Estate Talk Blog

Estate Planning for your Digital Assets

When Michael was several years into his retirement, he felt that his estate plan was well up to date. He had addressed so many tangible assets in his life in that plan, from his home to his cars to a small but valuable art collection he and his wife had accumulated. Unfortunately, while the “physical” part of his estate plan was taken care of, Michael had neglected to address all the aspects of his digital life in that plan that were important – including all of his online accounts. So, once he passed away, he’d left behind quite the puzzle for his family to sift though and trace the answers to, which was the last thing they wanted to do in the midst of their grief.

How can your family prevent the same type of outcome?

Remember that digital assets need to be planned for in much the same way as the rest of your assets, so don’t marginalize them. Digital assets are easy to forget about because they become so ubiquitous to our daily life. Think about it – in a normal day, you’re on email, your smartphone, social media channels and using various web services. You’re also streaming entertainment services through music and television. Still, although it’s easy to not be conscious of it as you go about your routine, it doesn’t mean that it’s not something that needs to be addressed.

In an estate planning situation, you can decide to what degree that you’d like to inventory all of your digital assets, but one strategy is to have a list of service providers. It doesn’t mean including every account number or detail within that list, but by providing a list of banks, brokerages, advisors, and key online accounts, it will not be a complete mystery for whoever steps in later on.

What are digital assets?

And what needs to happen to ensure that this area of your life is as well covered as your tangible assets? Digital assets may include a range of things held electronically, from financial accounts, to files, photographs, social media, subscriptions, and on and on.

Financial Accounts
These can include:
– Bank accounts, such as checking, savings, certificates of deposit, etc.
– Brokerage accounts
– Retirement accounts

If you aren’t getting statements from these accounts through the mail and instead have set them up as paperless statements to be accessed online, some of these electronic communications take on a higher priority of your focus. An agent acting under a power of attorney needs to know what accounts exist, which bills need to be paid, and how to pay them. Similarly, an executor needs to be able to identify where assets are located, including where accounts are held.

Cloud Storage
Dropbox, Box, Google Drive, iCloud and other kinds of cloud services are vital because they may serve as a place where you currently store records, photos, documents, music and other types of files.

Business Records
Do you own a business and have a place where business records are stored? If you envision someone stepping in to take over your role or you’re trying to sell the business, having access to those business records may be very important.

Social Media
There are far too many social media services and platforms to mention, but to the extent that you have photos, subscriptions, etc., it’s smart to have a conversation now about these assets from your “digital estate” through our planning process.

Online Payment Systems
In the last several years, there has been a proliferation of online payment systems and applications in which people can exchange money back and forth, such as PayPal. There may be money sitting in those kinds of accounts, which would become part of the estate.

Subscriptions
Yes, that Hulu, Netflix or Amazon Prime subscription is going to be important for someone stepping in, either to maintain or deactivate. So keep track of any active ones you may currently have.

Passwords
With passwords, one has to be mindful of security risks should they fall into the wrong hands. As an alternate to writing passwords down, there are online password services that will allow you to set up access for a family member or an agent to use in case of an emergency. This is a way to expediently handle the proliferation of accounts and passwords, without compromising the security of the underlying accounts.

Cryptocurrencies
If you hold cryptocurrencies, you’ll want to provide instructions for how to access an account, identify the brokerage or exchange, and if necessary, conduct any exchanges. Since cryptocurrencies can be relatively volatile, it’s important for an agent or successor to have access without undue delay.

Cryptocurrency exchanges may be outside of Illinois jurisdiction, and possibly United States jurisdiction. Therefore, should things proceed to probate upon your passing, it’s essential that you provided a detailed set of instructions for the designated person who is going to step in for you.

We Can Help You Take Inventory Of Your Digital Assets

Besides a trustee, executor or agent, who else should be made aware of your digital asset list? It can include not only a contact list of people, but also a contact list for service providers, such as your accountant, financial planner, banks, brokerages, cloud storage providers, and more.

One thing is for certain – the scope of digital tools will continue to grow. That being the case, it’s a reason to take stock of them for an estate plan and if you have an existing estate plan that hasn’t been updated in the last couple of years, it’s time to take another look to ensure that it encompasses any digital assets. Windy City Legal can help you on two key fronts:

1) Advising you on how to assemble your inventory for a digital estate plan as far as what should go on your list, and

2) Creating the formal language necessary for a trustee, executor or agent to execute the appropriate steps necessary within certain documents pertaining to your digital assets.

Don’t view your digital assets as something nice to have in your estate plan. Many of them should have a place in your estate plan along with more traditional assets. Addressing them and incorporating them an estate plan will give your family the continuity and clarity they deserve. To get started, call Windy City Legal for a consultation at 312-278-1187 today.

What is the difference between a springing vs a durable power of attorney?

A power of attorney is a document that allows the principal – the person signing it – to appoint an agent, or someone else to act on the principal’s behalf. For both healthcare and property, there are two different types powers of attorney – springing and durable. Which you choose can have a big impact.

A durable power of attorney becomes effective when signed, or a particular date if specified. It will continue to be in effect until the person who created it either revokes it or dies, or a stated expiration date is reached. In the event of an incapacity, the power of attorney should be in effect without further action.

A springing power of attorney is intended to become effective (or spring into effect) in the event the person is incapacitated. In theory, a springing power of attorney would allow the designation of an agent to be made, as if in reserve.

Unfortunately, the springing powers of attorney generally require that a doctor designate the principal as incapacitated, or unable to make decisions for himself, before the agent has authority to act under the power of attorney. This has led to greater uncertainty with a springing power than with a durable power.

There are at least three problems with a springing power that do not exist with a durable power.

First, there is the potential for delay. With a durable power of attorney, the agent could act immediately in case of an emergency. With a springing power, the agent must obtain the determination that the principal is unable to act. This may take days or weeks.

Second, state and federal law and regulatory requirements may inhibit the ability of the agent to obtain such a designation until he is authorized. One example is HIPAA, the Health Insurance Portability and Accountability Act of 1996. Designed to protect patient privacy, among other things, it creates a conundrum: an agent under a spring power cannot act until the principal is designated incapacitated, and he may have problems receiving the designation unless he has appropriate documentation from the principal waiving HIPAA’s requirements.

Third, a medical provider may have other definitions, beliefs, or incentives as to what constitutes incapacity. So while the doctor has no exposure to the principal’s daily needs for care, or for financial and business affairs to be maintained, that same doctor has the ability to withhold the very certification that allows the agent to act. In other words, a springing power enables a third party to thwart both the principal’s decision-making and the agent’s ability to assist the principal.

Because a power of attorney needs to be reliably in place should the need arise, principals should give serious consideration to whether a durable power or springing power best suits their needs, and for the springing power how best to manage the risks of certification, or effectively a veto, by a doctor.

Myth: “My Family Knows My Wishes. We Don’t Have To Talk About It.”

Karl figured if anybody would be totally in sync with his wishes, it would be the loved ones closest to him – his wife and children. Writing these wishes down in documented form was something he thought was a good idea, but if something happened in the interim, he was confident that everyone would know what to do.

Big mistake.

Karl never did get around to putting the proper estate planning documents in place, much less discussing then with his family. As a result, with nothing in place, his family was headed for potentially long court proceedings due to a host of questions such as: Who is in the family? Who are the heirs? Who is going to step forward and become a representative for the estate?” And that was only the beginning.

Why Does This Problem Keep Happening To Families?

It’s a common perception that there are shared values within a family and that a surviving family member will implement the values of the person who has passed away.

Yet we can hear and interpret things differently, as you may have experienced in your own family. Just because one person thinks that he or she has been clear doesn’t necessarily mean that somebody else fully understood what they were saying or intended. Add multiple family members with different interpretations and it isn’t long before there is potential for conflict.  Also, memories fade.  As time goes on, merely having talked about a topic at one point doesn’t necessarily mean that it’s going to be remembered.

Saying “This Is What They Wanted” Is Often Not Enough.

There are also some legal problems with the idea that a surviving family member will implement a decedent’s wishes if not properly documented.  If one passes away intestate, or without a will, the provisions of the Probate Act will apply, regardless of other intentions. The best way to preserve those decisions is, again, to create the written estate plan.

What one had thought about the issue will not overcome the default provisions provided by law if he never took action to make a document to preserve those decisions. In many cases it involves a will; in others it may involve other estate planning documents. But the time to do that is before the need arises.

The Impact On Real Estate

Real estate can be a big question for an estate, particularly where the number of properties (or their respective value) does not match the number of heirs.  Who gets what? What if at least two of those kids want the same real estate? What happens then?  Is the property going to be kept in the family, or sold?  If it remains in the family, how will the ownership and maintenance be addressed?  Such issues should be resolved now.

The Impact On A Business

Imagine the type of questions when the owner of a family business passes away. What’s going to happen from here? In the case of a small business, there may be financial holdings, real estate, contracts, accounts receivable, intellectual property, inventory – and possibly liabilities as well. Without a plan, a statute could divide shares evenly among heirs, but that does not address the sale or continued operation of the business.  If not easily allocated and no plan is in place, there is the potential for disagreement, operational dysfunction, and even a diminution in value or wasting of the business.

Opening The Door To Probate

The purpose of probate is to administer the assets of the estate. If you fail to put an estate plan in place, what difficulties might be in store for your heirs in the way of the assets they should receive? No structure and no plan could lead to a prolonged probate process, as well as costs and potential disagreements that could have been avoided.   The clearest way to communicate your wishes is through a written estate plan that addresses the issues and leaves no question about it. They’re written down, fully documented, and properly executed.

 

Most people would agree that avoidable costs and potential arguments are not part of the legacy they want to leave.  It’s almost a given that without an estate plan, you’re going to have family members who disagree to the point of where the damage to the relationships could be irreparable. That’s not a legacy you want to leave behind. So talk with Windy City Legal about an estate plan that leaves no doubt as to what your intentions are for your family, your real estate, your business and any other important estate planning concerns.

 

Myth: “I Have To Give Up Control Of Assets I Put In A Living Trust.”

Do you have to give up control of your assets once you put them in a living trust? The answer is no – not necessarily. There are a lot of different kinds of trusts, to address many different goals and objectives. Also, some trusts are revocable and others are irrevocable.

For the purposes of this question, we’re going to focus on the revocable living trust. The word revocable means it can be changed – the trust can be revoked or it can be amended. (Irrevocable trusts are the opposite. They often do involve giving up a certain degree of control, in exchange for tax savings or other benefits.)

With revocable grantor trusts, the person (or couple) who owns the property and creates the trust often serves as the initial trustee. In the capacity of trustee, the grantor will have control of the property that is held by the trust. The trustee can sell it or exchange it. Financial assets can be invested. Real estate can be held for use, or it can be sold or rented, or another property purchased. Administering the assets as trustees rather than as individuals does not necessarily prevent the use of those assets.

A popular formulation of such trusts is for the trust assets to be distributed only after the grantors pass away. When that is the structure that is elected and implemented, the grantors should have access to the assets they have titled into the trust.

For more questions about wills, trusts and the types of considerations associated with estate planning, talk to Windy City Legal. No matter which stage of your life you are in, we’re here to help develop your estate plan to reflect it, and can help you keep it current as things change. It’s what we call Estate Planning For Life. Experience it for yourself by calling Windy City Legal today at 312-278-1187.

Dividing a Family Business in Equal Shares Might Be a Bad Strategy

Clients often express a desire to leave their estate to their children in equal shares. But when the estate includes a family business, that might not work.

For example, consider a situation where the father, Frank, has spent the last several decades creating and building a family business. Now as Frank ponders retirement, he wants to leave the business to his three children, Amy, Brian, and Colleen.

Amy is intensely interested in the business and has been working in it for the last several years. She knows the systems, processes, products, and clients. In fact, as Frank wanted to step back, Amy picked up the slack. She is ready to go immediately, so that the business keeps making money.

Brian is totally uninterested. He is an outdoorsman at heart, and hates the idea of being behind a desk of any kind.

Colleen has the aptitude for the business, but has a consulting job that has her working long hours. She is often out of town at client locations, and does not have the time to put into the family business.

Dividing everything equally would be unfair and impractical. Amy would be putting in all of the work for only a third of the profit. That is a recipe for disputes among the three children. It also may create other problems that arise in operating a business with absentee owners, from morale problems to governance issues. Worse yet, it would be possible for Brian and Colleen to out-vote Amy in any significant business decisions, even though they do not have any experience with the business or its operations, employees, culture, or products.

In other words, this is a case where an equal division would be unfair to Amy – and potentially also harmful to the business itself and to its employees.

Instead, Frank might think about other allocations of assets. One possible way is to designate the business to Amy and other assets for Brian and Colleen. A different strategy may be for Frank to purchase life insurance for benefit of Brian and Colleen to give them reasonably equivalent value. And there may be other possible solutions.

Estate planning fortunately allows a lot of flexibility to tailor a solution, and to avoid the kinds of situations that can impose stress on both the business and the family. If a small business is in the family, it pays to make sure that it will not fall apart because of – or due to – an artificial allocation among beneficiaries.

How Do You Choose a Good Executor?

One of the inevitable questions that comes up in estate planning is who to designate as the executor of your will.

It should be:
– Someone you trust,
– Someone who is organized, and
– Someone who is diplomatic.

Why?

Nominating someone you trust is a clear necessity. An executor will be responsible for collecting information about the assets you own and the liabilities you owe, paying off any debts and taxes, and then eventually distributing the estate according to the terms of the will. You must have confidence in whoever is entrusted with such information and duties.

Gathering the assets and liabilities requires some organization, particularly as statements from creditors and accounts owed roll in. Creditors may include utility service providers, open credit card accounts, home loans and mortgages, car loans, consumer installment contracts, medical service providers, subscriptions, clubs and societies that you belong to, insurance, and on and on. Assets may include bank and brokerage accounts, retirement accounts, insurance policies, real estate, personal property, and more. There potentially can be a lot to get organized, and someone who will approach it systematically is likely to be a strong choice.

Finally, the larger the family, the greater the number of people who have a potential interest. That can also increase the potential for a dispute, whether based on emotions or family history or perceived unfairness. Having a diplomatic executor who can deal with such issues — particularly at a time when emotions can run high — may be best able to keep the family on track and focused on moving forward together, and to diffuse any tensions that build up.

Myth: The Estate Plan We Wrote Will Be Fine Forever.

When Shannon and Joe executed their Estate Plan, they were delighted to have a plan that reflects their true wishes, and even covers a variety of “what if” scenarios.

“Now we have that out of the way,” they thought.

Only a few years later, some things in Shannon and Joe’s life began to change. They became proud grandparents, then decided to move to be closer to them. Joe started talking about selling his business earlier than he originally thought he would. And they began talking about how to help fund college for the grandkids.

These are not rare and unheard of circumstances, but they can impact the estate plans. And other unplanned, less fortunate circumstances can arise too.

So how do you deal with the unplanned in estate planning?

1) Replace “One and Done” with “Estate Planning For Life”

Some things you can see coming and some things you can’t. After all, life has its ups and downs. That’s why the best approach to estate planning is not to have a “one and done” mindset.

Instead, we emphasize revisiting the Estate Plan every so often ,including for each phase of life and each major life event. We don’t want to think about your life’s work being a single conversation or document that you sign and gradually forget about. We want it to be something that grows with you, changes with you, and reflects where you are now as well as where you’re trying to go.

2) Build a plan to address many “what if” scenarios

When you build your estate plan to take certain “what ifs” into account, you can better recalibrate where necessary, such as appointing different agents or reconfiguring the beneficiaries of certain things.

There are also major life events that should be taken in account. Weddings. Births. Job changes. Perhaps divorce. Eventually death. How will these kinds of events impact what you have or want in the estate plan? It’s possible that such an event leads you to change certain allocations, or to add or subtract provisions to take care of certain family members. In addition, there may be insurance or retirement accounts may need to be updated.

So rather than view the structure of your plan as permanent, look at it as a foundation you are continually building upon, re-shaping the structure where necessary.

3) Assume there will be law and technology changes

Over time, the law changes. For example, changes to the estate tax from time to time have changed certain estate planning priorities, and have led to different planning opportunities. Also, the enactment of HIPAA increased the healthcare-related documentation often included in plans.

We’ve also seen technology changes, such as the increase in online transactions through email, financial accounts, and even online photography through Instagram, Facebook, etc. It’s now important for an agent or executor to be able to access these kinds of digital accounts. That wasn’t an issue years ago. However, as technologies evolve, things change — and as they do, certain provisions in your estate plan may need to be updated.

Life isn’t a simple plan – make sure your estate plan can keep up.

If you don’t review an estate plan periodically, you’re taking a chance that you outgrow it. This creates a potential situation where you have documentation that doesn’t reflect your present set of circumstances.

Instead, with an estate plan that’s regularly updated, you can rest easier knowing that for all of life’s changes, you’ve done everything you can to account for where you are today, and what your wishes are for tomorrow. Let Windy City Legal show you how Estate Planning For Life offers a long-term approach you can be comfortable with. To learn more, call Windy City Legal at 312-278-1187 or schedule a strategy session with us right from our Estate Planning page.

Estate Planning for an Ever-Changing Life

John and Jessica are ready for a long and happy life together as they’re getting married in a few months. They’ve even decided to sit down with an estate planning attorney to talk about the long haul and putting some paperwork in place that expresses their wishes.

Just as they head off to their appointment with the attorney, Jessica turns to John and says, “You know, should we really talk to someone about this right now? After all, we’re going through a big change. Let’s just do this a few months after we get settled. Then we’ll have a plan that matches where we are.”

John agrees. A few months later won’t hurt anything. Of course, a few months stretches into a few years. That’s when John asks his spouse, “Hey, I think we should talk to our attorney about a will.” Jessica responds, “I’m all for it. But look, we’ve got a lot of big changes coming up – what with the baby arriving in six months and then we’re planning on moving into a bigger place. Let’s just wait until things settle down. Then we can have a plan that syncs up with our life at that point in time.”

But when is life ever truly “settled”? It seems like there always will be an impending life change happening. The instinct in people like John and Jessica is to wait until the change occurs so they can address estate planning to match their circumstances, but by the time they get past one event, another change will be on the horizon.

How to Break the Cycle of Fear and Make Estate Planning Real

A common fear of doing estate planning is that if you put plans in place today, those plans will be set in stone or inconsistent with your needs in no time. Instead, remember that life isn’t static and change is going to happen. This is not a reason to choose to do nothing at all.

In fact, it’s when you know there’s a change coming up that you have an incentive to create or update your estate plan accordingly. But a significant life event does not always change the structure of your estate plan, and does not necessarily mean having to start from scratch just to account for the update.

If you carry the assumption that you can’t take action right now, however, that attitude may result in you never taking any kind of action.

Plan. Pivot. Repeat.

At Windy City Legal, we see clients who are going through changes great and small. The big changes can consist of events like a marriage, birth of a child, divorce, or the recent sale of a family business. There’s no doubt that these can change the picture of your estate plan. But remember that we can pivot the plan to face such change when we need to. Change, regardless of the degree of it, is not a reason to hold off on estate planning. Nor is it a reason to hold off on updating as you go.

So rather than pressing the pause button and waiting for some mythical point in time when life “settles down,” seize the moment to tackle estate planning with us now. Call Windy City Legal at 312-278-1187 or schedule an estate planning strategy session with us today.

Myth: “Estate Planning Is Just For The Wealthy”

Cindy thought about estate planning for a long time, but when she was finally ready to make an appointment with an estate planning attorney to talk about it, she read that the estate tax at the federal estate tax threshold was over $11 million, and the Illinois estate tax started at the $4 million level.

“What am I worrying about,” she thought. “I’m not anywhere near that level! So my estate isn’t subject to an estate tax anyway. That’s for wealthy people to deal with.”

Not long after, Cindy got in a car accident where she was severely disabled. Her family members were distraught and jumped in to try to act on her behalf. Unfortunately, that’s where the problems began. Though her family all wanted what was best for her, they could not agree on what that entailed. Since Cindy hadn’t done any estate planning, nobody knew her true wishes on healthcare for herself, and she hadn’t designated anyone to act on her behalf. Consequently, dealing with doctors, hospitals, and insurance was a struggle.

Estate planning is for everyone who want to invest in continuity and stability for themselves and their family.

Let’s take a closer look at some of the reasons why estate planning is important, regardless of income level or net worth.

• Healthcare Planning
In the example of Cindy and her family, an estate plan can include healthcare planning. In the event of a disability or incapacity, somebody can step in and act based on instructions that are already written out. That way, the choices that you would make for yourself and take the actions that you would want taken can be implemented by the person designated to step in and help. Estate planning can also give designated people access to medical records so that doctors and hospitals can communicate with them. Some examples of healthcare planning documents that can be implemented include the healthcare power of attorney, living will, HIPAA authorization, and other advance directives.

• Guardianship
If you pass away or are incapacitated, who is going to take care of your children if they’re under the age of 18 or have special needs and can’t be left alone? Estate planning can help you nominate the individual you would like to see designated as guardian for your children. It also helps you think through who best would match your values, the needs of the child, and how care would be funded. Other considerations may include whether the potential guardian is good with children, responsible with money, and has a stable home and work life. Making a careful selection among those qualified and willing to act can minimize the impact of the change on the child.

In contrast, failing to address the question of who to appoint would not make the question go away should the need arise. Instead, there is a chance that your family will be involved in a heated dispute over who should be the guardian of your children – and this is a period of time when the children are going to need as much stability as they can get. Prolonged court activity is not what will bring stability quickly. Or perhaps no qualified family member or friend of the family emerges, and the court appoints someone with no prior relationship to the child or the family. That’s usually a less desirable outcome than making a decision as far as who in the family is qualified and willing to take on that role.

• Avoiding Probate
Probate is a process by which a decedent’s affairs are settled, debts are paid and property is distributed. It can take a significant period of time, and it is a public kind of proceeding. Estate planning offers opportunities to implement trusts and other structures that may reduce or eliminate the need to go through probate. Without estate planning, probate should be expected for people who own any real estate, or who have assets of $100,000 or more. That figure applies to everything, including cars, bank and brokerage accounts that are held in your name, any art, jewelry, or collections, household objects and furnishings, and more. With a lifetime of working and accumulating assets, it doesn’t take long to reach this threshold.

Stability. Continuity. A strong family. These aren’t things that should be reserved for the very wealthy. Every person deserves it and estate planning is a key tool to deliver it from one generation to the next. So whether you’re just starting out or have a high level of assets, Windy City Legal can help you customize a plan that addresses your needs, and identify any areas that need to be re-aligned. By having a discussion of what you have and what can be put into place, Windy City Show can show you why estate planning is an outstanding investment in yourself and your family. To get started, call Windy City Legal at 312-278-1187 or schedule an estate planning strategy session.

Myth: “I don’t need estate planning, because my spouse will get everything.”

A group of friends decided to meet up after work the other day. The conversation turned to their families and how much their kids had grown in such a short time.

Joe commented that he and his wife had just done some estate planning. Tom shrugged. “My wife will get everything anyway, so why bother?”

But Tom was both incorrect and shortsighted.

As a father, his wife would only be entitled to half of his estate. Without an estate plan that specifically articulates his intentions, his estate would be governed by the Illinois Probate Act. The default provision under the Act would provide half of his estate to his children, not the whole of the estate to his wife.

Would that arrangement provide enough for her? What would happen to the house? Are the children over 18 and able to care for themselves, or are they still minors? What other problems will manifest themselves?

In addition to those potential problems, what if Tom’s wife were to pass away before Tom? If something were to happen to him too, his lack of action would expose his heirs to the time and costs of a probate court proceeding to settle Tom’s estate, and to potentially avoidable costs and delays.

If his kids are not yet 18, their fate becomes uncertain. Who becomes their guardian, and who will ensure their welfare?
Tom can address these and other potential problems by following Joe’s path and creating an estate plan. And if he does not, Tom’s kids may wish that he had.

Ultimately, estate planning is an investment in stability and continuity. It can be tailored to the needs of the individual and his family, and can be updated over time as goals change. But it remains a foundation that supports the needs of the family, even when the person who first created it is no longer around.