5 Not-So-Common Estate Planning Questions

Clients rely on their estate planning attorneys to guide them in what to consider when developing their estate plan.  The usual discussions are centered around how best to provide for beneficiaries and who should be in charge of things when they can no longer manage their affairs due to incapacity or death.  Without proper guidance from their attorney, clients may not know to ask about more nuanced situations that require special consideration in the overall estate plan. This article is both for estate planning attorneys and their clients. We have put together five “not-so-common” questions that might help families more clearly frame their wants and needs for a personalized estate plan. Considering these questions could have large impacts on clients, their families, and their assets.

How Do I Posthumously Safeguard My Digital Assets?

Technology has become intricately woven into our lives, and most people now own some kind of digital assets. Although digital assets are not entirely different from other kinds of assets, there are some differences that clients should be aware of. Digital assets encompass an array of elements like social media accounts, digital photographs, emails, cloud-based storage, and even cryptocurrencies. It would be prudent to include these assets in your estate plan, furnishing instructions regarding who should access and how your successor Trustee should manage or distribute them.

In order to efficiently handle your digital assets within your estate plan, consider creating an inventory of these assets. Along with the inventory, include access instructions (such as usernames, passwords, and other essential information) for your successor Trustee. A password manager or another secure portal (like Box.com or Dropbox) can be a useful way of storing this information. This would allow the successor Trustee to access everything with just one username and password. Given the highly sensitive nature of some digital assets, meticulous care should be taken in storing and communicating this information. Leave detailed instructions about what should happen to your digital assets upon your demise in your estate planning documents. For example, do you prefer your social media profiles to be deleted, converted into memorial pages, or kept active?

Many online platforms have service agreements addressing the transferability of accounts. It’s vital to read these agreements as they could potentially influence your ability to transfer the account to a trust. Also, certain states have laws about digital asset succession, so checking the laws in your state would be beneficial. For assets that can be owned by a trust (like domain names and certain financial accounts), you may need to formally transfer ownership to the trust. This could involve re-titling the registration information to list the trust as the owner.

Estate planning for cryptocurrencies can be more complex, and strategies must respond to a lightly defined and quickly developing legislation. However, we recommend strategies that preserve distinctions as far as possible between trustee, settlor and beneficiary. For example, we might recommend placing the cryptocurrency in a cold storage device titled to a trust and owned by an LLC within the trust. The device generates access passcodes to the trustee and/or the manager of the LLC owned by the trust. 

What If a Family Member Has Special Needs?

This is one of the estate planning questions that we hear occasionally. However, it should be a conversation to consider for almost every family considering an estate plan. In recent years, we’ve seen a notable surge in individuals requiring specialized care. For example, the United States Centers for Disease Control and Prevention (CDC) reports that currently, about 1 in 36 children are identified with Autism Spectrum Disorder. This appears to be a dramatic increase from 1 in 150 in the year 2000. In other words, it is highly likely that a member of your family does need or will need additional support. If you have a family member with special needs, you might consider setting up a special (or supplemental) needs trust (SNT) as a component of your estate plan.

If appropriately administered by a competent Trustee, a SNT can help fund ongoing care without rendering the beneficiary ineligible for government benefits. There are two ways to establish a SNT. First, an independent SNT can be drafted to provide immediate support to the special needs beneficiary. In this case, the Trustee uses the trust funds to cover needs not addressed by the government benefits. A standalone SNT doesn’t require any other estate planning documents. 

Second, settlors can include provisions for a SNT in their own living trusts. This is particularly relevant if the settlor is a parent of a special needs child who is currently receiving government benefits. The SNT provisions under a living trust activate upon the settlor’s death and fund the SNT. From this point, the SNT Trustee steps into the parent’s role (financially, at least) in using SNT funds for the child’s needs not covered by government benefits. 

Special needs planning is a complex field necessitating specialized knowledge. Consulting with an attorney well-versed in this field is crucial.

How Can My Estate Plan Support Charitable Endeavors?

There are many ways to employ your estate plan in support of charitable causes, from simple cash bequests in your will to establishing a charitable trust or foundation. Some methods include:

Bequests in a Will or Trust

You can bequeath money or other assets to a charity in your will or trust. This could be a specified amount, a percentage of your estate, or a particular asset (like real estate or a valuable art piece).

Beneficiary Designations

Many financial accounts, including retirement accounts and life insurance policies, allow you to designate a charity as a beneficiary. Upon your death, the assets in the account transfer directly to the charity, bypassing probate.

Donor-Advised Funds (DAF)

A DAF is a charitable investment account. You contribute to the fund, securing an immediate tax deduction. The funds are then invested and grow tax-free. At any time, you can recommend grants from the fund to your preferred charities.

Charitable Remainder Trusts (CRT)

With a CRT, you can deposit assets into the trust. You can then receive an income stream from the trust for a set period. At the end of this period, the remaining trust assets go to the charity. This can provide you with an income tax deduction and assist in avoiding capital gains taxes.

Charitable Lead Trusts (CLT)

A CLT is essentially the opposite of a CRT. The income generated by the trust goes to the charity for a specific period. After this period the remaining assets are passed on to your heirs.

Testamentary Charitable Lead Annuity Trusts (T-CLAT)

A T-CLAT is a type of CLT that is integrated into your living trust. Mainly intended for taxable estates, a T-CLAT provision will divert the value of your estate that would otherwise be subject to an estate tax, directing assets to the T-CLAT for the benefit of specified charities (such as your private foundation) for a set number of years, with the remaining assets going to your heirs afterwards.

For more information on philanthropy, read here about how to form a philanthropic mission, and here about how to implement it. Each of these options listed above carries its own tax implications and legal prerequisites, making professional advice tailored to your situation crucial.

What Happens If I Own Assets in Multiple States or Countries?

If you own real estate or other assets in several states or countries, your estate might need to go through probate in each of these jurisdictions upon your death. Probate is the legal procedure of administering a deceased person’s estate, encompassing debt repayment and asset distribution to heirs. If your estate has to undergo probate in multiple jurisdictions, the complications, duration, and cost of the proceedings can multiply. There are a few reasons why.

First, each state has its distinct probate laws, and these can vary significantly. If you owned property in multiple states at your death, your Personal Representative may have to grapple with different legal stipulations in each one.

Second, the probate process can extend over several months or even years. If an estate has to undergo probate in multiple jurisdictions, this process can stretch out even longer.

Third, probate can become expensive due to court fees, legal fees, executor fees, and other costs. If your estate must go through probate in multiple jurisdictions, these costs can accumulate. Also, some states may levy their own estate or inheritance taxes, which could result in a larger overall tax bill for the estate.

Fourth, probate is a public process, meaning that the details of your assets and debts become part of the public record. If your estate undergoes probate in multiple jurisdictions, more information may become public.

In light of these issues, people frequently utilize estate planning strategies to avoid probate or limit the number of jurisdictions where probate is necessary. For instance, holding property in a trust, joint ownership with right of survivorship, or designating beneficiaries on financial accounts can help sidestep probate. Often, a revocable living trust is the simplest and most convenient way of avoiding having to go through a probate in each jurisdiction where property is located. 

How can I prepare for potential long-term care?

Long-term care costs, like those for a nursing home or assisted living facility, can rapidly diminish an estate. Preparing for long-term care is an essential aspect of comprehensive estate and financial planning and can be complicated, requiring you to make decisions about potential future needs and expenses. Here are some steps you can take.

Understand the Costs

Research the average cost of various types of long-term care, like home health care, assisted living, and nursing home care. Costs can substantially fluctuate depending on the required level of care and the region you live in.

Consider Long-Term Care Insurance

Long-term care insurance can help defray the costs of long-term care. Policies vary greatly, so it’s important to comprehend what’s covered, the cost of premiums, whether the policy adjusts for inflation, and other details.

Health Savings Account (HSA)

If you have a high-deductible health insurance plan, you might be eligible to contribute to a health savings account (HSA). Money in an HSA can be used tax-free for eligible healthcare expenses, which can encompass long-term care services.

Asset Conversion

You might consider converting some of your assets into an income stream to fund long-term care. For example, if you have significant equity in your home, you might contemplate a reverse mortgage.

Medicaid Planning

Medicaid, a joint federal and state program, can help cover the costs of long-term care for those with limited income and assets. However, the eligibility rules for Medicaid are complex and vary by state, so consulting with an elder law attorney can be beneficial.

Veterans Benefits

If you’re a veteran, you might qualify for long-term care benefits through the Department of Veterans Affairs.

Family Support

If you have family members who are willing and capable of providing care, this could be part of your long-term care plan. However, it’s important to have frank discussions about this and consider the potential physical, emotional, and financial burden on your family members.

Ensure you have the necessary legal documents in place, like a healthcare power of attorney and a living will, to guarantee your healthcare wishes are respected if you become incapable of making decisions for yourself.

Remember, planning for long-term care isn’t merely about financial planning; it also involves discussing your wishes with your family and ensuring that you’ll receive the level and quality of care you desire.