A Letter of Instruction is a Good Addition

October 8, 2020

A letter of instruction, or LOI, is a good addition to your estate plan. It’s commonly used to express advice, wishes and practical information to help the people who will be taking care of your affairs, if you become incapacitated or die. According to this recent article “Letter of instruction in elder law estate plan can help with managing important information” from the Times Herald-Record, there are many different ways an LOI can help.

In our digital world, you might want to use your LOI to record website names, usernames and passwords for social media accounts, online accounts and other digital assets. This helps loved ones who you want to have access to your online life.

If you have minor children who are beneficiaries, the LOI is a good way to share your priorities to the trustee on your wishes for the funds left for their care. It is common to leave money in trust for HEMS—for “Health, Education, Maintenance and Support.” However, you may want to be more specific, both about how money is to be spent and to share your thoughts about the path you’d like their lives to take in your absence.

Art collectors or anyone who owns valuable items, like musical instruments, antiques or collectibles may use the LOI as an inventory that will be greatly appreciated by your executor. By providing a carefully created list of the items and any details, you’ll increase the likelihood that the collections will be considered by a potential purchaser. This would also be a good place to include any resources about the collections that you know of, but your heirs may not, like appraisers.

Animal lovers can use an LOI to share personalities, likes, dislikes and behavioral quirks of beloved pets, so their new caregivers will be better prepared. In most states, a pet trust can be created to name a caregiver and a trustee for funds that are designated for the pet’s care. The caregiver and the trustee may be the same person, or they may be two different individuals.

For families who have a special needs member, an LOI is a useful means of sharing important information about the person and is often referred to as a “Letter of Intent.” It works in tandem with a Special Needs Trust, which is created to leave assets to a person who receives government benefits without putting means-tested benefits in jeopardy. If there is no Special Needs Trust and the person receives an inheritance, they could lose access to their benefits.

Some of the information in a Letter of Intent includes information on the nature of the disability, daily routines, medications, fears, preferred activities and anything that would help a caregiver provide better care, if the primary caregiver dies.

The LOI can also be used to provide basic information, like where important documents are kept, who should be notified in case of death or incapacity, which bills should be paid, what home maintenance tasks need to be taken care of and who provides the services, etc. A letter of instruction is a useful document and a good addition to your estate plan. It will help those you leave behind to adjust to their new responsibilities and care for loved ones.

If you would like to learn more about what should be included in your estate planning, please visit our previous posts.

Reference: Times Herald-Record (Sep. 8, 2020) “Letter of instruction in elder law estate plan can help with managing important information”

Digital Asset Laws Are Now More Common

September 22, 2020

More and more of our lives are lived online. However, what happens when we become disabled or die and our executor or a fiduciary needs to access these accounts? Digital asset laws are now more common than ever. Pennsylvania recently joined many states that have passed a law intended to make accessing these accounts easier, reports the Pittsburgh Post-Gazette in the article “New Pa. law recognizes digital assets in estates.”

The official name of the law is the Revised Uniform Fiduciary Access to Digital Assets Act, or RUFADAA. Pennsylvania is one of the last states in the nation—48^th—to adopt this type of legislation, with the passage of Act 72 of 2020. Until now, the Keystone state didn’t allow concrete authority to access digital information to fiduciaries. The problem: the ability to access the information is still subject to the agreement that the user has with the online provider. That’s the “yes” we give automatically, when presented with terms of service agreement every time we open a new app on our phones.

Online service providers give deference to “legacy” contacts that a user can name, if authority to a third party to access their accounts is given. However, most people don’t name a successor to have access, and most apps don’t have a way to do this.

It’s worse than dying without a will. If you die with no will, the state has a process to identify legal heirs and distribute your estate. However, with digital assets, first you have to locate the person’s digital assets (and chances are good you’ll miss a few). There’s no shoebox of old receipts, or letters and bills coming in the mail to identify digital property. The custodians of the online information (Facebook, Instagram, TikTok, Google, etc.) still rely on those contracts between the user and the digital platform.

However, with the adoption of the new digital asset law, if the user does not make use of the online tool to name a successor, or if one is not offered, then the user can dictate the terms of access or non-access to the online accounts through estate planning documents, including a will, trust or power of attorney.

Here are some tips to clarify your wishes to disclose (or not) digital assets:

Make a list of all your online accounts, their URL address, usernames and passwords. Share the list only with someone you trust. You will be surprised at just how many you have.

Review the terms of service for each account to see if you have the ability to provide a name for a person who is authorized to access the account on your behalf.

Make sure your estate planning documents are aligned with your service contract preferences. Does your Power of Attorney mention access to your digital accounts? Depending on the potential value, sentimental and otherwise, of your digital assets, you may need to revise your estate plan.

Remember to never put anything in your will, like account numbers, URLs, usernames or passwords, since your will becomes a public document once it is probated. Now that digital asset laws are more common nationwide, you need to work with an estate planning attorney. They will know how to best accomplish documenting your digital assets, while protecting them.

If you would like to learn more about digital assets and other vital parts of an estate plan, please visit our previous posts.

Reference: Pittsburgh Post-Gazette (Aug. 24, 2020) “New Pa. law recognizes digital assets in estates.”

What Must Be Done when a Loved One Dies?

July 13, 2020

What must be done when a loved one dies? When a member of a family dies, it falls to the people left behind to pick up the pieces. Someone has to find out if the person left a last will, get the bills paid, stop Social Security or other automatic payments and file final tax returns. This is a hard time, but these tasks are among many that need to be done, according to the article “How to manage a loved one’s finances after they die” from Business Insider.

This year, more families than usual are faced with the challenge of taking care of the business of a loved one’s life while grieving a loss. When death comes suddenly, there isn’t always time to prepare.

The first step is to determine who will be in charge. If there is a will, then it contains the name of the person selected to be the executor. When a married person dies, usually the surviving spouse has been named as the executor. Otherwise, the family will need to work together to pick one person, usually the one who lives closest to the person who died. That person may need to keep an eye on the house and obtain documents, so proximity is a plus. In a perfect world, the person would have an estate plan, so these decisions would have been made in advance.

Don’t procrastinate. It is hard, but time is an issue. After the funeral and mourning period, it’s time to get to work. Obtain death certificates, and make sure to get enough certified copies—most people get ten or twelve. They’ll be needed for banks, brokerage houses and utility service providers. You’ll also need death certificates for taking control of some digital assets, like the person’s Facebook page.

The first agency to notify is Social Security. If there are other recurring payments, like VA benefits or a pension, those organizations also need to be notified. Contact banks, insurance companie, and financial advisors.

Get the person’s credit cards into your possession and call the credit card companies immediately. Fraud on the deceased is common. Scammers look at death notices and then go onto the dark web to find the person’s Social Security number, credit card and other personal identification info. The sooner the cards are shut down, the better.

Physical assets need to be secured. Locks on a house may be changed to prevent relatives or strangers from walking into the house and taking out property. Remove any possessions that are of value, both sentimental or financial. You should also take a complete inventory of what is in the house. Take pictures of everything and be prepared to keep the house well-maintained. If there are tenants or housemates, make arrangements to get them out of the house as soon as possible.

Accounts with beneficiaries are distributed directly to those beneficiaries, like payable-on-death (POD) accounts, 401(k)s, joint bank accounts and real property held in joint tenancy. The executor’s role is to notify the institutions of the death, but not to distribute funds to beneficiaries.

The executor must also file a final tax return. The final federal tax return is due on April 15 of the year after death. Any taxes that weren’t filed for any prior years, also need to be completed.

This is a big job, which is made harder by grief. Your estate planning attorney may have some suggestions for who might be qualified to help you. An attorney or a fiduciary will take a fee, either based on an hourly rate for services performed or a percentage of the entire value of the estate. If no one in the family is able to manage the tasks, it may be worth the investment.

Reference: Business Insider (May 2, 2020) “How to manage a loved one’s finances after they die”

Protecting a Digital Legacy

June 15, 2020

There’s never an easy time to talk about end-of-life planning, and a pandemic that has everyone thinking about death can make it harder, says the article “Wannabe Wired: Preparing your digital legacy,” from The Lawton Constitution. Most of us think about creating a will, making burial plans and ensuring that our loved ones are cared for when we are gone. However, planning to protect a digital legacy is often neglected.

You don’t have to be Bill Gates or own billions in bitcoins to have a digital legacy. In fact, most people don’t even recognize their digital assets as a new type of property. If you have bank accounts, social media, own any websites or have original music, artwork, or videos online, you have digital assets.

Prior planning can help your loved ones protect your digital legacy, as well as your traditional property.

Different online platforms have different policies about what happens to accounts owned by people who have passed. Sometimes there is an option to delete or deactivate a profile, if the owners have checked the right box. However, that’s not always the case. Many digital giants won’t allow someone who is not the owner, to gain access to their accounts or the data.

Start by making a list of user names and passwords. If you can, go through all of your accounts one by one to see if they allow users to make a plan for what happens if the owner dies. Some, like Facebook, allow the account owner to name a Legacy Contact. That person is permitted to manage tribute posts on your profile, deciding who can and who cannot post on your account and request the removal of your account. Just go to General Account Settings and click on the “Memorialization Setting.” You also have the option to have your account deleted after you die.

Not every platform makes this process so easy. Some will delete accounts, if there is no activity after a certain number of months or years. If you have a business that relies on a free email service like Yahoo!, this could cause your family to lose access to valuable information.

Once you’ve made a thorough list of all of your online accounts and passwords, talk with a trusted family member about your wishes for your digital accounts. Do not include the document with online accounts and passwords in your will! Remember that your will is likely to be a probated document, meaning that it will be entered into the public record. You don’t want people accessing your online accounts—it’s an invitation to identity theft.

Speak with your estate planning attorney about protecting your digital and traditional legacy. It will spare your loved ones a lot of trouble and provide you with peace of mind.

Reference: The Lawton Constitution (May 12, 2020) “Wannabe Wired: Preparing your digital legacy”

Steps to Take When a Loved One Dies

May 28, 2020

This year, more families than usual are finding themselves grappling with the challenge of managing the affairs of a loved one who has died. Handling these tasks while mourning is hard, and often families do not have time to prepare, says the article “How to manage a loved one’s finances after they die” from Business Insider. There are some basic steps to take when a loved one dies. The following are some tips to help get through this difficult time.

Someone has to be in charge. If there is a will, there should be a person named who is responsible for administering the estate, usually called the executor or personal representative. If there is no will, it will be best if one person has the necessary skills to take the lead.

When one member of a married couple dies, the surviving spouse is the usual choice. Otherwise, a family member who lives closest to the deceased is the next best choice. That person will need to get documents from the local court and take care of the residence until it is sold. Being physically nearby can make many tasks easier.

It is always better if these decisions are made before the person dies. Wills should be kept up to date, as should power of attorney documents, trusts and advance directives. When naming an executor or trustee, let them know what you are asking of them. For instance, don’t name someone who hates pets and children to be your children’s guardian or be responsible for your beloved dogs when you die.

Don’t delay. Grief is a powerful emotion, especially if the death was unexpected. It may be hard to get through the regular tasks of your day, never mind the additional work of managing an estate. However, there are risks to delaying, including becoming a target of scammers.

Get more death certificates than seems necessary. Make your life easier by getting at least a dozen certified copies, so you don’t have to keep going back to the source. Banks, brokerage houses, phone companies, utilities, credit card companies, etc., will all want to see the death certificate. While there are instances where a copy will be accepted, in many cases you will need an original, with a raised seal. In fact, in some states it is a crime to photocopy a death certificate.

Who to notify? The first call needs to be to the Social Security Administration. You may also want to send an email. If Social Security benefits continue to be paid, returning the money can turn into a time-consuming ordeal. If there are any other recurring payments, like VA benefits or a pension, those institutions need to be notified. The same is true when it comes to insurance companies, banks and credit card companies. Fraud on the credit cards of the deceased is quite common. When a notice of death is published, criminals look for the person’s credit card and Social Security numbers on the dark web. Act fast to prevent fraud.

Protect the physical property. Secure the home right away. Are there plants to be watered or pets that need care? Take pictures, create an inventory and consider changing locks. Take any valuables out of the house and place in a secure location. If the house is going to be empty, make sure to take care of the property to avoid any deterioration.

Paying the bills. Depending on the person’s level of organization, you’ll have to identify where the money is and if anything is being paid automatically. Old tax returns can be helpful to identify income sources. Figure out what accounts need payment, like utilities.

Some accounts are distributed directly to beneficiaries, like transfer-on-death accounts like 401(k)s, IRAs and life insurance policies. Joint bank accounts and real property held in joint tenancy will pass directly to the joint owner. The executor’s role is to inform the institutions of the death, but not to distribute funds.

File tax returns. You’ll have to do the final taxes, due on April 15 of the year after death. If taxes weren’t filed for any prior years, the executor has to do those as well.

Consider getting help. An estate planning lawyer can help with the administration of an estate, if it becomes overwhelming. Regardless of who handles this process, expect the tasks to take anywhere from six months to two years, depending on the complexity of the estate.

Consider these steps to take when a loved one dies. Focusing on a check list can keep you from allowing the grief to overwhelm you. If you would like to learn more about managing affairs for a loved one who has passed, please visit our previous posts.

Reference: Business Insider (May 2, 2020) “How to manage a loved one’s finances after they die”

Digital Assets Need to Be Protected

May 13, 2020

Most people have an extensive network of digital relationships with retailers, financial institutions and even government agencies. Companies and institutions, from household utilities to grocery delivery services have invested millions in making it easier for consumers to do everything online—and the coronavirus has made our online lives take a giant leap. Your digital assets need to be protected. As a result, explains the article “Supporting Your Clients’ Digital Legacy” from Bloomberg Tax, practically all estates now include digital assets, a new class of assets that hold both financial and sentimental value.

In the last year, there has been a growing number of reports of the number of profiles of people who have died but whose pages are still alive on Facebook, Linked In and similar platforms. Taking down profiles, preserving photos and gaining access to URLs are all part of managing a digital footprint that needs to be planned for as part of an estate plan.

There are a number of laws that could impact a user’s digital estate during life and death. Depending upon the asset and how it is used, determines what happens to it after the owner dies. Fiduciary access laws outline what the executor or attorney is allowed to do with digital assets, and the law varies from one country to another. In the US, almost all states have adopted a version of RUFADAA, the law created by the U.S. Uniform Law Commission. However, all digital assets are also subject to the Terms of Service Agreement (TOSAs) that we click on when signing up for a new app or software. The TOSA may not permit anyone but the account owner to gain access to the account or the assets in the account.

Digital assets are virtual and may be difficult to find without a paper trail. Leaving passwords for the fiduciary seems like the simple solution, but passwords don’t convey user wishes. What if the executor tries to get into an account and is blocked? Unauthorized access, even with a password, is still violating the terms of the TOSAs.

People need to plan for digital assets, just as they do any other asset. Here are some of the questions to consider:

What will happen to digital assets with financial value, like loyalty points, travel rewards, cryptocurrency, gaming tokens or the digital assets of a business?
Who will be able to get digital assets with sentimental value, like photos, videos and social media accounts?
What about privacy and cybersecurity concerns, and identity theft?

What will happen to your digital assets? Facebook and Google offer Legacy Contact and Inactive Manager, online tools they provide to designate third-party account access. Some, but not many, other online platforms have similar tools in place. Your digital assets need to be protected. The best way, for now, may be to make a list of all of your digital accounts and look through them for death or incapacity instructions. It may not be a complete solution, but it’s at least a start.

If you would like to learn more about digital assets, please visit our previous posts.

Reference: Bloomberg Tax (April 10, 2020) “Supporting Your Clients’ Digital Legacy”

Category: Digital Assets

A Letter of Instruction is a Good Addition

Digital Asset Laws Are Now More Common

Protecting a Digital Legacy

Digital Assets Need to Be Protected

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