Illinois Estate Planning and Elder Law Blog

Nearly everyone has a digital presence these days, but many people fail to consider their digital assets when designing their estate plan. As a result, loved ones of someone who has passed away often face great difficulties in trying to access, collect, maintain, or close their digital accounts. After addressing what digital assets are and why they should be addressed in an estate plan, I will write next week about the steps one can take to plan for their digital assets.

What Are Digital Assets?

More and more essential parts of our lives are moving online or onto a cloud, and the COVID-19 pandemic has accelerated this trend.

With a Google account, you have options to control your data and the tools to manage your account – and you can also tell Google how to manage this account as part of your estate plan.

Google accounts and apps are used for a wide variety of purposes, including email, creating and managing documents, spreadsheets, photos, and navigation. In order to use Android phones and tablets, Chromebooks, and to install mobile apps, you also need to have a Google account set up.

Managing your digital assets is a vital part of estate planning. If you become disabled or pass away, what will happen to your online accounts? When it comes to powers of attorney and executing your will, what does the law require regarding these accounts?

A number of well-known celebrities who were worth millions, including Princess Diana, Prince, Heath Ledger, Michael Jackson, and Kurt Cobain, have passed away in recent years without an up-to-date estate plan or without any estate plan at all. As a result, lengthy and stressful legal battles were fought over their assets and were decided by people they did not get to choose.

While most people don’t have the same amount of wealth as these celebrities, it doesn’t make estate planning any less important to be able to leave a legacy and pass down wealth to family members.

The No. 1 Estate Planning Mistake

Last week I wrote about beneficiary designations, and today I will finish writing on that topic and talk about different ways these designations may be set.

In the case of many contracts, as well as a will or trust, you can pre-determine how assets might be divided if one or more of the beneficiaries has already passed away before receiving their share of the inheritance.

Suppose a mother has three adult children who are the primary beneficiaries of her life insurance policy. Upon the mother’s death, each of her three children would receive one third of the policy proceeds.

When it comes to estate planning, one item that can often be forgotten or overlooked but can also be easily remedied is updating your beneficiary designations. Taking an hour of your time now to look these over can ensure you have a say in what happens to these funds when you’re gone.

A beneficiary – which can be either a person, entity, or charity – is named to make the transfer of money quick, easy, and clear. While people often choose their spouse, child, or another family member to be the beneficiary, you can also choose a trustee of a trust, an estate, or a charity.

The most common accounts that allow you to name a beneficiary to inherit the account value upon your death are:

The beginning of any new year is a good time to reflect, look forward, and plan for the future – especially this year with a pandemic that has made self-reflection that much more important.

So many things have changed, including things we took for granted or overlooked before now. We as individuals have also changed during this time.

Most of us have faced the fact that we are not immortal, and we may have thought more about our own aging and immortality this year than we had in previous years.

There is no one-size-fits-all tax planning strategy, especially this year with so many new factors and uncertainties. The current pandemic has had a great impact on all of us as it has brought mortality to the forefront of our minds and prompted a lot of people to review estate planning strategies.

Because of the current low interest rate environment, now is a good time to consider the techniques available to transfer wealth to other family members at substantially reduced gift tax cost.

A Grantor Retained Annuity Trust, or GRAT, is one estate planning tool used to minimize taxes on large financial gifts to family members. Using this method, property can be transferred to an irrevocable trust for a specific period of time in exchange for annual annuity payments, and the beneficiary receives the remaining assets at the end of the trust term. When interest rates are low, it is more likely that the amount passing to the beneficiary will be greater than the calculated amount of the gift, allowing them to receive assets gift-tax free.

Everything can go more smoothly when tailored to fit an individual’s needs. This is especially true of estate planning, as Carol Ann Fey, of counsel at Artz, Dewhirst & Wheeler in Columbus, and Mary Eileen Vitale, principal at HW & Co. CPAs & Advisors in Beachwood, explain:

“The reason (to personalize your estate plan) is to make sure assets are taken care of properly and they end up going where you want them going forward,” Vitale says. “So, you want to make sure the parameters get assets transferred correctly. For example, if a beneficiary has special needs that need to be taken care of, you want to make sure your documents do that. Generic documents don’t typically take care of that. Even if you have ‘regular circumstances,’ everyone’s ‘regular’ is going to be different and you don’t know how that will affect how assets transfer.”

One clear example of this is do-it-yourself estate planning templates. Although there are a number of these templates available online that may appear to get the job done, it is difficult to know if these very general plans will end up covering everything you need.