Estate planning is dead?

I came across an article in Forbes today called “Estate Planning is Dead.”  It is dangerously misleading about the need for a proper estate plan, but buried under all of that is the true message that Mr. Scott, the author, believes and was trying to deliver.  And it is a message I can get behind.

That message is that traditional estate planning isn’t about you, it is about what will happen when you die.  It is a plan based around the two great inevitabilities: death and taxes.

Estate planning, with the proper planner, can and should be more.  It should be about your legacy.  What you have brought into this world, and are still bringing into this world.  Proper planning is more than a snapshot of who you are.  It is a projection of what you will be and a plan to be even more of who you are.

Meeting with clients, many have to take a deep breath and say something like “Here we go!” when they start to make their plan.   It feels more like they are about to jump out of an airplane instead of making a sound financial decision.  But it is a sound decision, not just for the estate, but for YOU.  As estate planning draws to a close, my clients feel relief, secure in the knowledge that they can live their lives with a significant chunk put finally in its place.

Dare to reorient your thinking about estate planning.  Think about YOUR future.

Anthony Bourdain’s Will Reveals A Rarely Considered Asset Category

Famous food critic Anthony Bourdain’s fortune, initially reported at $16 million, is being probated in New York at $1.2 million.  This could be just misreported information, but often travelers like himself will have offshore assets that will not be probated in America.

In addition to his cash and tangible assets, most of which was left to his daughter, he left his frequent flyer miles to his wife.  Not all frequent flyer programs will allow miles to be passed on, but if you travel as often, or even a tenth as often as Anthony Bourdain, this is another area to consider when making an estate plan.

How do I change my will?

Everything changes in time, including what we have and who we want to give it to.  Changing your will is not overly complicated, but it is important to do it the right way.  There are a few ways to do it.

  • Add a codicil to your will

A codicil is an addendum that adds to or changes the terms of your will.  Like a will, the document must be witnessed by two uninterested witnesses.  It should be kept with your will, and you should let some trusted people know where it is and that it exists.

  • Rewrite your will

Since most wills are short documents, rewriting a will can also be done relatively quickly and simply, as long as all of the legal requirements of writing a will are met.  The old will should be phyiscally destroyed, and the new will takes its place.

Protecting your digital assets

It is a brave new world of digital assets.  Instead of trekking to a rental store for physical media, now we merely boot up our computer, turn on our television, or flick on our phone to access digital assets in libraries with more content than our local rental store could ever hold.

Our photos fill digital albums, and so does our music and our correspondence.

When someone passes away now, we can’t sort through their memories (the music and movies that spoke to them, the photos they kept, the letters they wrote) without access.

Getting access and keeping access depends on where the assets are stored.

Facebook:  Facebook allows users to add a legacy contact to their account.  This person will be able to pin photos and change your picture after you pass away, but they won’t be able to post as you.  A relative can also remove the account after you pass if you don’t want it online anymore.

iTunes and Amazon digital assets: Your iTunes music/videos and Kindle books are nontransferrable assets since they are only licensed.  That means that when you pass away, nobody else gets to use them.  If you want your loved ones to have access to these assets, you should write your passwords in a password manager or a secure location and give the information to your executor.

Google (Gmail, photos, etc.):  Google has a tool called the “inactive account manager” which allows you to pass everything Google to someone if your account becomes inactive for a preset period.  I use three months.  It also allows you to send a final text message to the executor regarding the account.

If you have questions about setting any of this up, or other estate planning issues, contact Gotto Law today.

New tax laws means it is time to review your estate plan.

The Tax Cut and Jobs Act signed into law on December 22, 2017, doubled the estate tax exemption.  So nobody needs an estate plan any more right?  Unfortunately not.  This doubling is not slated to last forever, and depends highly on who is in control of congress when the bill sunsets in a few years.

You should look at this instead as a window to make changes that could save you millions.  If you answer yes to any of the following questions, you should review your estate plan with an attorney.

  • Did you get married or divorced?
  • Did your spouse pass away or become incapacitated?
  • Are there any new children in your family?
  • Did any of your beneficiaries have any of the above changes in their family, or do they have any new financial problems?
  • Are your designated fiduciaries still able to fulfill their roles?
  • Did you sell or buy any significant assets?
  • Did you move to a new state?
  • Did you retire?

To speak about any of these changes with a responsive, qualified attorney, click or call today.

New Tax bill means some will have to review their estate planning documents.

The new estate tax bill doubles the amount of federal estate tax exemption, so now there is no estate tax on estates up to just over 11 million.  That means that if you sit in the 5-11 million range (or 10-22 million range for couples), you should be contacting your financial planner or estate planning attorney to review your estate planning documents, because you may be leaving money on the table.

One major gotcha is that this is only true from 2018-2025, so absent congressional action, the amount could revert to just over 5 million.  Still, there are some planning techniques to be used in the meantime to ensure that you get the tax savings even if there is a reversion.

Other key estate planning provisions remain unchanged, importantly the property step-up value at death.

When do I make a will as a millenial?

We usually define a millennial as someone born from the early 80s through the mid-90s.  I’m one, and most of us don’t think about dying as much as we think about getting to work on time, making house payments, and feeding children or even before that, when to swipe left.

So why start working on the business of dying when there is so much living left to do?  Without delving into morbid statistics, there are good reasons to prepare a will even if you are okay and also if you don’t have a lot to your name.

First, you should do it for the people you love.  A will is one more time that people can hear from you after you are gone.  Even if you bequeath someone your computer or a doll collection, to be thought of by someone after they are gone is a good feeling.

Second, you will feel better after you do it.  I promise.  Every will I have seen finished ends with happiness.  A feeling of completion and a sense of control sets in around an area that doesn’t often give people feelings of control.

Third and finally, when you die, your stuff goes to your family through the laws of intestacy unless you have a will.  Millennials just aren’t marrying like other generations.  If you want your partner to get anything after you die, you need to spell it out.

If you don’t have much, a form will might be enough.  You can fill it out and get a lawyer to look it over.  If you have significant assets, it is worth consulting an attorney because of probate and other issues.

 

Is an unsent text a valid will?

Last year in Australia a man committed suicide and was found with his phone near his body.  On the phone was a text leaving all of his worldly possessions to other relatives, not his immediate family:

Dave Nic you and Jack keep all that I have house and superannuation, put my ashes in the back garden with Trish Julie will take her stuff only she’s ok gone back to her ex AGAIN I’m beaten . A bit of cash behind TV and a bit in the bank Cash card pin 3636 MRN190162Q 10/10/2016 My will.

The Australian supreme court ruled that the message was a valid will, and the instructions in the text message were carried out.  The Australian law on what makes a will valid is similar to California.  A will must be signed and dated by the maker of the will and witnessed by two witnesses, but the court can overlook those requirements if it is satisfied that a document is meant to be the will but doesn’t meet the criteria.

In that case, there was enough outside evidence to satisfy the court that the will was valid.

Given the general attitude of California cases, California courts are unlikely to find an unsent text to be a valid will.  If nobody witnesses the will, it must be handwritten, signed, and the court must be able to figure out the date of the will.

The court can (but does not usually) ignore these requirements if the writer doesn’t meet them entirely, but even then the will must be signed.  California allows for digital signatures, but an unsent text message is not a digital signature.  Most of the relevant code sections are here.

Either way, it would be an expensive lawsuit in California with claims from both the widow and the other family members.  Even if the man had followed the California instructions for a holographic will,  it would not be cut and dry, and his assets would be subject to probate.

This whole situation could all be avoided by a few hours of preplanning.  Even when using a form will, consulting an attorney will ensure that everything is correctly filled out.  Don’t leave the future of your loved ones to chance.

Passing the family business

Most business owners I speak with don’t have a plan for what will happen to their business if they are incapacitated or pass on.  They have a general idea of who they want their business to go to, but not how the business will get to that person or people.

There are numerous ways to pass on or sell a business, and the earlier one begins planning, the better the chance of success and the cheaper it will be.   For example, if you are passing your business to a loved one, it may be better to start giving portions of the business via tax-free gifting long before you pass to avoid tax penalties later on.  I’ll get into a few more examples later, just know that there are many ways to decrease the cost in both a sale and passing on of a business, and the earlier you do so, the easier it will be in the long run.

Why does probate cost so much?

Earlier this week I wrote about how probate costs run into the tens of thousands even for homeowners that only have a condo.   The family I met last week was understandably angry at the idea of probate.  Why do you have to pay the government tens of thousands of dollars when you die just to give your house to your children?  The answer is you don’t, but only with proper planning, and a will is usually not enough.

Why do I need to go through probate if I already have a will?

Because your will is just the start of the probate process.

First, the court has to examine your will to ensure that it is a valid will.  Then, once it has determined it is valid, the court must appoint a personal representative to distribute the deceased’s assets.  Someone, usually the executor or an attorney, has to:

  • publish notices and notify creditors
  • deduct costs of administration before distribution
  • transfer assets to beneficiaries
  • handle any pending lawsuits and claims against the estate
  • deal with any contests to the will

These all take time and money.  The estate must cover the cost of Judges, clerks, lawyers, administrators, and all of the time and overhead associated with these people.  These procedures are in place to ensure that the wishes of the deceased are carried out to the fullest.

For the majority of cases where the heirs aren’t arguing about, or even thinking about, who will get what, these costs can seem like an unfair burden.  Still, it is the price we pay to ensure that even the least among us has his or her wishes carried out.

Often, these costs are avoidable through proper estate planning. Rather than pay the tens of thousands later, and go through the lengthy probate process, you can increase the speed of distribution and decrease the costs by making plans well in advance.