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.
Usually when you visit an estate planning attorney, there is a LONG form to fill out describing family, last wishes, assets and liabilities, and who should be your executor, trustee, or guardian of minor children. There are often conversations about health care choices, nursing homes, and how the primary residence should be owned.
When was the last time your attorney asked you to write down your Facebook username? Probably never. In our rapidly changing relationship with technology, what we own and how we own it is also changing. I heard on the radio this morning that 60% of bills are paid on-line now (this is why the U.S. Post Office needs to shrink).
Think about how that will affect the person who probates your estate…We used to hope that there would be an organized file with bills and account numbers, we’d count on the mail coming with statements and other account numbers. How do we find the electronic accounts that “Aunt Edna” kept on her office computer? How will we find the beautiful photo albums that mom kept in her Flickr account? What about the software that has three years left on its license – who owns that, and what is it worth? How on earth do you cancel the monthly Xbox Live account? (Anyone who can provide this information to currently living mothers will also score some major points!)
Let’s get started on our digital asset planning. I’ve got another long form that I’m happy to e-mail to anyone who requests one. Please put “digital asset planning” in the subject line and send a request to firstname.lastname@example.org.
I recently had a client explain that they wanted a trust because Suze Orman said that everyone needed a trust. Now, in general, trusts meet many needs, and are often a good idea. Especially if there are minor children, adult children who might do better with structured payments, or long term care planning concerns, trusts can fill a valuable need. However, just as not everyone NEEDS a prenuptial agreement, not everyone needs a trust.
Trusts help you avoid much of the probate process, but there are other ways to do this, too. If your assets are jointly held with your spouse, and one of you dies, the assets will go “by operation of law” to your spouse without going through probate. In a similar way, anything with a beneficiary designation (life insurance, annuities, most retirement accounts) will go to that beneficiary directly. The probate court will oversee any assets that pass through your will, and sometimes this can be a good thing. It does take time to probate an estate, but if the assets are fairly limited, the cost of setting up a trust may not be appropriate.
Regardless of whether you do or do not need a trust, please call an advisor you trust before you make important estate planning decisions, I know that you aren’t cookie cutter clients, why should you have a cookie cutter estate plan?
I want to re-finance my house, consolidate all those little IRAs and 401k’s from old jobs, get a new passport, make a will…What’s the common denominator? When you start on any of these tasks, you need to be able to put your hands on paperwork, sometimes LOTS of paperwork. Do you know where your birth certificate, bank statements, investment statements for the last three months are? And I mean you can hand them to someone easily, not that you’re sure that they are in the big pile over there.
Or, could you tell someone else where to find your life insurance policy, homeowner’s policy, or auto insurance policy if you were away on vacation and you needed to file a claim?
Join us for a complimentary seminar on May 26th, 2011 at 5 pm at the Cape Ann Savings Bank in Gloucester. Gail Ramos, Senior Trust Officer at the
Cape Ann Savings Bank and I will talk about getting a grip on organizing some of that paperwork…Networking from 5 to 5:30 and the program will go from 5:30 – 6:30.
Everyone has a different reason for beginning, updating, or implementing an estate plan. Usually one very specific reason. For some, it’s the birth of a child and the need to secure their future. For another it might be a divorce and the need to separate in life and in death. For a third, it’s the death or illness of a loved one that makes a client realize that planning can make a death either easier, or much harder for their family members.
For others it’s a chance encounter or event. I have some friends who were first time homebuyers, excited about a great home, and in a hurry to move in with their young family. Sadly, the elderly owner of the home passed away two weeks before the closing. This could have completely derailed this family’s plans, but the home was held in a trust. The home did not need to go through probate since it was legally owned by the trustees. Because of this, the closing could continue, and the heirs and the family were able to finish the transaction quickly and efficiently. You can be sure that the young family was much more enthusiastic about good estate planning once they had seen it in action.
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.
Are you the kind of person that makes New Year’s resolutions? If so, getting your finances and planning organized is a great goal for 2011. I often provide clients with a “document organizer” which is essentially a list of your various important papers and where you store them. This is useful when you re-finance your house, when you prepare taxes, meet with your financial planner, or if someone should need to step in and find something on your behalf. Feel free to contact me if you’d like to receive one. (email@example.com; put “document organizer” in the subject line.)
Below is a list of other action steps to take as you think about getting your estate plan in order for the New Year. (I once met a woman who spent every New Year’s Day putting together her filing system for the coming year, I can’t personally claim to do that, but she WAS one of the most organized people I had ever met…)
1. Get organized! Put your papers somewhere all together, label as appropriate, and then tell someone where they are.
2. Communicate! If you have special wishes, let your family, or loved ones know what they are; if you plan to treat children differently, let them hear about it from you, along with your reasons, to prevent resentment later.
3. Plan! The best way to create a legacy, to be assured that your wishes are followed out, and that your family is cared for as you want is to make sure all this information is known, communicated, and executable.
Best wishes for happiness, peace and prosperity in 2011.