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It’s nearly always imperative to take a multi-faceted approach to estate planning as it involves the health and finances of multiple people. Ensuring that family and loved ones are taken care of in the way that benefits them most requires proper planning. One estate planning tool that is especially helpful is a life insurance policy.

Life insurance, much like a last will and testament, is recognized by most people as something used upon death. However, the benefits of a life insurance policy, the options available for it, and possible unexpected consequences are not always well known.

People often think of life insurance as income replacement for an individual’s dependents, and this is especially important for those who are a significant provider for their households. It is also important to keep in mind homemaking spouses, particularly those who are primary caregivers of minor or disabled children, as the expense of hiring caregivers, cleaning services, and food preparation might be a lot higher than the income of a spouse working outside the home.

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Estate planning can be extremely confusing for a lot of people. In last week’s blog post, I addressed 5 common estate planning myths that often cost individuals and their loved ones time and money and add extra stress to their lives. Here are 5 more common estate planning myths:

  1. If I have a will, I don’t have to worry about probate. Although a will gives the court guidance on your wishes, having a will doesn’t make it so that you can avoid probate. Probate can be a long and expensive process in which one or more courts decide who will inherit your assets, so wanting to avoid it if possible is certainly understandable. It is important to note, also, that if you have real estate in multiple states, each of your properties may have to go through probate in its respective state.
  2. To avoid probate, you have to draft a trust. If you plan to draft a trust, this is definitely one area for which you may want to hire an attorney. Although avoiding probate is one of the most common reasons for people to want to draft a trust, there may be other methods that are easier and/or less expensive that will still meet your needs.
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If you find estate planning confusing, you’re not alone. Estate planning is one of the areas of financial planning with the most widespread confusion, and this can lead to costly mistakes and unnecessary loss of time and money as well as excess stress for people’s loved ones.

Here are some common estate planning myths (I will address 5 now and then 5 more next week):

  1. I’m too young for estate planning. We never know for when we will need our estate plan – and when we do, it is already too late. Although our specific needs change depending on which stage of life we are in, estate planning is important for those young and old alike.
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With the current 2020 federal estate tax exemption amount being $11.58 million, a lot less people are needing to plan around this tax while mapping out their estate plan, and more planning can be focused on saving income taxes for family and heirs. Saving income and transfer taxes has always been part of the goal of estate planning, and this was more challenging to do when both the estate and gift tax exemption level was lower.

Below are some strategies to keep in mind:

Plan gifts that use the annual gift tax exclusion. When you make transfers using the gift tax annual exclusion during life, the transferred assets as well as post-transfer appreciation generated by those assets are removed from your estate.

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These days, our lives are surrounded by a lot of uncertainty and more people are thinking about their own mortality. Many people are choosing to review and update their estate plans during this challenging time. One thing that can easily trip up an estate plan is not paying attention to how assets are owned. Titling assets in a way that does not work with your estate plan can result in additional cost to your estate or to assets being passed on in a way that does not fit with your wishes.

Here are a few examples of ways this can go awry:

  • Your estate attorney recommends a revocable living trust so that your assets do not need to go through probate and to provide for the management of these assets in case of your incapacity. After you set up the trust, your attorney informs you that you need to retitle your assets in the name of the trust. You intend to do this, but you are extremely busy with other matters in your life and don’t get around to doing it. If you die before you retitle the assets, they will most likely have to go through probate, costing your estate money and your loved ones time as well as exposing your assets to public scrutiny. If you become incapacitated before retitling the assets, this would likely lead to undue delay in the management of those assets. Taking the time to retitle the assets before your death or incapacity would have provided the promised benefits with your trust.
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There are a lot of options in online services to draft estate planning documents, such as wills, trust, durable powers of attorney, and healthcare proxies. These online services can appear to be a very good option for most people. With these options available, is it necessary to use an estate planning attorney?

An effective estate plan combines learning from the past, adapting to the present, and anticipating the future. While these document generators codify learning from the past through processes and procedures and have some elements that adapt to the present, they do not provide a way to anticipate the future in the way that a professional advisor can.

An estate planning attorney can help you to anticipate the cause and effect relationship between the choices you make today and the effect it may have on your future goals and objectives. They can also help you to identify what might prevent you from achieving your objectives, to determine the likelihood of these things happening, and plan for what to do if they occur.

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As the digital world becomes a bigger part of our lives, many people have accumulated a lot of “digital assets,” which are non-physical assets that exist online in electronic format. Most estate planning clients preserve these assets either for their sentimental value or financial value. Those held for their sentimental value include things such as digital photos, music, movies, eBooks, information and documents stored on cloud accounts, subscriptions, smart-phone applications along with the data stored on these applications, and social media accounts. Digital assets preserved for their financial value include cryptocurrencies, bank or investment accounts, credit card rewards, income-generating websites or blogs, digital videos or written works that produce income, email accounts, and digital copyrights or trademarks.

With the rise of digital assets also comes the increased threat of cybercrimes. Cybercriminals are able to steal information by hacking into online user accounts and then sell information from these accounts on the black market. They also target online investment accounts that produce substantial financial gain. A 2019 survey conducted by Morgan Stanley revealed that cybersecurity risk is a major concern for high net worth individuals. These individuals often seek attorneys who can help manage and protect their digital assets and help them navigate the legal framework controlling these assets.

Different states vary in their legal treatment of digital assets, but there are certain statutes that protect digital accounts from cybercrime. The Computer Fraud and Abuse Act (CFAA), for example, criminalizes the intentional access of a computer system without authorization. The Stored Communications Act (SCA) also prohibits the intentional access of an electronic communication without authorization. Violation of these acts is punishable by imprisonment and a fine. Additionally, all but a few US states have adopted the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA), which allows fiduciaries such as agents under powers of attorney, executors, guardians, and trustees to access a client’s digital assets upon the client’s incapacity or death. Without RUFADAA, it is more difficult for fiduciaries, particularly executors, who have a duty to protect a client’s assets, to collect digital assets upon a client’s death or incapacity. Digital assets that live “on the cloud” unclaimed and unmonitored by owners can easily become a target of cybercrime.

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Bank of America reached a settlement with the federal government over allegations of discriminatory policies against individuals with disabilities under guardianships.

According to the U.S. Department of Justice, Bank of America maintained written policies that barred adults with disabilities under legal guardianships or conservatorships from obtaining mortgages or home equity loans. These policies were in place from 2010 and lasted until Bank of America changed their policy for mortgages in 2016 and for home equity loans in 2017.

The Justice Department said these practices violate the Fair Housing Act. This act protects people from discrimination when they engage in housing-related activities, including renting or buying a home, getting a mortgage, or seeking housing assistance.

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The Social Security program, in addition to providing retirement benefits, also provides disability payments to those who are unable work because of a physical or mental condition. Unfortunately, the process that applicants (who are often older and poorer than most Americans) have to go through in order to start receiving these benefits can sometimes take years.

According to a new report from the U.S. Government Accountability Office, which is a nonpartisan federal agency, nearly 110,000 people died from 2008 to 2019 while waiting for an appeal after initially being denied Social Security disability benefits.  Additionally, 50,000 people who were waiting for their cases to be resolved filed for bankruptcy between the years of 2014 and 2019.

The median wait time for the appeals process was 506 days last year, and rose as high as 839 days in 2015, according to the U.S. Government Accountability Office.

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Q:How long are wills good for? Can you renew them or do you have to make a new one? How about powers of attorney?

A: Wills don’t expire or become invalid over time, so once you have created one, you won’t need to renew or replace it after a certain number of years. However, you will want to make sure to update it following certain life changes.

The same is also true for a power of attorney – it does not expire, especially in the case of a durable power of attorney. You can, however, choose to give a POA a time limit that is specified in the body of the document, such as a limited POA created for a specific transaction or period of time.

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