Don’t Forget to Plan Your Digital Estate

Uncle Willie was an accomplished amateur photographer who transferred thousands of photographs and videos to digital storage in “the cloud.”  He also did all his banking, investing and bill paying online.  In recent years he wrote his memoirs and traced the family’s ancestry back more than 200 years – all preserved electronically.

When Uncle Willie passed away, his executor and surviving family members were vaguely aware that he possessed important online assets and accounts, but they didn’t have a clue about his passwords or how to access his e-mail and contact lists.  They finally hired a company that helped dig out the details on Uncle Willie’s “digital estate,” but it was a costly and time-consuming procedure.

A better plan for Uncle Willie would have been to supply his executor, standby trustee or other trusted person with information about all his online storage and accounts, together with the necessary passwords and access codes.  Details of one’s digital estate should be included in the estate inventory prepared when making or revising a will or revocable living trust.  Because your “digital estate inventory” may contain sensitive financial information, you should take care to store it in a safe place, such as a safe deposit box.  Your executor or trustee should be given power of attorney to access and administer your digital assets and accounts.

Note:  Several companies, such as Entrustet, Legacy Locker and DataInherit offer to assist with storage of passwords and digital estate inventories and at death will provide that information to the designated “trusted person.”

Forgoing Vacation Days Can Benefit Hurricane Victims

The IRS has approved employer programs that assist victims of Hurricane Sandy by allowing employees to forgo vacation days, sick time or personal leave, in exchange for cash payments by the employer to qualified relief organizations.  The IRS announced that these payments would not generate taxable income for donor-employees, but they would not be entitled charitable deductions.  Employers, however, could deduct cash payments as charitable gifts.  Payments must be made before January 1, 2014.

A Personal Message to Friends and Family

Everyone reading this article needs a will, and everyone should have a “living will” (or other health care directives), as well.  In recent years many people also have begun creating “ethical wills” – statements of their beliefs, values and ideals that they plan to leave behind for friends and family.
           
These aren’t legal documents, and they are not made for the purpose of distributing estate assets – although one could argue that ethical wills leave behind the most valuable of all assets: the wisdom and knowledge drawn from a lifetime of experience.  Ethical wills are usually written statements, but video or audio recordings of one’s thoughts and experiences can serve just as well. The content, not the form, is what’s important.  What do people put into ethical wills?

• Expressions of faith and beliefs and the role such convictions have played in their lives;

• Lessons learned during life, including the impact of specific events and experiences;

• Personal messages of forgiveness, apology and reconciliation that were left unsaid during life;

• Messages of hope and inspiration for those who carry on.

Making an ethical will can be a satisfying complement to your other estate planning.  As you make or revise your will or living trust, your thoughts about personal values and experiences may lead you to contemplate the people and organizations that have been important in your life. Including an estate gift for our benefit is easily accomplished through a codicil to your will or amendment to your living trust.  Simpler yet is to make us a beneficiary of life insurance, financial or retirement accounts.  Please call our office for details.

Trust Solves IRA Beneficiary Puzzle

Millie’s estate currently is not large enough to owe federal estate tax, but she is concerned about what eventually will happen to her $650,000 IRA – both from an income tax and money management standpoint.
           
“I want to use the IRA to help my sister Rose, who is 82, and my son Tom, who is 51,” Millie explained to her adviser.  She confided that Tom had squandered an inheritance from her late husband and that Rose would need some assistance investing her share of the IRA.  Finally, Millie expressed a wish to include a significant charitable bequest as part of her estate plan.
           
Her adviser pointed out that the conventional strategy would be to name designated beneficiaries for the IRA, who would then be able to “stretch” required minimum distributions over their life expectancies.  But IRA rules require that the account be liquidated over the life expectancy of the oldest beneficiary – her sister, in this case – which would likely exhaust the account very quickly.  The adviser proposed that Millie use her IRA to establish a testamentary charitable remainder unitrust that would pay Rose and Tom 5% of the value of the trust assets annually, with the remainder benefiting our programs.  Minimum distributions are not an issue with a tax-exempt unitrust, and both beneficiaries would be assured of lifetime payments.         

“The trust would also provide professional management of the funds remaining in your IRA, and you’d satisfy your goal of eventually helping a worthwhile cause, as well,” he added.