Reverse Mortgages Explained

How they work: Most reverse mortgages are federally insured and have several requirements including: (1) at least one borrower is aged 62 or older; (2) the home must be the primary residence; (3) the borrower must have financial resources to keep up with the home (taxes, insurance, maintenance); and (4) the borrower must own the home outright or have a low enough “regular” mortgage.

Impact on your estate plan: If you plan on leaving your home to your heirs, understand that a reverse mortgage will reduce the value they receive. Depending on when you pass away and how long the reverse mortgage was in place, your home’s equity may have been exhausted meaning that there is nothing of value to leave your heirs. In that case, your heirs may need to pay off or refinance the mortgage to keep the house.

Retirement income: The positive trade-off of a reverse mortgage is that you will have an additional source of retirement income, which can be received in several different ways including: (1) an upfront lump-sum, (2) a monthly payout, or (3) a line of credit. Each scenario has its own tax, borrowing costs, and home value implications. If you’re considering a reverse mortgage, talk to your financial advisor and estate planning attorney first, to make sure you select the best payout option for your circumstances.

Buyer beware: It is important to make sure you avoid scams that are pretending to be legitimate reverse mortgages. One way to help avoid being tricked is to make sure you work with a reputable provider. You should also make sure that a reverse mortgage is a good fit for your financial needs before signing any documents. Finally, consider the estate planning impact entering into a reverse mortgage may have on your intended wishes once you are gone.

The Implications of Reverse Mortgages

There are several factors to take into consideration when you are contemplating a reverse mortgage. Specifically, the effect it will have on your estate plan, the type of retirement income you are trying to obtain, scams to watch out for, and anything unique to your circumstances. There are several questions you should address before deciding whether or not a reverse mortgage is right for you. These include:

• Can the life insurance you have in place pay off your reverse mortgage?
• Will your reverse mortgage exceed your home’s value when you pass away?
• What will happen to others living in the home if you die without paying off the loan?

Seek Advice

In addition to shopping around to find a reverse mortgage lender with terms that are most favorable to you, you should also determine whether a reverse mortgage is right for you and your needs. We can help you learn more about the options available to you and your family when it comes to your applying for a reverse mortgage and the impact it will have on your estate plan.

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What Happens to My Estate If I Am in Bankruptcy When I Die?

A will enables you to leave specific instructions about who you would like to receive your money and property and how you would like for it to be given away when you die. However, your debts must be paid before your beneficiaries will receive a dime. As a result, if you are in bankruptcy when you pass away, your beneficiaries will receive only what is left of your life savings and property when the bankruptcy case concludes.

Individual debtors typically file for Chapter 7 (liquidation) or Chapter 13 (repayment plan) bankruptcy. If you pass away during a Chapter 7 bankruptcy, the bankruptcy case will proceed without much of an interruption because your direct participation is very limited. The bankruptcy trustee will sell your property (including your interest in property you own jointly with your spouse that’s non-exempt, and in community property states, all property acquired during the marriage) to obtain cash that can be used to pay off your creditors (though certain property is exempt because it is necessary for living and working, such as motor vehicles, clothing, household goods, and retirement savings accounts). At the conclusion of the bankruptcy case, any remaining money or property can go through the probate process and be transferred to the beneficiaries of your will.

A Chapter 13 bankruptcy involves a repayment plan that typically lasts from three to five years, so you, as the debtor, must actively participate in the plan by making those payments. If you are in the midst of a Chapter 13 bankruptcy when you pass away, your bankruptcy trustee and your survivors usually must petition the court for instructions about what to do next. Typically, there are several possible courses of action. They can: (1) request that the case be dismissed, enabling your creditors to seek repayment of debts in a probate proceeding; (2) petition for a hardship discharge, eliminating the obligation to continue to repay the debt even though the repayment plan was not completed; (3) request the case to be converted to a Chapter 7 bankruptcy filing so the estate can be liquidated (converted to cash) until the debts are discharged; or (4) continue the case as a Chapter 13 bankruptcy, with your heirs attempting to complete the repayment plan. Although the bankruptcy trustee and survivors can request a certain course of action, the court will ultimately decide what is in the best interests of all the parties involved.

Solutions

• If you want to protect your savings and property against potential future creditors, you may want to consider transferring them to an irrevocable trust. You will not be able to easily amend or cancel the trust, but because you no longer own any of the property or money in the trust and have no right to change its terms, the assets in the trust cannot be used to pay off creditors, even if you file for bankruptcy in the future. As a result, your assets will remain available for future distribution to your beneficiaries. But beware that this strategy won’t work if you transfer away savings and property to knowingly avoid debt. It is important to implement this strategy proactively, long before any financial problems leading to bankruptcy arise. This is because you must disclose to the bankruptcy trustee any transfers made within two years before filing, and the trustee will review the transfer to evaluate whether it should be undone, making that property or money available to your creditors.
• Some states allow an asset protection trust, which is a special type of irrevocable trust that is also a self-settled trust, that is, the person who creates and funds the trust also is a beneficiary of the trust. There are many details that an experienced estate planning attorney should consider in determining whether this type of trust will achieve the goal of protecting your assets if you eventually file for bankruptcy. For this type of trust, transfers of money or property made within 10 years prior to the bankruptcy filing will be vulnerable to being undone by the bankruptcy trustee.

What Happens If One of My Beneficiaries Is in Bankruptcy When I Die?

If you die within 180 days after your beneficiary files for bankruptcy, your beneficiary must disclose the inheritance to the bankruptcy trustee. In a Chapter 7 bankruptcy case, unless the property is exempt, the trustee is free to take the inheritance to pay off your beneficiary’s creditors. If the beneficiary has filed a Chapter 13 bankruptcy, the value of the inheritance (except for any exempt property or money) will be added to the amount that the beneficiary has to repay creditors under the repayment plan, i.e., it will be used to increase the amount of the payments your beneficiary must make under the repayment plan.

Solutions

• You are free to amend your will to revoke all gifts to a beneficiary who has filed bankruptcy (or may do so) to avoid having your hard-earned money and prized belongings used to pay off creditors rather than be distributed to the beneficiary. Alternatively, you could include a provision in the will stating that no part of your estate is to be used to benefit a creditor of any beneficiary. Many people dislike this option, however, because they do not want to effectively disinherit someone (often, a child) they want to benefit from their estate.
• One of the best ways to prevent your life savings and property from being used to pay off a beneficiary’s creditors is to create a revocable living trust. You can transfer ownership of the money or property to the trust and retain complete control and enjoyment over your property during your lifetime. Because the trust owns the property, not the beneficiary, and the beneficiary has no legal claim to the trust assets during your life because the trust can be revoked at any time prior to your death, it will not be considered part of the beneficiary’s bankruptcy estate.
• In addition, money and property held in a trust with a valid spendthrift provision specifying that the beneficiary cannot transfer his or her interest in the trust and has no control over it typically cannot be used to pay off the beneficiary’s creditors in bankruptcy. After your death, your beneficiary can receive distributions, i.e., gifts from the trust, according to the terms of the trust, as long as they are purely at the trustee’s discretion or for certain specific purposes, such as health, education, support, or maintenance. However, any amounts that are distributed prior to bankruptcy or within 180 days after the bankruptcy petition is filed can become part of the beneficiary’s bankruptcy estate and used to pay off creditors.
• A standalone retirement trust can be used to protect the funds held in your Individual Retirement Account (IRA) from being taken by creditors if your beneficiary files for bankruptcy after your death. Because inherited IRAs are not protected in bankruptcy proceedings like the IRA of the debtor, it is necessary to provide additional protection through the use of a trust. The trust is funded from your IRA upon your death. Because the trust is irrevocable, those funds are protected from the beneficiary’s creditors. A bonus is that the IRA assets will continue to grow tax-deferred within the trust.

We Can Help You Plan Ahead

It is impossible to know what the future holds: Those who are prospering today may encounter severe money problems tomorrow. It is crucial not to wait until you or your family members or loved ones are experiencing financial troubles, or even the prospect of bankruptcy, to take action to protect your life savings, heirlooms, and other property you have worked so hard to accumulate. We can design an estate plan that will help protect your property and money —and your children or loved ones’ inheritance. Call us today to create or update your estate plan to ensure that your property is protected from creditors’ claims—whether or not you or a loved one eventually files for bankruptcy.

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Protecting Owners from Liability

Just like any rental relationship, there is risk for the property owner. If anyone is hurt on the premises during their stay – no matter how short – a property owner could be held legally and financially liable for injuries suffered.

The first line of defense is general liability insurance – assuming there is proper and sufficient coverage on the property. In the case of a lawsuit the insurance company should step in and defend the claim up to the policy’s limits. Any damages beyond that may become a personal liability to the owner, depending upon how the property is titled.

If the property is owned by a limited liability company (LLC) instead of the individual(s), then the individual member(s) of the LLC may have some additional protection if the liability insurance coverage limits are not sufficient to cover the total amount of financial liability. It is important to note that in order to receive liability protection through the use of an LLC, the entity must be formed correctly and managed properly. If the entity is viewed as merely an “alter ego” of the member(s), the court may not uphold the liability protection, placing the property owner(s) back on the hook. To ensure that you have the most protection available, you need to consult with an attorney.

Estate Planning Considerations

Beyond liability in the event of an incident, deciding how an asset will be passed from generation to generation is an important part of estate planning. This is particularly true if such property is lucrative – like income-generating rental property. If the real estate is held in an LLC, you have options. You may choose to divide up the membership interest of the LLC among the multiple beneficiaries. With an income producing asset, such as a rental property, it is important to consider your family’s situation and your ultimate goals for the property.

Using an LLC is also helpful for estate planning because you can gift some of the membership interests during your lifetime without losing control, transfer it at the time of your death to the beneficiaries, or have it held by a trust for the benefit of the beneficiaries. Regardless of your personal situation or goals, there is a solution for everyone.

Determining whether or not to use an LLC for rental property is just one aspect of the overall estate planning process. We can guide you through your legal options and help ensure your property is protected and distributed at your death according to your wishes. Do not leave this to chance, contact us today to learn more.

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Lifetime QTIP Trust

If you and your spouse individually own unequal amounts of money or property, this type of trust will allow the wealthier spouse to transfer money and property into trust for the benefit of the less wealthy spouse. This is a great alternative to outright gifts to the less wealthy spouse, as that would result in complete loss of control over the money and property and vulnerability to the money or property by the donor spouse’s potential creditors. A Lifetime QTIP Trust is also a helpful strategy for couples in a second or subsequent marriage. During the less wealthy spouse’s lifetime, he or she will receive all of the trust income and may be entitled to receive trust principal for limited purposes. When the less wealthy spouse dies, the assets remaining in the trust will be included in his or her estate, making use of that spouse’s otherwise unused federal estate tax exemption. If the less wealthy spouse dies first, the remaining trust property can continue in an asset-protected, lifetime trust for the wealthy spouse’s benefit (subject to state law) and the remainder will be excluded from the wealthy spouse’s estate when he or she dies. After both spouses die, the balance of the trust will go to the beneficiaries named by the wealthy spouse when the trust was originally created.

Spousal Lifetime Access Trust (SLAT)

This type of trust allows one spouse to gift money or property into a trust for the benefit of the other spouse, protecting the money and property from creditors and estate tax, while still allowing the gifting spouse the ability to enjoy the money or property through the beneficiary spouse. As opposed to a Lifetime QTIP Trust, this type of trust does not require that the beneficiary spouse be given income distributions but that spouse can be given access to principal during his or her lifetime. The goal of this strategy is to use the gifting spouse’s own estate tax exemption, not the beneficiary spouse’s. Additionally, other beneficiaries, such as children or grandchildren, can be named as current beneficiaries of the trust. An added benefit of this type of trust is that it can be drafted to take into account a potential divorce and remarriage. The trust can refer to the beneficiary as the “current spouse”, so if there is a divorce, the former spouse is no longer entitled to payments, and any new spouse will have access without changing all of the estate planning.

Note: If both spouses desire to use their own exemption during their lifetimes through estate planning, special attention needs to be paid to ensure that reciprocal trusts are not drafted, which could unwind all of the planning. As experienced attorneys, we can help ensure that both spouse’s goals are met in the most tax efficient manner.

Portability

With the Tax Cuts and Jobs Act of 2017 (TCJA) doubling the estate tax exemption to $10M adjusted for inflation ($11.58M in 2020), you may feel that you do not need to worry about estate tax reduction strategies. However, this provision will sunset on December 31, 2025, unless Congress takes additional action. If you die in 2026 or after, there is a possibility the estate tax exemption could be back down to $5 million adjusted for inflation. Unfortunately, without a crystal ball, there is no way to know what the exemption amount will be if you die after the sunset. However, portability is a handy tool to have in our belts to help us battle this uncertainty.

Portability allows a surviving spouse to use his or her deceased spouses’ unused exclusion (DSUE) for either gift or estate tax reduction. This means that the surviving spouse has his or her own exclusion plus whatever is left over from their deceased spouse. In order to take advantage of this, however, an estate tax return (Form 706) has to be timely filed (usually within 9 months, or longer if an extension has been granted) when the first spouse passes. Without this filing, the surviving spouse will only have his or her own exclusion amount to use.

Note: You can only use the DSUE for your most recent deceased spouse. If you remarry, you must use the DSUE from your first spouse before your second spouse dies or else you will lose it.

We Are Here to Help

You have worked hard to build a wonderful life for yourself and your family. We are here to help develop a plan to ensure that your spouse and family will be taken care of upon your passing according to your wishes. Give us a call today to schedule an appointment so we can discuss ways to help.

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In general terms, an estate plan is a set of legal documents that outline your wishes on how your assets should be distributed and who is responsible for your dependents, in the event of your death or legal incapacity. An estate plan should be developed with a qualified estate planning attorney to ensure that it will work as intended and fully protect your family. Here’s how an estate plan can you protect the newest addition to your family.

Protect Your Children

Perhaps to top reason to put together an estate plan is to dictate who will care for your children in the event you and your spouse die early or become legally incapacitated and therefore unable to care for your kids. Your estate plan can designate someone you trust and who shares your values as a guardian of your minor children. – This is the person who will essentially be a surrogate parent and raise the children through adulthood. When selecting a guardian, it is important to choose people who will be willing participants in your estate plan, who share your values and parenting philosophy, and who you trust to raise your children.

Distribute Your Things

While some assets have purely financial value, others have deep emotional attachments. Not only will a trust-based estate plan speed up – and, possibly, eliminate – the probate process, but it will save your heirs bickering, time, and money. As you may already know, probate is the court-supervised process of wrapping up a deceased person’s affairs. This consists of multiple steps, including presenting a deceased’s last will and testament (if they had one – otherwise the probate court uses the government’s default plan known as intestacy), gathering assets, paying off debts, and distributing what’s left over to the deceased’s heirs. Using a trust to provide specific instructions on distribution of assets can help ward off fights among surviving relatives. Additionally, special features in your trust, sometimes called lifetime trusts, also allow you provide long-term financial stability and support for your children. These lifetime trusts can prevent a financially immature young child from using up their inheritance.

Provide for Your Loved Ones

Beyond your children, creating an estate plan will inform your loved ones what final health care decisions should be made on your behalf in the event you become incapacitated and are unable to make decisions. Serving as healthcare proxy is an enormous responsibility for the person you name, but you can help lessen the burden by communicating your wishes about medical decisions. One significant advantage of properly planning is that your intentions can be clearly stated so that your surviving family members do not have to guess what your desires are.

Find an Estate Planning Attorney

If you have experienced a recent life-event – such as a new baby, a work promotion, purchasing a home, moving to a new state, or any other milestone – you should discuss your situation with an estate planning lawyer. If you already have a will or trust in place, it may make sense to update it to ensure it provides for your family and loved ones. To learn how estate planning can protect you, your newborn, and the rest of your family, contact us today.

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What Exactly Is Asset Protection Planning?

Asset protection planning is the use of legal structures and strategies to safeguard property that creditors might snatch away, by completely, or, at the very least, partially, protecting it from the creditor’s reach.

Unfortunately, this type of planning cannot be done as a quick fix for your existing legal problems. In fact, if you transfer assets to shield them from existing creditors, it could be considered a fraudulent transfer, resulting in legal penalties. Instead, you must put an asset protection plan in place before a lawsuit is imminent, let alone filed at the courthouse. So, now is the time to consider implementing one or more of these tips.

Below are three tips that you can use right now to protect your assets from creditors, predators, and lawsuits.

Asset Protection Tip #1 – Load Up on Liability Insurance

The first line of defense is insurance, including homeowner’s, automobile, business, professional, malpractice, long-term care, and umbrella policies. Liability insurance not only provides a means to pay money damages, it often includes payment of all or part of the legal fees associated with a lawsuit. If you do not have an umbrella policy, then now is the time to get one, since it is relatively inexpensive compared with more advanced ways to protect your assets. You should also check all of your current insurance policies to determine if your policy limits are in line with your net worth and make adjustments as appropriate. You should then review all of your policies on an annual basis to confirm that the coverage is still adequate and the benefits have not been stripped to maintain the same premiums.

Asset Protection Tip #2 – Maximize Contributions to Your 401(k) or IRA

Under federal law, tax-favored retirement accounts, including 401(k)s and IRAs (but excluding inherited IRAs), are protected from creditors in bankruptcy (with certain limitations). Therefore, maximizing contributions to your company’s 401(k) plan is not only a smart way to increase your retirement savings, but it will also safeguard the investments from creditors, predators, and lawsuits. On the other hand, if your company does not offer a 401(k) plan, then start investing in an IRA for the same reasons.

Asset Protection Tip #3 – Move Rental or Investment Real Estate into an LLC

If you are a landlord or a real estate flipper or investor, then aside from having good liability insurance, moving your real estate into a limited liability company (LLC) can be a great way to help protect your assets from creditors, predators, and lawsuits.

There are two types of liability that you should be concerned about with rental or investment property: (1) inside liability (where the rental or investment property is the source of the liability, like a slip and fall on the property, and the creditor wants to seize an LLC member’s personal assets) and (2) outside liability (where the creditor of an LLC owner wants to seize LLC assets to satisfy the member’s debt).

An LLC will limit your inside liability related to the real estate, such as a slip and fall accident or a fire caused by faulty wiring, to the value of the property. In addition, in many states, the outside creditor of the member of an LLC cannot get their hands on the member’s ownership interest in the company (in some states, this will only work for multi-member LLCs, while in others, it will also work for a single member LLC). At a maximum, the outside creditor would only be entitled to the member’s share of the distributions and would have no voting or management rights.This type of outside creditor protection is often referred to as “charging order” protection. This means that if properly protected, a creditor will have to look to your liability insurance and any unprotected assets to collect on their claim, not the LLC.

If you are interested in asset protection planning for your investment real estate using an LLC, then you will need to work with an attorney who understands the LLC laws of the state where your property is located to insure that your LLC will protect you from both inside and outside liability.

You have worked hard to accumulate the assets you have. Don’t let a lawsuit take it all away from you. Give us a call today so we can evaluate your situation and craft an asset protection plan that best serves you and your family.

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What Is a 529 Plan?

A 529 plan, legally known as a “qualified tuition plan,” is a savings plan that provides tax advantages designed to encourage people to save for their children or grandchildren’s future education costs. They are known as 529 plans because they are authorized by Section 529 of the Internal Revenue Code, and they are available in every state and the District of Columbia. There are two types of 529 plans:

Prepaid tuition plans. Prepaid tuition plans let individuals purchase units or credits for a beneficiary’s future tuition and mandatory fees, in advance and at the current prices, helping to avoid paying the higher costs that will be charged by the college the beneficiary will attend in the future. These plans are usually available only for public and in-state colleges, cannot be used for room and board, and cannot be used to prepay tuition for elementary and secondary schools. If a child later decides to attend a private college or university, prepaid funds can be applied to tuition at most private post secondary institutions.

Education savings plan. These plans enable individuals to open investment accounts to save for any qualified higher education expenses. Unlike prepaid tuition plans, they can be used not only for tuition and mandatory fees, but also for college expenses such as room and board, books, computers, and software. They also typically can be used for any college or university, unlike prepaid tuition plans, which are usually limited to in-state and public colleges. Education savings plans can be used to pay for elementary or secondary school education as well.

What Are the Pros and Cons to 529 Plans?

Pros

Tax benefits. 529 plans provide several tax benefits:

• 529 plans allow investment earnings to grow tax-free: generally, the longer the funds are invested, the greater the tax benefit you will receive. When you withdraw the money to use it for a qualified higher education expense or to pay tuition for elementary or secondary schools, the earnings are not subject to federal, and sometimes, state income tax.
• A 529 plan allows you to make five years of tax-free gifts in one year per beneficiary. However, no additional gifts can be made to the same beneficiary for five years, and if the donor dies before the five years have passed, a prorated portion of the gift is returned to the donor’s taxable estate.
• Some states allow contributions to be deducted from state income tax, although this may be limited to 529 plans sponsored by the state in which you are a resident.

Changing beneficiaries. If the child initially named as a beneficiary does not attend college or does not need all of the funds in the 529 account, the account owner can change the beneficiary to another eligible family member without any gift or income tax consequences. In addition, no federal generation-skipping transfer tax will be incurred if the new beneficiary is a member of the same generation as the initial beneficiary.

Cons

Possibility of penalties. If withdrawals from 529 accounts are not used for qualified higher education expenses or tuition for elementary or secondary schools, the investment earnings will be subject to state and federal income tax, as well as a 10% federal tax penalty.

Fees. Education savings plans and prepaid tuition plans typically charge enrollment and application fees, as well as ongoing administrative, account maintenance, and/or asset management fees. If an education savings plan is purchased from a broker, there may be additional fees.

Eligibility for need-based financial aid. It is likely that the money invested in a 529 plan will have an impact on the beneficiary’s eligibility to receive need-based financial aid for college or elementary or secondary school tuition.

Estate Planning Considerations

Name a successor. It is important for account owners to name both a primary and secondary successor, i.e., someone else who can control the account in case the original owner passes away or becomes unable to make decisions regarding the account. It is crucial to name a successor who is trustworthy, as the successor will be able to make decisions about how the money is invested, when and how it is used for the beneficiary’s education expenses, and changing the beneficiary. The successor will also have the discretion to make nonqualified withdrawals for a purpose other than the intended educational purposes. If no successor is named, the new account owner may be decided through probate if there is a will or by operation of law if there is no will in place. Some plans have their own rules of succession and may name the beneficiary as the account owner if the beneficiary is over the age of 18. This may not be an optimal result if the beneficiary is not mature enough to make wise decisions about the funds. If the beneficiary is not yet a legal adult, the beneficiary’s guardian may be named the account owner.

Consider alternatives. 529 plans have tax advantages, but they restrict you from using the funds for non-qualified purposes unless you are willing to pay tax on the earnings plus a 10% penalty. If you may need the funds for retirement or are not sure the child will attend college, other alternatives may be a better choice for college savings. Here are two commonly used strategies:

• Revocable education trust. A special purpose revocable education trust provides more flexibility, as it allows the individual who sets it up to serve as the trustee and make distributions for the beneficiary’s education, but it can also be revoked or revised if the funds are needed for other purposes or if the beneficiary does not attend college. It will not provide the tax benefits of a 529 plan, but it may still be a better option for some families for whom flexibility is a priority. Similar to the 529 plan, a trustworthy individual should be named as the successor trustee.
• Demand trust. A demand trust, also known as a “Crummey” trust, allows parents or grandparents the flexibility to set aside funds to provide for a child or grandchildren that can be used for any purpose and allows the trustee to determine when and how the funds will be used. This type of trust is irrevocable, and thus, it cannot easily be revoked or revised. Because the beneficiary does not have the right to receive any of the funds held by the trust–except during a brief demand period–the funds held in the trust are protected from claims by the beneficiary’s creditors. In addition, because the beneficiary has the right to receive the gift during the demand period, the funds in the trust are considered to be completed gifts, removing the funds transferred to the trust from the parent or grandparent’s estate. In addition, funds transferred into the trust up to the exclusion amount (in 2019, $15,000) are considered to be gifts that are free from federal gift tax.

We Can Help

If paying for your child or grandchild’s college education is one of your estate planning goals, and you are confused about the best way to save for those college expenses, we can help you think through which method will work best for you and your family. The strategies discussed above are only a few of the possibilities. Please contact our office to schedule a meeting so we can help you create the best plan to set your child or grandchild up for success.

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What is happening in your destination state?

Because we are still in the midst of a pandemic, it would be prudent to do some research about your winter destination. How many COVID-19 cases has the state had? Are these numbers trending upward? Upon your arrival, will the local or state government require that you quarantine for a period of time? Lastly, are there any additional local orders that you should be aware of, such as a requirement that masks be worn indoors or restrictions on dining in restaurants?

Which state do you consider your home?

Your state of domicile impacts your estate planning, family law matters, and taxes. Due to differences in state tests for determining residency, you can be considered a resident of more than one state; however, you can only be domiciled in one state. Although state laws differ as to determining domiciliary status, the common elements are that your domicile is where you permanently live and where you intend to remain or return.

Because you are spending time in two (or more) states, you should meet with your tax advisor to confirm that you are filing the appropriate tax returns and have a plan in place to maximize the potential differences in tax laws. For example, Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming do not have any personal income tax. You should also consider meeting with us to discuss the estate planning implications of owning properties in multiple states, especially if you own properties in both community and separate property states.

Have you reviewed your estate plan lately?

Before you depart, locate and review your estate planning documents. Life changes are common and sometimes occur without warning. Having an up-to-date estate plan helps ensure that your wishes are carried out during your lifetime and upon your death. The following questions can help determine if your documents still meet your needs.

• Do you still want your named fiduciaries (i.e., the trustee, personal representative, guardian for a minor child, and agents under a financial power of attorney or medical power of attorney) to act on your behalf, and are they still able to serve in that role?
• Are your named beneficiaries still alive? Are there any additional individuals or charities you would like to leave something to? Do you want to make any adjustments to the amount of an inheritance or the manner in which you are leaving an inheritance to a beneficiary?
• Do your beneficiary designations for retirement accounts and life insurance policies match the rest of your estate plan?
• If you need to move for health reasons but cannot make the decision for yourself, does your agent have the authority to relocate you to another state?

Additionally, you may require assistance with financial matters or transactions while you are away. For this reason, you should review your financial power of attorney to determine if it is springing or immediate. A springing power of attorney allows your agent to act only when you are no longer able to act on your own (as determined by a physician or, in some instances, a judge). By contrast, an immediate power of attorney allows your chosen agent to act on your behalf right away, regardless of your current ability to act for yourself.

While reviewing your existing estate plan, you should evaluate whether it includes all of the necessary documents. If you currently have a will-based estate plan, it may be time to add a revocable living trust to your estate planning portfolio. This is especially important if you own property in more than one state. Without a trust to consolidate ownership and administration, your loved ones may end up going through multiple probate administrations in different states. This can increase the time and cost of settling your affairs at your death.

Are your estate planning documents compliant in both states?

Estate planning laws are state specific and for certain documents, such as the financial power of attorney and healthcare directive, each state may have its own statutory forms. While it is possible for one state to honor a document that was validly executed in another state, it will be faster for medical personnel to honor your wishes in an emergency if your instructions are in a familiar form. We suggest that you have an attorney licensed in your second state review your estate planning documents for compliance, and if necessary, prepare a second financial power of attorney and healthcare directive.

As you prepare for your upcoming travel, please do not hesitate to give us a call. We are here to answer any questions and to make sure you are properly protected no matter where you may roam. We are available to meet with you in person or via video conference.

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Cryptocurrencies Explained

Cryptocurrency is a form of internet currency. Instead of a central bank regulating the funds, encryption techniques are used to regulate the amount or units of currency. These techniques are also used to verify the transfer of funds. In this manner, cryptocurrency can be transferred online without a third party. Some cryptoassets have units that are all the same (called “fungible tokens”). Bitcoin is an example of a fungible token since all bitcoins are the same as one another. Other cryptoassets have unique attributes (called “non-fungible tokens”). Cryptokitties is an example of a nonfungible token since each digital “cat” is unique.

Notably, if you lose the key (i.e., the encryption) to your cryptocurrency, you will be unable to access your digital assets. Thus, making access to your key available to your loved ones upon your death or incapacity is vital to estate planning. This is because if there is no access to the key, there is no access to the assets. Unlike more “traditional” assets, there is no third party to control or compel assets nor reset the key for access to these digital funds. The software or hardware device that holds the keys to your cryptocurrency and manages your transaction is referred to as a “wallet.”

Digital Asset Estate Planning

It is important to understand that cryptocurrencies are typically a non-listed, non-vetted asset category. In other words – cryptocurrencies are not like publicly traded stocks, which have a vetting process, legal disclosures, and are subject to other requirements. In short, buyer beware when it comes to digital currencies. Therefore, if you own cryptocurrency — or are thinking about investing in digital currency — understand that you will need a technical access plan (a way to ensure your successors can access your digital wealth) in addition to a legal plan in order to effectively create an estate plan that incorporates these digital assets. And because what is going on with digital currency is evolving all the time, and quickly, it is important to touch base with a knowledgeable estate planning attorney at least once a year to make sure you and your family’s needs are being met.

Keeping your money, family heirlooms, and other values hidden from everyone in a safe in an unknown location without giving anyone the combination to the safe is foolish. The same is true if you own cryptocurrencies and do not take the appropriate steps to protect this asset through estate planning. Do not let life’s surprises leave your family in the dark. Contact us today to learn about your options and how to protect the loved ones you will leave behind.

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