When to Update Your Will or Trust

Friends often ask me whether they need old willto update their Will or Trust. Or the other side of that is the people who just don’t want to be bothered and say, “We already did our Wills” or “We already have a Trust.”

So when should you update your Will or Trust?  The same rules apply to both, so I’ll just refer to a Will for the remainder of this post.  I tell people there are several times when that should be done. Obviously, if you have changed your mind about who you want to receive your estate when you die, you should change your Will. But you should also revise your Will if you discover one of your beneficiaries is not handling his or her finances well or is now married to someone who doesn’t appear to be able to manage finances well or they appear to have debt problems where creditors are coming after them or are likely to do so. Provisions can be added to your Will (and to a Trust) to place their inheritance in a trust or add other protections.

If you are in the midst of a divorce or have been divorced since you last did your Will, you should review your estate planning documents. The law on how divorces impact the distribution of your estate varies from state to state and over time. The type of assets you own will also be a factor in how your estate is distributed.  And you need to consult with your divorce attorney to determine what you can do under the court’s orders and when you make changes to your estate planning documents.

Over time laws change. For example, the size of estate you have before you owe federal estate tax has risen significantly over the past couple decades. When that threshold was low, people would often have complex trusts in their Wills to help minimize or avoid estate taxes. With higher thresholds many people no longer need those complex trusts to minimize or avoid estate taxes. So your Will may not be very old, but without changes it might impose rather complex requirements on your executor and your estate, even though those requirements are no longer necessary for your estate.

Other laws have been enacted fairly recently that impose strict guidelines on the disclosure of “protected health information” without the patient’s explicit permission (the law is often referred to as HIPAA). While these privacy protections are a good thing, they can also become problematic if your executor, trustee or agent (under a durable power of attorney) needs to deal with your employer, insurer or medical providers such as doctors, clinics and hospitals. Because of this law, to act on your behalf, an authorized person must have a written document executed by you, with very specific language mandated by HIPAA. If your estate planning documents were executed before the mid-1990s or even as late as the mid-2000s, you may not have this language included among your estate planning documents.

In summary, if you have estate planning documents, chances are they remain “valid” and could be used to probate your estate. But depending on their age they may not contain the most appropriate terms under current law and may result in added complexity and expense for your executor, trustee and agents. If you have experienced a change in your family life or it has been more than five or six years since you last executed your estate planning documents, you should make an appointment to meet with your estate planning attorney to review your situation.

Posted in Advance Directives, Community Property, Divorce, Estate Planning, Estate Tax, HIPAA, Inheritance, Power of Attorney, Probate, Trusts, Wills | Tagged , , , , , , | Comments Off

What, me worry?!

binder-est-plngSome people contacting my office with confusion in their voices are children of parents who set up a living trust and failed to communicate to their children the responsibilities they would have when mom and dad died or became incapacitated.  So when that occurs, the children either ignore the trust or enjoy the fruits of the trust without ever looking at it closely.  If your parents have a living trust and have made you or one of your siblings the successor trustee when your parents die or become incapacitated, you should read the information below.

A living trust has many advantages for some people and in some circumstances.  It is not necessarily the best estate planning alternative for everyone.  But one of the big advantages listed by promoters of living trusts is the avoidance of probate upon the death of the trust-makers.  That’s because unlike a will, a trust is a private document and is not filed with the probate court.

Nonetheless, the successor trustee (the person appointed in the living trust to become trustee when the trust-makers die) must still take steps to administer the trust:  beneficiaries must be contacted and kept informed; the trust-maker’s assets gathered and invested; any debts paid; potential creditors notified; taxes filed and paid;  and assets and/or income distributed in conformity with trust provisions to beneficiaries.

Successor trustees often lack the time, resources or knowledge to personally administer the trust, and therefore may call upon legal, accounting and investment professionals for assistance. The successor trustee must undertake many activities, some of which are listed below.

  • Read and understand at least the basic terms of the trust.
  • Place the interests of the trust beneficiaries upmost and deal with them impartially; avoid conflicts of interest and self-dealing.
  • Following the terms of the trust, ensure that trust assets are properly titled and invested prudently; diversify, review periodically and consult with a professional regarding the balance of income versus growth of the trust assets.
  • Keep trust beneficiaries regularly informed about the trust.
  • Maintain proper accounting records, file appropriate tax returns and pay any tax due.
  • Make distributions from the trust in accordance with the trust document.

So while a living trust can help you avoid probate, a deceased trust-maker’s family are still well-advised to contact an estate planning attorney to discuss what steps they should undertake to ensure the trust is handled in a way to fulfill mom’s and dad’s wishes.

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Does Your Estate Plan Include your Digital Assets?

Many of us have prepared our will or trustdigital-assets to distribute our assets when we die.  But what happens if your personal representative cannot find or access your assets?  This is what often occurs regarding your digital assets.

So, what are digital assets.  Digital assets are defined as any electronic record in which an individual has a right or interest.  But it does not include an underlying asset or liability unless the asset or liability is itself an electronic record. So, this includes things like your online bank, investment, shopping, gaming and social media user accounts. The basic idea is to knit these digital assets in with the rest of your estate plan. Who should get the data? And more importantly, are there things we don’t want others to have?

Many digital assets have little or no financial value. But there can be significant value if you know what to look for.  An obvious example of a valuable digital asset would be a manuscript on the computer of a best-selling author. But domain names and advertising from web pages and blogs may also have financial value. Downloaded assets such as digital music and book libraries may be worth something, too.  And even if they don’t have monetary value, digital assets may have sentimental worth.

The first big hurdles for a personal representative in dealing with digital assets can often be  simply identifying the assets and then gaining access to them. Unless the owner of those assets has left specific guidance about the existence and whereabouts of the digital assets, the deceased or disabled individual’s fiduciaries may not even be aware of their existence. Additionally, those digital assets may not only be password-protected or encrypted, but they may also be covered by data-privacy laws or criminal laws regarding unauthorized access to computer systems and private data. Fiduciaries may be able to unearth passwords and gain access to their loved ones’ online accounts, but they may not be doing so legally.

The field of digital estate planning is also evolving rapidly, as are digital providers’ policies on what should happen to digital assets that are left behind. For example, Google  and an increasing number of social media providers have created procedures, which allow you to name a trusted person who can gain access to your data once your accounts have been inactive for a certain period of time. Digital assets are also governed by a complex web of rapidly evolving laws, both at the state and federal levels.

So here are some things you might consider in your planning.

1) Identify your Digital Assets

Think about the following:

  • What valuable items would you lose if your computer was lost or stolen today?
  • If you were in an accident, would your loved ones be able to gain access to your valuable or significant digital information while you were incapacitated?
  • If you were to die today, to what valuable or significant digital property would you like your loved ones to have access?

2) List Your Digital Assets and Critical Access Information

Make a list of your digital assets.  For each asset, list the URL to locate the sign-in page for it, your username, the email associated with it, if any, your password, security question answers.  As time allows, log on to your digital assets sites and note what information you had to possess in order to access the account.

You might also want to list all of your digital devices such as computers and smartphones, data-storage devices or media, domain names you own and where they are registered, and any intellectual property you possess in electronic format (like a book or paper you created).

Obviously, this list contains highly sensitive, confidential information.  It needs to be backed up and you should probably have a hard copy of it, also.  But be sure you protect it by storing it in a safe place.  But if you protect it too well, again your personal representative may not be able to access it.  So be sure you tell your personal representative (and any secondary representatives) how to access this list.

Finally, it is critical to keep this list updated.  So, any hard copies may not be as up-to-date as your electronic list, but you should regularly replace the hard copy with an updated copy.

3) Back It Up

Be sure your Digital Asset list is backed up, just like all of your computer files.  Having multiple back-ups is always good as long as they are secure.  Use an external drive.  Or better yet, use two.  Keep one in a safe or safe deposit box.  Keep the other connected to your computer for real-time backing up.  Regularly swap the two disks so that the stored one is only a little behind.  Add to this a cloud back-up with something like Carbonite, OneDrive, Google Drive or any number of similar cloud back-up services.  Then even if a specific device malfunctions, storing digital assets on another storage device or in the cloud helps ensure the longevity of those assets.

Keeping your list current and letting your personal representative know how to access the list are critical factors in insuring your digital assets won’t be lost forever.

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