I’m almost 50, I use computers every day. My life is more organized and more efficient because of on-line banking, automatic bill pay, PayPal, and my smart phone. What happens to my life if I get hit in the head and forget my passwords? Have you ever forgotten the secret questions for the ITunes account you opened 8 years ago? Have you ever had a small child “re-set” your security code on your Iphone? Have you had a loved one pass away and have no way to access their email account or banking services? If any of these things have happened to you, you know that digital assets are an important part of life today.
All these services, data, and passwords are part of your digital assets. Your music collection on ITunes is a digital asset, as are photos and albums you store on the internet, blogs you write for personal enjoyment or for business, content that is published on YouTube or on Twitter. In many cases, these assets are licensed to you personally. If you die, your heirs may have not rights to them. If you become incapacitated and no one knows about them or how to access them, they may be lost. It makes sense to keep track of passwords, account numbers and names, security questions, where your domain is hosted, what email it was associated with when you set it up, and much more. It may also make sense to designate someone who can control these assets if you are not able to. Many estate planning attorneys are adding rights to digital assets to durable powers of attorney. Others are specifying what happens to digital assets in wills or trusts. Everyone should have a digital asset organizer that you update on a regular basis, preferably kept somewhere that a friend or loved one will be able to find it if they ever need to.
First, a trust is a form of ownership that separates legal title from beneficial ownership. So something held in trust is “owned” by trustees for the benefit, according to the terms of the trust, of the beneficiaries. A trustee is a fiduciary, and is required to follow the terms of the trust. Trusts have been around for centuries, and are used to serve several different purposes.
You might consider putting your home in a trust so that when you pass away it will go directly to the beneficiaries, without going through probate. You might also put a residence into trust so that you don’t technically own it anymore, but you can still benefit from it in some way (you might be able to continue living there, for example). Assets held by trusts often provide protection from creditors. If your son is a beneficiary of a trust, a creditor or divorcing spouse typically could not reach the principal of the trust, as he does not technically “own” the assets. People also put homes into trusts for Medicaid planning, or for estate tax planning. These types of trusts need to be irrevocable and carefully drafted.
Trusts take on-going work and administration once they have been created. Irrevocable trusts, in particular, require their own tax ID number, and tax returns must be filed annually.
When you put a residence into trust, you take the title of the property from your name, and put it in the name of the trustees. This is accomplished by drafting and executing a deed which is then recorded in the local registry of deeds.
Trusts can be confusing or relatively straightforward; they can provide asset protection, a way of planning your legacy, or a way of protecting your family from unexpected events. They’re an outstanding way of creating structure for a family member who has special needs, or unpredictable spending habits. If you decide to do trust planning, choose your attorney carefully, and be certain that your advisor has experience working with the type of trust you need.
A homestead protects a person’s home from certain creditors. In some states, this protection is automatic – when you purchase a home and live in it, you receive a certain amount of protection from creditors. In Massachusetts, you needed to declare a homestead, and file it with the probate court — until recently. On December 16th, 2010, Governor Patrick signed into law a bill containing a series of important amendments to the Homestead Act (Mass. General Laws, Ch. 188). The new provisions will be effective on March 16, 2011.
One important change is that homestead protection of $125,000 will be automatic; greater protection (up to $500,000) is available with the filing of a homestead declaration form. Forms are available to download from salemdeeds.com or from other county registry websites.
The other important change, particularly if you are doing estate planning (and really, why else would you be reading this blog?) is that a home held in a trust can now be protected by the homestead declaration. This provides clarity which has been lacking, and it tis a welcome change for homeowners who have elected to place their homes in trust. Next week I’ll talk about the benefits of putting your residence into a trust.