Monthly Archives: May 2013

Digital estate planning: Does anyone know your passwords?

In a past post we discussed the challenges of dealing with our digital property like music, photos, and emails in our estate plans. Figuring out what to do with correspondence and other digital belongings is one element of estate planning that is changing with new technology, but it isn’t the only one. In addition to thinking about those issues, Texas residents should also take time to think about another issue: access.

Access to our digital lives is much more difficult to pass along than a pair of keys to a home or the code to safe. This is because we store our information in dozens of different accounts with various passwords and usernames that may or may not be written down anywhere. And while it is a relatively simple process to shut down a loved one’s Facebook account without password access (the site itself can help with that), it is quite another issue altogether to gain access to things like online banking or automatic bill paying.

While many of us have migrated our financial affairs to online platforms rather than paper statements, a recent study showed that 45 percent of high net-worth people who were polled had no organization system for passwords or online account information. This is a problem not only for access purposes, but for finding all of the assets that someone has after they pass away. Many people do not realize that after they pass away, family members, the probate system, and their named executor will all go on a hunt to make sure that there are no secret accounts or properties, or unknown children who are not listed in the a will. Without a paper trail to follow and no account login information to tell them where to look, executors are often at a loss to notify banks or portfolio managers that someone has passed away.

Readers: Do you have your digital life organized as a part of your will

Source:New York Times, “Leaving Behind the Ditigal Keys to Financial Lives,” Paul Sullivan, May 24, 2013.

Consider life insurance beneficiaries carefully

Many Texas residents have a life insurance policy, whether it is through their employer or a policy that they have taken out on their own, life insurance is an important way to make sure that our loved ones have some financial security after we are gone. 

Regardless of the sum involved in a life insurance policy, it is important to make sure all your ducks are in a row when you choose a beneficiary. There are a lot of ways that the ultimate goals of taking out the life insurance policy can be properly served, and just as many ways in which the final outcome might not go as planned. 

For example, many people may name their spouse as a beneficiary on a life insurance policy but later change their mind and want to name their children or they may divorce and want to name their new spouse. A lot of people think you can do this through a will that leaves everything to that newly chosen beneficiary, however, a will does not control what happens to life insurance proceeds so the payment will still be made to whoever is named on the policy itself, even if there is a contrary provision in the will.

Similiarly, sometimes people will name what is called a “class” on their life insurance policy, such as “all my children” or “my neices and nephews”. This means that when the policy is to be paid out, the insurance company will conduct a length and costly search to make sure that all living children are given a portion of the policy. And since some Texas residents may have children that they are unaware of or who they are no longer in contact with, this may create some confusion about the true intent of the gift. Instead, it is best to list specific individuals along with identifying information such as addresses, birth dates, and social security numbers.

Source:Fox Business, “Naming Life Insurance Beneficiaries: 10 Ways to Screw up,” Barbara Marquand, May 22, 2013

When estate planning meets family law

When Texas couples take their marriage vows, they promise to love and honor each other until death. When we get married, we are focused largely on the here and now and the exiting future for the family, but at some point it is also important to start thinking about what will happen if or when one spouse passes away before the other. This is a very sad thing to think about and plan for, but since it will be a reality for many people, it must be considered.

In addition to having the important conversations with a spouse about who will inherit what and how it should be passed down to friends or family members, spouses should also think about their individual estate plans. A lot of couples choose to execute the same or corresponding wills with the same attorney. This approach can have advantages and disadvantages, so it’s helpful to consider seeking individual counsel during the estate planning process as well.

There are both practical and ethical considerations to doing coordinated but separate estate plans with a spouse. For example, one spouse may have valuables or other assets that their partner does not know about that they would like to leave to a friend or relative instead of including in the entire joint estate. Or, a couple could choose to write their wills together using the attorney they work with on other issues, but that could give rise to a conflict of interest in the event of a disagreement between the spouses. In these sorts of situations, having an independent and unbaised advocate for each spouse can be helpful.

Source:Forbes, “Ethics in Estate Planning for a Married Couple,” Stephen J. Dunn, April 26, 2013.

Estate planning with your spouse

When Texas couples take their marriage vows, they promise to love and honor each other until death. When we get married, we are focused largely on the here and now and the exiting future for the family, but at some point it is also important to start thinking about what will happen if or when one spouse passes away before the other. This is a very sad thing to think about and plan for, but since it will be a reality for many people, it must be considered.

In addition to having the important conversations with a spouse about who will inherit what and how it should be passed down to friends or family members, spouses should also think about their individual estate plans. A lot of couples choose to execute the same or corresponding wills with the same attorney. This approach can have advantages and disadvantages, so it’s helpful to consider seeking individual counsel during the estate planning process as well.

There are both practical and ethical considerations to doing coordinated but separate estate plans with a spouse. For example, one spouse may have valuables or other assets that their partner does not know about that they would like to leave to a friend or relative instead of including in the entire joint estate. Or, a couple could choose to write their wills together using the attorney they work with on other issues, but that could give rise to a conflict of interest in the event of a disagreement between the spouses. In these sorts of situations, having an independent and unbaised advocate for each spouse can be helpful.

Source:Forbes, “Ethics in Estate Planning for a Married Couple,” Stephen J. Dunn, April 26, 2013.

Inheriting collectibles

Many Texas families have collections of some kind, like antique holiday decorations or specialty cocktail glasses. While these collections often hold a special place in our hearts and within our families, they may not hold a lot of monetary value. This is just one reason why considering this type of issue during the estate planning process is so important.

As with other sentimental items, family members often struggle to know what to do with collections after a loved one is gone. It is important to honor the memory and respect the person’s wishes, but with larger masses of items it can be difficult to strike the right balance. To save some of this emotional difficulty and possibly financial struggle, Texas residents should include some basic instructions on how to handle a large collection, including alternatives for when families want to either keep or not keep the items.

For example, perhaps the ideal situation would be for younger generations to keep the antique tea sets, but they are not interested at the moment. In the event that they are unwilling or unable to maintain the collection, consider whether a friend or fellow enthusiast might be a worthwhile recipient of the items.

For invaluable collections, the challenge is often finding a creative way to keep the sentimental value of the items while still dealing with the physical mass that can accompany large collections. As we’ve discussed in a previous post, smaller homes and more modest lifestyles brought on by the recession makes it more difficult for younger generations to hold onto heirlooms the way that they used to.

Source: New York Times, “The 700-Doll Question,” Jo Maeder, May 8, 2013.

Even young people should think about estate planning

We often make the mistake of thinking that estate planning is for someone else. Someone with more money, someone older, someone with more children, or someone with a more complicated family situation.

The truth is that estate planning is for everyone, and all Texas residents should take the time to consider what they want to have happen to their belongings and other assets when they pass away. Young people in particular often believe that estate planning is not for them, forgetting that they should plan for their pets, their retirement accounts, their cars, homes, and collectible items, even if this things hold little monetary value.

Another important element to estate planning for young people is healthcare planning. No one wants to think about what will happen after a car accident or other incident leaves them incapacitated, but for unmarried young adults, this is a crucial matter to consider. Without designating a friend, parent, or signficant other to make healthcare decisions, no one will have access to medical records or be able to discuss the next steps with doctors.

For these and other sensitive issues, it is important to understand the exact legal implications of filing out a particular form or completing certain documents. For example, HIPPA forms allow access to medical records, but do not provide for someone to make decisions in the event that the patient is unable to make them. As such, it is important to also designate someone as a healthcare proxy, which requires a different set of paperwork and different formalities.

Source:ABC News, “Even young adults should start estate planning,” Sheyna Steiner, May 6, 2013.

A $40 million estate with no heirs

A real estate developer who survived the Holocaust passed away at age 97 recently, leaving behind a legacy of mystery but no family members and no will. The man came to the United States after surviving a war that lead to the death or disappearance of any relatives here or in Europe. Officials in the state where he lived say that his $40 million estate is the largest in their history to go unclaimed by a blood relative or beneficiary under a will.

While most Texas readers have not been subject to a conflict of this magnitude, many people with small families or relatives in distant locations could be faced with a similar situation if they do not execute a valid will.

Even for people who do have children and siblings that may be eligible to inherit from them under state probate laws, executing a will is crucial in the event that those relatives do not live longer than you. However remote the possibility, it is always there, making it incredibly important to designate a backup plan.

For many people, this means choosing charitable causes or friends to inherit otherwise unclaimed portions of an estate.

In lieu of a known relative who has a legal claim to the estate, authorities have hired a genealogist to continue the search for a family member. They are also looking for a will or some kind that could indicate the man’s intentions for his estate. In the interim, a public administrator has sold the man’s primary home and auctioned off belongings and will manage taxes and other financial obgliations of the estate while the search continues.

Source:New York Times, “Holocause survivor left $40 million, but no heirs,” Julie Satow, April 27, 2013.