Dealing With Digital Assets In Your Estate Plan

In the 21st century, we now have to plan not only for financial and personal assets, but also for digital assets. We often forget to plan for these accounts. In Missouri, there is no law regarding digital assets. But that doesn’t mean we can’t take steps to plan. There are many reasons
to do so, including just making sure that your spouse or family knows what accounts they will need to deal with and how to locate them. Here are some tips for how to handle your digital assets after death:

1. Create an inventory. Make a list of all of your online accounts, with usernames and passwords. Make sure there is someone that is aware where to find the list.

2. You may want to use a password manager, such as LastPass, and share that information with your trustee or executor, but don’t put log-in information or passwords in your will or trust.

3. Write a document stating your digital-asset plan or write it into your estate documents. When you do this you need to be very clear about it. The more specific you are about who is in charge of these assets and the assets to which they should have access. You can include a specific statement that the trustee or executor should have the same access as the account holder for all of his digital accounts, specifically including the access to the content of the digital accounts (e.g. content of the emails). Of course, that is if you want them too!

4. You may also want to leave for your trustee/executor a statement of intent for digital assets or specific directions for each account. Also, due to the fact that an average American could have hundreds of accounts, you can write a general statement of intention to encompass
all other accounts that you don’t specifically name — past, present, and future.

5. Think carefully and be specific about what you want your executor to have access to. For example, can he read all of your email messages? If not, be direct about that issue in your statement.

6. Pick your executor carefully. Consider what information they’ll have access to in your online accounts—and also that they’ll need at least some tech savvy to deal with those accounts.

Thomas Walters Estate Planning builds lasting relationships with our clients based on the highest standards of integrity and professionalism. We help our clients customize plans that meet their unique needs, concerns, and goals. We compassionately assist families after the loss of a loved one. We believe that a well thought out and professionally developed plan will provide peace of mind making transitions for generations stress free and cost efficient.

Estate Planning for Blended Families

Issue 1: Simple wills inadequate to protect children from previous marriages:
Joe (age 77) and Beth (age 75) are in a long-term second marriage. Joe has two children from a previous marriage, Ashley (age 50) and Dawn (age 48). Beth also has two children from a previous marriage, Jeremy (age 45) and Jason (age 44). Joe and Beth have simple wills that give their entire estate to the surviving spouse with contingent gifts for the four children. After Beth dies, Joe moves closer to his children and becomes estranged from Jeremy and Jason. He changes his will to give his entire estate to his children.
Issue 2: Delayed inheritance leads to litigation:
Andy, a widower (age 56), marries Paula (age 25). Andy has two children, Alexis (age 24) and Lauren (age 21), from his previous marriage to Maureen. Andy wants to provide for his new wife, but does not wish to disinherit his children. He creates a trust that names his two children as remainder beneficiaries. Andy dies and his children eventually become resentful for having to wait until Paula’s death to receive their inheritance. They institute litigation against Paula over extravagant distributions from the trust.
Issue 3: Long term care needs threaten inheritance:
Linda and Mike marry when they are in their 60s. Linda has significantly more assets than Mike. Both Mike and Linda have children from previous marriages. Linda is concerned that her children’s inheritance will be diminished if Mike ever requires long term care, which she would have to pay for with her own funds.
Issue 4: Child’s blended marriage raises estate planning concerns:
Chris and Lisa have a happy first marriage with two children, Ryan and Rory. Rory is married to Ken, who has children from a previous marriage and has difficulty keeping a job. Chris and Lisa are concerned that if they leave an inheritance outright to Rory, Ken will “permanently retire” and live off of the inheritance.

• Married couples in which one or both spouses have children from a previous marriage.
• Families with children who are in second or subsequent marriages and who have children
from previous marriages.
• Families with children whose spouses have children from previous marriages.
Blended families can face complex estate planning challenges. Issues can arise between spouses, or between children and their spouses. Typically, individuals in blended families want to provide for the spouse as well as the children from the previous marriage. In some cases, they also want to provide for the children from their spouse’s previous marriage.

• Several trends related to divorce have increased the number of blended families.
• Approximately 50% of American marriages end in divorce.
• Approximately 60% of remarriages end in divorce.
• Approximately 43% of marriages are remarriages for at least one party.
• The average duration of these marriages is 7.8 years.
• There are approximately 1,160,000 new divorces each year.
• Approximately one million children each year have newly divorced /divorcing parents.
• 54% of divorced women remarry in five years.

• In a blended family, estate planning challenges can include:
• The potential for children to be disinherited.
• Delays in the children’s receipt of inheritance until after the death of their parent’s spouse.
• The need to protect assets from former spouses.
• Disputes over division of authority or responsibility.

There are many ways to plan for these challenges.

Thomas Walters Estate Planning builds lasting relationships with our clients based on the highest standards of integrity and professionalism. We help our clients customize plans that meet their unique needs, concerns, and goals. We compassionately assist families after the loss of a loved one. We believe that a well thought out and professionally developed plan will provide peace of mind making transitions for generations stress free and cost efficient.

5 Goals of Estate Planning For Farmers

1. Transfer Ownership: The primary goal of estate planning is to facilitate the transfer of ownership and management of the farm business, farmland, and other assets. Estate planning ensures that the farm/ranch will be passed along to the intended party with as few complications as possible, and per your wishes, taking into account family situations, taxes, medical conditions.

2. Reduce Estate Taxes: The second goal of estate planning is avoiding unnecessary transfer taxes. Transferring ownership of assets can be very complicated for the layman, and amid the complex laws and confusing language is the potential for extreme transfer taxes. Very often transferring real estate through a trust will save or eliminate taxes. There may also be agricultural exemptions to take into account.

3. Secure Financial Future: The third goal of estate planning is to ensure financial security for all generations. Without proper documentation showing how assets should be allocated, the state has the ability to distribute the estate as it sees fit. Just as important, the estate can be set up so that the costs of medical care, funeral costs, and the costs of settling the estate are covered by the estate, rather than on the shoulders of the estate’s beneficiaries. The estate can also be set up to provide living costs, educational costs and more for the surviving heirs. The
distribution of the estate, especially if one child wants to keep the farm, can also be set up so to be fair to all children.

4. Develop Management Skills: The fourth goal of estate planning in the farm/ ranch context is to develop the next generation’s management skills. With a properly planned estate, you and your family can choose the business ownership structure and asset transfer methods that allow the younger generation to participate in the management and ownership of your farm/ranch as soon as both generations are ready.

5. Keep Land in Agriculture: The fifth goal of estate planning may be to keep productive land in agriculture. There are different mechanisms that can be used to ensure that the farm/ranch will continue to be actively used in agriculture in the future, such as conservation easements, or even donations to charity.

Thomas Walters Estate Planning builds lasting relationships with our clients based on the highest standards of integrity and professionalism. We help our clients customize plans that meet their unique needs, concerns, and goals. We compassionately assist families after the loss of a loved one. We believe that a well thought out and professionally developed plan will provide peace of mind making transitions for generations stress free and cost efficient.

Estate Planning 101: What Is A Will VS. A Trust Anyway?

Even if you are a person of modest means, you have an estate—so everyone needs an estate plan. The right plan depends on your individual circumstances. For some, a living Trust can be useful. For others, a Will may be all that is needed. What is a Living Trust anyway? And how does it differ from a Last Will and Testament?
What Is a Will?
A Will is a written document that is signed and witnessed that indicates how your property will be distributed at the time of your death. It becomes public record upon its filing. It states who is in charge of overseeing the distribution (called the Executor). It is revocable and subject to amendment at any time during your lifetime. It also allows you to appoint a guardian for your minor children. But distributions made per a Will are usually outright upon closing of the probate. And distributions are not made until the probate is closed, which often causes significant delay of the distribution. Additionally, there may be times when there are special circumstances that warrant that the distributions have certain conditions, or that the money be held or distributed over a period of time or at a certain age. Under these circumstances, a Will cannot always achieve the necessary goals. On top of that probate could end up much more costly than setting up an estate plan. Typical costs of probate are 2-3% (or more) of the value of the assets in the estate. A Will also plans for when you are gone, but does not make provisions for what may happen if you become incapacitated. So typically a Will is now used for a more simple estate or family situation. If you have larger concerns or a larger estate, you may consider a Trust.
What Is a Living Trust?
A Living Trust provides lifetime and after-death financial and property management. If you are serving as your own Trustee, the Trust agreement will provide for a successor upon your death or incapacity. Going through a court proceeding is not required, and therefore your Trust provisions are completely private. Livings Trusts also are used to manage property. If a person is disabled by accident or illness, the Successor Trustee can manage the Trust property. As a result, the expense, publicity, and inconvenience of court-supervised distribution of your estate can be avoided.
If a Trust is properly written and funded, some things that you can do are…

  • Avoid the cost and delay of a probate on your assets;
  • Plan for the possibility of your own incapacity;
  • Control what happens to property after you are gone, and potentially how the assets are used by your heirs;
  • Plan for heirs with special needs or inheritances by minors;
  • Protect assets from possible divorce or undesirable in-laws;
  • Use it for any size estate, including making necessary tax plans for a larger estate; and
  • Prevent your financial affairs from becoming a matter of public record;

While a Trust is often appealing, it usually is more expensive to set up than a typical Will because it must be funded after it is set up, and often contains more complicated arrangements. Nevertheless, the cost is still much less than going through a probate proceeding.

Will vs. Living Trust Considerations
There are many positive reasons to establish a Trust, but do not overlook the fact that it will involve more upfront effort and expense. To determine if you should make the extra effort and invest in the expense of a Trust, answer these questions:

Is informal probate an available option? Most states have an expedited or simplified form of probate for estates under a certain dollar threshold ($40,000 in the State of Missouri). If your estate could pass under an expedited form of probate, a Will could be appropriate.
Do you have assets in more than one state? Owning property in multiple states could require more than one probate proceeding.
Do you have minor children? A Trust allows you to establish guardians for your children while they are minors as well as provisions specifying when a child will be entitled to any assets held in Trust, or for what purposes.
Do you have children, grandchildren, or other dependents with special needs? In those instances the access or control those heirs have over their inherited property may need to be limited. You do not want to jeopardize disability or other government benefits. With a standard Will your property can be passed on to those heirs but a Will alone does not allow you to exercise much control over their use of the property.
Do your children get along? Do they live nearby or are they scattered? Do you even want to leave them all the same amounts, or anything at all? Sometimes we have family situations that are complicated, and we need to find ways to set them out in black and white so there is no confusion or conflict at the end of the day. Wills may not be able to address all these “special family circumstances.”
Will your estate be subject to estate taxes? If the value of your estate exceeds the current estate tax threshold, you may wish to consider setting up a Trust with tax planning provisions. The estate tax threshold frequently changes, so be sure to check with the IRS to determine whether or not estate tax is a concern for you.
Do you have issues with a daughter-in-law or a son-in-law? A living Trust could protect inheritances from a potential divorce, or help avoid conflict at the time of distribution.
Are you on your second marriage… or third, or fourth? Blended families often have more complex situations to consider. How do you deal with inheritances for your children versus making arrangements for your spouse? These are oftentimes situations that are properly dealt with only by setting up a Trust.
Do you have long term medical concerns, and concerns about paying for those expenses? Per the Alzheimers Association, more than $5M people are living with Alzheimers in 2017. Alzheimers will cost the US approximately $259B this year alone. And statistics show that 35% of caregivers for people with Alzheimers or dementia report that their health worsened due to care responsibilities. Be sure to discuss how to protect your family and your assets sooner rather than later.
So what is best for you? In many respects, a Trust and a Will accomplish similar objectives. A Trust, however, allows you to realize other objectives that a Will cannot. But those advantages don’t come without a price. Whether or not a living Trust is better for you than a Will depends on whether the additional advantages are worth the cost. When choosing, remember that one size does not fit all. What is right for one person may not be right for everyone. Your estate plan should be prepared in a way that best meets the needs of you and your family.

Either way, EVERYONE needs an estate plan. Dying intestate (with no Will or Trust) will be sure to involve the government. It doesn’t have to be complicated. Stop procrastinating and call to make an appointment to sit down with us for a FREE CONSULTATION to plan your legacy. Protect yourselves, protect your family and give yourself the peace of mind you deserve for years to come.

Thomas Walters Estate Planning builds lasting relationships with our clients based on the highest standards of integrity and professionalism. We help our clients customize plans that meet their unique needs, concerns, and goals. We compassionately assist families after the loss of a loved one. We believe that a well thought out and professionally developed plan will provide peace of mind making transitions for generations stress free and cost efficient.

10 Reasons To Create An Estate Plan Now!

Many people think that estate plans are for someone else, not them. But as the following list makes clear, estate planning is for everyone, regardless of age or net worth.
1. Loss of capacity. What if you become incompetent and unable to manage your own affairs? Without a plan the courts will select the person to manage your affairs.
2. Minor children. Who will raise your children if you die? Without a plan, a court will make that decision.
3. Dying without a will. Who will inherit your assets? Without a plan, your assets pass to your heirs according to your state's laws of intestacy (dying without a will). Your family members (and perhaps not the ones you would choose) will receive your assets without benefit of your direction or of trust protection.
4. Blended families. What if your family is the result of multiple marriages? Without a plan, children from different marriages may not be treated as you would wish.
5. Children with special needs. Without a plan, a child with special needs risks being disqualified from receiving Medicaid or SSI benefits, and may have to use his or her inheritance to pay for care.
6. Keeping assets in the family. Would you prefer that your assets stay in your own family? Without a plan, your child's spouse may wind up with your money if your child passes away prematurely. If your child divorces his or her current spouse, half of your assets could go to the spouse.
7. Financial security. Will your spouse and children be able to survive financially? Without a plan and the income replacement provided by life insurance, your family may be unable to maintain its current living standard.
8. Retirement accounts. Do you have an IRA or similar retirement account? Without a plan, your designated beneficiary for the retirement account funds may not reflect your current wishes and may result in burdensome tax consequences for your heirs (there are even new vehicles such as Inheritance IRAs and IRA Trusts to consider).
9. Business ownership. Do you own a business? Without a plan, you don't name a successor, thus risking that your family could lose control of the business.
10. Avoiding probate. Without a plan, your estate may be subject to delays and excess fees (depending on the state), and your assets will be a matter of public record.

The Staggering Costs of Dementia

Most of us know of someone who has been diagnosed with dementia. It is a costly and heart-breaking condition that is nearly doubling in numbers every 20 years. Dementia has affected the likes of Norman Rockwell, E.B. White, Rita Hayworth, Charlton Heston, Ronald Reagan, Charles Bronson, Margaret Thatcher and many others.
What is Dementia?
Dementia is a general term for a decline in mental ability, severe enough to interfere with daily life. Memory loss is an example. Alzheimer’s is the most common type of dementia. Symptoms can vary, but there are usually two core mental functions significantly impaired: memory, communication and language, ability to focus and pay attention, reasoning and judgment, and visual perception. These symptoms can be displayed when the person with dementia has problems with short-term memory, keeping track of his/her purse or wallet, paying bills, planning and preparing meals, remembering appointments, or travelling out of the neighborhood. These often progressive symptoms will likely eventually require assistance with daily activities, resulting in increased expense and stress on the individual and their family members.
The RAND Study
The RAND Corporation recently concluded a nearly decade-long study on close to 11,000 people. The study sheds light on dementia statistics including rates of diagnosis and costs to society.
The Cost of Dementia to Society
According to the RAND Corporation’s study, the cost of caring for those with dementia is projected to double by 2040 and is currently higher than caring for those with heart disease or cancer. The direct costs of dementia, including the cost of medicine and nursing homes, was $109 billion a year in 2010 compared to $102 billion for heart disease and $77 billion for cancer. This cost is pushed even higher, to $215 billion, when support from family members or other loved ones is given a cost value. This figure will rise to $511 billion by 2040. Information from the RAND study and from the Centers for Medicare & Medicaid Services indicates that, by 2020, dementia patients will ac-count for about 10% of the elderly population.
The Cost of Dementia to the Family
While the cost to society is great, the costs to individuals diagnosed with dementia and their loved ones is even more significant. As evidenced by the RAND study, each individual case of dementia costs between $41,000 and $56,000 a year. In addition to the financial drain on families, dementia increases the stress on the caregiver. In fact, caregivers have been found to be at increased risk for depression and anxiety and long term medical problems, which impose a further financial burden on the family.
Dementia poses higher costs to society and individuals than heart disease or cancer. With help from an Elder Law attorney, the family of those afflicted with dementia can obtain the support they need to care properly for their loved one. We can help clients prepare or deal with an immediate need to find appropriate resources in dealing with dementia, as well as handle all your general estate planning needs. We can support the loved one in making sure the dementia patient has access to the care and medical attention they need. We would be honored to help.
The Wall Street Journal, Dementia Will Take Toll on Health-Care Spending, April 8, 2013 Care Spending, April 8, 2013

Estate Planning For The Real Estate Investor

As with most businesses, estate planning for those in the real estate investment business presents a unique set of challenges. Lender concerns, tax considerations, asset protection and family business dynamics can all play a role and there can often be tension between these areas of concern.
Who Owns the Property?
One of the first questions to address is who owns the real property? The answer to this question will determine liability exposure and how the real property will pass upon death. When it comes to real estate, title is king. If real property is held solely in a person’s individual name; that property will likely be subject to probate on death. It also means that the owner is personally liable for the debts and liabilities associated with that property. If there are two or more owners, the question becomes whether that property is held as joint tenants with rights of survivorship or tenants-in-common. In some states there are additional options for married couples, such as tenancy by the entireties or community property.
If the property is held in a joint tenancy (or in some other form that allows for rights of survivorship), then upon the death of one joint owner, the remaining joint owners will inherit the deceased owner’s share automatically and without the requirement of probate. If the property is instead held as tenants-in-common, then the deceased owner’s share will likely require a probate. While joint tenancy may appear to be an appealing way to avoid probate, it is important to understand that property owned by multiple owners is potentially at risk, in whole or in part, for the debts and liabilities of each individual owner.
Should You Use a Trust?
Holding real property in a trust can be an excellent way of avoiding probate. Holding real property in a trust can also reduce the likelihood that a guardianship or conservatorship will be necessary in the event of incapacity. This can be crucial if a timely decision is needed on whether to sell or rent a parcel of land. But remember, unless the trust is an irrevocable trust, you may not have the asset protection that you may desire. Instead it may be advisable to hold the land in an entity, such as a limited liability company (LLC) that is in turn owned by a trust.
Why Should You Consider an Entity?
Owning your real estate investment properties in an entity or multi-ple entities can limit your personal vulnerability to potential lawsuits related to the property. It can also protect the property from lawsuits against individual owners of the entity. Another benefit to owning land in an entity, such as an LLC, is avoiding fractionalization of the real property upon transfer to heirs. Fractionalized real estate is vulnerable to forfeiture in the event of partition. Many states allow the owner of a fractional interest in land to sue for the partition or sale of the land without regard to how small the fractional interest may be. Giving interests in entities governed by ownership agreements can prevent the possibility of partition. Entity interests also provide a way for the owner to gift or sell an interest during the owner’s life without losing control.
In determining what type of entity to use, a careful analysis of the income tax consequences is important. A general rule is that you should never hold real estate in a corporation. The reason is that while real estate can go into a corporation tax free, it is almost impossible to get it back out without tax consequences. The preferred way of holding real estate will most often be an LLC taxed as a partnership or a limited partnership. If you invest in farm or ranch land, additional consideration should be given to government program limitations.
The Stepped-Up Basis
In all planning it is important not to lose sight of the income tax basis rules on death. Subject to certain limitations and exceptions, when an owner of assets dies, assets passing to heirs obtain a new tax basis equal to the assets’ fair market value as of the date of death. Because of the built in gain of many real estate investments, careful consideration must be given to the consequences of gifting or selling during life and gifting at death. Planning with certain entities can result in a loss of the stepped-up basis. While this may sometimes make sense, it should always be done with caution.
Investors are savvy of the many income tax benefits that come with investing in real estate. Investors should be equally savvy about the benefits of a well-planned estate. It is often stated that a person reaps what they sow. When it comes to estate planning for the real estate investor that holds true. Taking time to invest in the planning process can reap great benefits for generations to come.

Estate Planning for People with Minor Children; Guardianship

For most young parents, writing a will is less about leaving their assets than it is about naming guardians for the kids. The guardian you name in your will is the person who would take over if both you and the other parent were unavailable to raise your children. That’s very unlikely, but worth addressing just in case.
If your children ever needed a guardian, the local court would appoint the person you nominated in your will, absent a serious problem with that person. You can name different guardians for different children if you wish.
If you haven’t made your wishes clear in your will, however, the court would have to choose someone without any guidance from you. The common choice is a family member. But what if you really wouldn’t want certain family members to raise your children? Or if you would prefer that a close friend, who has a good relationship with your kids, step in as guardian? The court wouldn’t have any way of knowing.
Many, many parents get stuck when they go to choose a guardian—after all, no one likes even thinking about someone else raising their children. And parents sometimes discover that they disagree about who would be best.

1) Your First Choice Is Older Than You Are: The best solution is to forget about what might happen in 10 years, and just pick someone now who could take care of your children in the next three to five years, knowing that you can change their guardian choices as the children, and their nominated guardians, grow older.
2) Your Family Won't Like Your Choices: Your first loyalty is to your children, and you should always make the choices that you think will serve them best. You should also know that a court challenge to your choice of guardian is unlikely -- and unlikely to succeed. A family member who wanted to overturn your choice of guardian would have to prove to a judge that there was a very good reason to set your choice aside. To prevent conflict as best you can, leave a written explanation of your choices. It can calm tension, and if necessary it could be used in court.
3) You Worry That Your Children Won't Like Your Choices: So talk it over with them. If you think your children won't like your nominations for guardians, you might want to discuss it with them, especially if they're already in their teens. In Missouri, a child 11 years or older may ask the court for a different guardian than the one nominated by their parents. The judge will take their wishes into account along with other factors.
4) Your First Choice Is Not a Good Money Manager: If the person you want to raise your children is not good with finances, that is easily fixed. Just name someone else to manage your children's money, and leave the guardian with only the job of making sure your child grows up well cared for and as happy as possible.
5) You Don't Like Your First Choice's Spouse: What if only one person in a couple is your choice for guardian? Just name the person you want -- not both of them -- as guardians. That way, if the couple divorces, your kids could stay with the person you feel closest to.
6) Your First Choice Lives Far Away: There's no requirement that a guardian live where you live, but having an out-of-state guardian complicates things. A nonresident may have to post a bond (a sum of money or an insurance policy) as insurance that they will faithfully perform their duties as a guardian. Also, an out-of-state guardian would have to get the guardianship proceeding moved to the state where they live. If you want to name someone far away as a guardian, also nominate someone local who could serve as a temporary guardian. This person could take care of your children until your permanent guardians could get to them.
7) You Have Children From Previous Marriages: Blended families are common these days, making guardianship choices even more complicated. Some parents name different guardians for the children of different marriages. Others make a plan that would keep all the children together. Remember that guardianship doesn't come into play at all if a child has a surviving parent, and that's more likely when their parents are not living or traveling together.
8) You Don't Want Your Ex-Spouse to Get Custody: If you're divorced, you may not like the idea that should you die first, your ex-spouse would get custody of your children. That is what would happen, unless the parent is clearly unfit. If you really don't want your ex-spouse to take custody of your children, explain why in your will or in a letter. Include court records, police reports, or any other evidence of your ex's unsuitability as a custodial parent. Give that letter to your first choice for a guardian, to be used as evidence of your wishes in the case of a court proceeding.