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Articles Posted in Estate Planning

About four out of every ten families are blended families, according to recent statistics.

Estate planning for blended families can be complex, both in terms of the logistics surrounding financial and tax planning and the emotional aspects of those decisions. Here are tips to consider if your family is a blended family:

First, it is important to have a Will and to keep this Will updated. Depending on what state you live in, you might face unique challenges (in some states, for example, a stepchild who has not been legally adopted by you is not considered to be your child for purposes of intestate succession).

Last week I wrote about 3 important components of planning for your non-financial legacy. Here are 4 more essential components to include in your legacy planning:

4. Family Heritage

The roots of your family tree are part of your identity and show you some of the family behaviors and patterns you can build upon or learn from. There are a number of online resources you can use to do family research and go back several generations to learn more about where your family originated from. If possible, you might want to try to locate photos, letters, stories, and other documents that belonged to your ancestors. A DNA ancestry test can also give you more insight and information regarding your origins and health history. Learning more about your family can help to shape your identity and give you knowledge that you may wish to pass down to future generations.

Much of estate planning focuses on financial planning and documents such as wills and trusts. While making these plans for how you will pass on your physical assets, it is also an opportune time to focus on your intangibles. What impact do you want to have on your family and the world, and what kind of legacy do you want to leave behind? How do you want to establish and pass on memories, values, traditions, philanthropic vision, skills, and beliefs together with your family?

7 Components of a Non-Financial Legacy

Here are 3 intangible components to consider in your estate planning process, and I will write about 4 more next week:

Those who draft Wills often include a “no-contest clause” in a decedent’s Last Will and Testament. If an heir challenges the validity of the decedent’s Will, this clause provides for the disinheritance of that heir. Although the no-contest clause could have this effect, it might also be defeated during a challenge to the Will. Also, if the litigation is settled before trial, parties often reach an agreement in which the no-contest clause would not apply.

An heir to an estate might challenge the validity of a no-contest clause in the same way that they would challenge the validity of the decedent’s Will. This heir might call into question the decedent’s capacity to execute a Last Will and Testament or assert that a third party exerted undue influence over the decedent. There are also other ways a Will might be challenged, but these two ways are the most common.

When deciding whether to challenge a Last Will and Testament that contains a no-contest clause, an heir will often consider the inheritance they would receive under the current Will compared to what they would gain if their challenge were successful. If the heir has little to gain from contesting the Will, it may make sense to forego a challenge to it. On the other hand, if they could inherit a considerably higher amount (especially if they are set to inherit very little under the current Will), an heir might be more likely to challenge it.

In last week’s post, I wrote about the importance of digital assets and including them in your estate plan. Here are a few steps you can take to plan for these assets:

(1) Create a Digital Assets Inventory: Digital assets don’t have a physical presence, so a digital wallet holding Bitcoin couldn’t be located in the same way a coin collection in a house would be found. A digital assets inventory identifies digital assets stored on devices or online and provides the information needed to access them.

You will want to create (and frequently update) this inventory in order to make instructions for and access to your accounts as straightforward as possible for your fiduciary. At a minimum, this inventory should include the information to access your primary email account and cell phone. You’ll want to give access to the primary email where electronic financial statements and bills are sent, as well as where password reset emails would be sent so that your fiduciary can use this to access your other online accounts. Your cell phone holds many of your digital assets (texts, pictures, apps) and might be needed for two-step authentication to access certain online accounts as well.

Nearly everyone has a digital presence these days, but many people fail to consider their digital assets when designing their estate plan. As a result, loved ones of someone who has passed away often face great difficulties in trying to access, collect, maintain, or close their digital accounts. After addressing what digital assets are and why they should be addressed in an estate plan, I will write next week about the steps one can take to plan for their digital assets.

What Are Digital Assets?

More and more essential parts of our lives are moving online or onto a cloud, and the COVID-19 pandemic has accelerated this trend.

With a Google account, you have options to control your data and the tools to manage your account – and you can also tell Google how to manage this account as part of your estate plan.

Google accounts and apps are used for a wide variety of purposes, including email, creating and managing documents, spreadsheets, photos, and navigation. In order to use Android phones and tablets, Chromebooks, and to install mobile apps, you also need to have a Google account set up.

Managing your digital assets is a vital part of estate planning. If you become disabled or pass away, what will happen to your online accounts? When it comes to powers of attorney and executing your will, what does the law require regarding these accounts?

A number of well-known celebrities who were worth millions, including Princess Diana, Prince, Heath Ledger, Michael Jackson, and Kurt Cobain, have passed away in recent years without an up-to-date estate plan or without any estate plan at all. As a result, lengthy and stressful legal battles were fought over their assets and were decided by people they did not get to choose.

While most people don’t have the same amount of wealth as these celebrities, it doesn’t make estate planning any less important to be able to leave a legacy and pass down wealth to family members.

The No. 1 Estate Planning Mistake

Do you need a professional trustee?

There has been more of a spotlight on legacy planning and the need to get our estate plans in order during the last year. Along with the prospect of a lower estate tax exemption and an aging baby boomer population, 2021 is the perfect time to focus on estate planning and on making sure important documents are up-to-date.

Since the current elevated estate credit is set to expire in 2025, many people were already anticipating the need for a trust before the pandemic began. This year brought an urgency to people’s focus on making sure their financial and legal affairs are in order in case of an illness or death.

Estate planning attorneys saw a lot of 2020 year-end gifting. Many people are trying to plan for the possibility of some of the previous administration’s reforms being rolled back – especially the estate tax lifetime exemption (currently set at $11,000,000, adjusted for inflation) now that Biden has been elected president and Democrats control both the House and Senate.

President Biden is entering the White House during a historic and very difficult time. Many people have suffered great loss this year, especially as a result of the Covid-19 pandemic. The focus of his inauguration address was a call for unity and for getting the pandemic under control. At this point, tax reform does not seem to be one of President Biden’s first main goals.

Most legislation requires 60 votes in the Senate to pass, so Democrats would need both Republican support and to keep the support of moderates in their own party in order to pass tax reform. Although it is possible that tax reform could pass late in 2021 and be retroactive to January 1, most tax advisors don’t think this is likely. Instead, if tax reform does pass this year, many think it is more likely to happen toward the end of the year and be effective in 2022.

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