate Planning To-Dos” says that with the potential for substantial changes to estate and gift tax rules under the Biden administration, this may be an opportune time to create or review our estate plan. If you are not sure where to begin, look at these to-dos for an estate plan.

See an experienced estate planning attorney to discuss your plans. The biggest estate planning mistake is having no plan whatsoever. The top triggers for estate planning conversations can be life-altering events, such as a car accident or health crisis. If you already have a plan in place, visit your estate planning attorney and keep it up to date with the changes in your life.

Draft financial and healthcare powers of attorney. Estate plans contain multiple pieces that may overlap, including long-term care plans and powers of attorney. These say who has decision-making power in the event of a medical emergency.

Draft a healthcare directive. Living wills and other advance directives are written to provide legal instructions describing your preferences for medical care, if you are unable to make decisions for yourself. Advance care planning is a process that includes quality of life decisions and palliative and hospice care.

Make a will. A will is one of the foundational aspects of estate planning, However, this is frequently the only thing people do when estate planning. A huge misconception about estate planning is that a will can oversee the distribution of all assets. A will is a necessity, but you should think about estate plans holistically—as more than just a will. For example, a modern aspect of financial planning that can be overlooked in wills and estate plans is digital assets.  It is also recommended that you ask an experienced estate planning attorney about whether a trust fits into your circumstances, and to help you with the other parts of a complete estate plan.

Review beneficiary designations. Retirement plans, life insurance, pensions and annuities are independent of the will and require beneficiary designations. One of the biggest estate planning mistakes is having outdated beneficiary designations, which only supports the need to review estate plans and designated beneficiaries with an experienced estate planning attorney on a regular basis.

Reference: Spotlight News (May 19, 2021) “Estate Planning To-Dos”

 

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Why Is Estate Planning So Important? – Annapolis and Towson Estate Planning Attorneys

Big Easy Magazine’s recent article “Estate Planning Is Essential and Here’s Why” says that writing a Last Will and Testament is not limited to what happens to your house, car, company, or other assets after you die. It also states who will take care of your minor children, if they are orphaned.

Your instructions for burial and other smaller things can be included.

If you fail to provide specific instructions, the state intestacy laws will apply upon your death. Here is a glimpse of the consequences of not writing your last will:

  • Your burial preferences may not be honored.
  • Your properties may be managed by an individual you do not necessarily trust. Without a named executor to your Will, some other family member may be asked to file taxes, make transfers and manage your estate.
  • Family members may not get an inheritance. Under intestacy laws, same-sex relationships and common-law marriages may not be recognized. So, your partner may not get a portion of your estate.
  • Your favorite charity may be left out. If you are committed to leaving a legacy, your charity, religious organization, or other organization of choice should be mentioned in the Will.
  • The government will name the guardians for your minor children.

With a Will, you can designate a guardian for your children and avoid additional taxes. Ask an experienced estate planning attorney about developing a comprehensive estate plan.

Aside from this, estate planning can also save your loved ones considerable angst and money.

A detailed Will with your instructions will avoid complications and provide comfort, while your loved ones recover emotionally from their loss.

Reference: Big Easy Magazine (May 17, 2021) “Estate Planning Is Essential and Here’s Why”

 

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How Can I Be a Super Executor? – Annapolis and Towson Estate Planning

Executors are frequently relatives or friends designated in a Last Will and Testament as the final administrator of a deceased person’s estate. If you agreed to serve as an executor, you likely are aware of some of the tasks you will face, closing accounts, inventorying assets and distributing bequests. Even when it is a relatively simple situation — one spouse dies and leaves everything to the other — there can be a lot of paperwork involved. It certainly can get more complicated when a widow dies, and there are several children and numerous assets.

AARP’s recent article entitled “How to Be a Good Executor of a Will or Estate” says being an executor is a tough job. So, heed these steps to make certain that when the time comes for you to serve, you honor the decedent, serve his or her heirs and do your job as efficiently as possible.

Communicate. Be sure that you understand the Will writer’s wishes. You can request that he or she be specific about what he or she truly wants to happen with the estate after his or her death. The Will writer can give an explanation in a last letter of instruction. It is an informal document to be read after he dies that explains his or her decisions.

Do the paperwork. When the person passes away, you must find the Will (the original, not a copy). The Will and the death certificate must be filed with the probate court to get letters testamentary. This authorizes the executor to take any actions required to administer the estate. Get at least a dozen extra certified copies of the death certificate because you will need these to cancel credit cards, sell a home, transfer title to a car and turn off the utilities.

Safeguard property. A vacant house may attract thieves who scan the obituaries, as well as relatives and neighbors who think they are entitled to help themselves. After the death, lock up and secure the property. Move jewelry and other valuables to a safe place. Also, take pictures of the home’s interior to document its contents.

Get organized. The executor must maintain and sell an unoccupied house, stop Social Security payments, pay debts, close financial accounts and file taxes. Start a detailed to-do list, keep good records and create a list of assets and liabilities.

Get a thick skin. Closing out an estate entails managing the emotions of heirs. They also may be your siblings who are resentful of the authority you have been given. If so, give them regular updates to smooth bad feelings that may arise. Total transparency is best.

Distribute personal items. This can be a difficult process, so put a system in place to fairly divide the possessions. Even the most ordinary item may have deep sentimental value to an heir and could cause stress for the executor without your guidance.

Educate the heirs. Heirs and beneficiaries cannot be paid, until all taxes and debts of the estate are settled. Let them know that it may take many months before they will receive payment.

Final steps. Lastly, the executor must pay any debts and taxes owed by the estate, distribute the estate property and give an accounting for the estate to the beneficiaries.

If you have questions, ask an experienced estate planning attorney.

Reference: AARP (May 7, 2021) “How to Be a Good Executor of a Will or Estate”

 

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys