What Power Does an Executor Have?

Being asked to serve as an executor is a big compliment with potential pitfalls, advises the recent article “How to Prepare to Be an Executor of an Estate” from U.S. News & World Report. You are being asked because you are considered trustworthy and able to handle complex tasks. That’s flattering, of course, but there’s a lot to know before making a final decision about taking on the job.

An executor of an estate helps file paperwork, close accounts, distribute assets of the deceased, deal with probate and any court filings and navigate family dynamics. Some of the tasks include:

  • Locating critical documents, like the will, any trusts, deeds, vehicle titles, etc.
  • Obtaining death certificates.
  • Overseeing funeral arrangements and memorial services, if any.
  • Filing the will in probate court.
  • Creating an estate bank account, after obtaining an estate tax number (EIN).
  • Notifying organizations, including Social Security, pension accounts, etc.
  • Paying creditors.
  • Distributing assets.
  • Overseeing the sale or transfer of real estate
  • Filing estate tax returns and final tax returns.

If you are asked to become the executor of an estate for a loved one, it’s a good idea to gather as much information as possible while the person is still living. It will be far easier to tackle the tasks, if you have been set up to succeed. Find out where their estate planning documents are and read the documents to make sure you understand them. If you don’t understand, ask, and keep asking until you do. Similarly, obtain information about all assets, including joint assets. Find out if there are any family members who may pose a challenge to the estate.

Today’s assets include digital assets. Ask for a complete list of the person’s online accounts, usernames and passwords. You will also need access to their devices: desktop computer, laptop, tablet, phone and smart watch. Discuss what they want to happen to each account and see if there is an option for you to become a co-owner of the account or a legacy contact.

Many opt to have an estate planning attorney manage some or all of these tasks, as they can be very overwhelming. Frankly, it’s hard to administer an estate at the same time you’re grieving the loss of a loved one.

As executor, you are a fiduciary, meaning you’re legally required to put the deceased’s interests above your own. This includes managing the estate’s assets. If the person owned a home, you would need to secure the property, pay the mortgage and/or property taxes and maintain the property until it is sold or transferred to an heir. Financial accounts need to be managed, including investment accounts.

The amount of time this process will take, depends on the complexity and size of the estate. Most estates take at least twelve months to complete all of the administrative work. It is a big commitment and can feel like a second job.

A few things vary by state. Convicted felons are never permitted to serve as executors, regardless of what the will says. A sole executor must be a U.S. citizen, although a non-citizen can be a co-executor, if the other co-executor is a citizen. Rules also vary from state to state regarding being paid for your time. Most states permit a percentage of the size of the estate, which must be considered earned income and reported on tax returns.

Be very thorough and careful in documenting every decision made as the executor to protect yourself from any future challenges. This is one job where trying to do it on your own could have long-term effects on your relationship with the family and financial liability, so take it seriously. If it’s too much, an estate planning attorney can help.

Reference: U.S. News & World Report (Dec. 22, 2021) “How to Prepare to Be an Executor of an Estate” 

Can I Avoid Password Problems for My Family in Estate Planning?

Barron’s recent article entitled “How to Ensure Heirs Avoid a Password-Protected Nightmare” explains that even financial planners may not consider until too late, how difficult it can be to recover and access a loved one’s accounts after they pass away. Since we are much more paperless with our finances, getting access to these accounts can be extremely hard for heirs, if they don’t have the right information. That’s because digital accounts are protected by encryption, multifactor authentication and federal data privacy laws.

Create a list of digital accounts and instructions on how to access them. The list should include not only financial assets but social media and other accounts. Digital accounts that loved ones or advisors may need to access following a death include:

  • Traditional financial accounts
  • Cryptocurrency accounts
  • Home payment and utilities accounts
  • Health insurance benefits
  • Email accounts
  • Social media
  • Smartphone accounts
  • Storage and file-sharing
  • Photo, music and video accounts
  • E-commerce accounts
  • Subscriptions to streaming services, such as Netflix, newspapers, music services; and
  • Loyalty/rewards programs for airlines and hotels.

Create a list of accounts, passwords and access information, keeping it up to date as information changes and letting a trusted person, such as an executor or estate planning attorney, know its location. Without a password list, it can be a nightmare.

Note that with every digital account, there’s a specific process that heirs must undertake to gain access, which should then be communicated clearly in your estate plan. Make a list of all digital assets and their access information, but don’t include this in the will itself, since the document is part of the public record in probate.

Being prepared well ahead of time can help your family avoid additional stress and delays as they probate your estate. It also ensures that they don’t forfeit significant financial assets concealed behind an impenetrable digital wall.

Reference: Barron’s (Dec. 15, 2021) “How to Ensure Heirs Avoid a Password-Protected Nightmare”

What are Digital Assets in a Will?

Most of us overlook the amount of information and assets we have online, from social media to networking websites, frequent flier miles, online bank accounts, subscriptions, photos, websites, etc. The list of most people’s digital assets has grown considerably in recent years, and yet most have no plan for what should happen to those assets when their owner dies.

This is a growing problem, says msn money, in an article making the case clear: “From Facebook to iTunes to Amazon, You Need A Digital Will!” Every website has its own legal requirements for dealing with the original owner’s death, almost aways hidden deep within the Terms of Service Agreement we all click on without reading. Some have created processes for executors, while others have not. What can you do to make it easier for your executor?

Make a list of everything you access online. Be prepared to be surprised at just how much your life occurs online. Compile a list of all online accounts, usernames and passwords. You probably have to do this bit by bit, as a marathon session might take a long time. Use either a password manager with top-notch security or a password-protected spreadsheet you update around once every three months.

This is especially important for accounts with monetary value. But sentimental value counts too. A side note: all those playlists you’ve created on iTunes? They are non-transferrable and when you die, they are deleted.

What do you want to have happen to each account? You’ll need to decide what you want to happen to each account and, depending on the account, state it clearly in what’s known as a directive. You may want to preserve some, or you may want to shut down others. Some free email accounts are automatically shut down, if they are not used for a certain period of time. Others should be down immediately to prevent fraud. Scammers prefer accounts where the owners have died, since they are often an easy entry to the person’s online identity.

Facebook is one of the platforms allowing you to designate a Legacy contact, so the person can memorialize the account, allowing only friends to see the page and removing some information. If you want to have the page deleted on death, Facebook provides directions.

Each platform has its own rules. Most rely on provisions regarding privacy protection: only the original owner is authorized to access the account. There are now federal and state laws prohibiting accessing private online data, which have created significant obstacles for loved ones to access digital assets. Don’t expect anyone to resolve your digital accounts after you pass, unless you have a digital will. Even with one, there might be issues.

Your estate planning attorney will help you add the correct language to your estate documents as to what you want to happen to each account. It’s important to ensure that your estate plan gives your executor or other fiduciary authorization to access your digital assets and what you want to happen to them. Remember—don’t put account names, usernames, or passwords in a will, as it becomes a public document during the probate process.

Without an inventory of digital assets, it may be simply impossible to ascertain where digital assets are located and how to access them. Looking at credit card statements for autopayments may be a place to start, or at least to stop the autopayments.

This is a relatively new asset class, with laws varying from state to state. Speak with your estate planning attorney to ensure your digital assets are protected, as well as traditional assets when creating or reviewing your estate plan.

Reference: msn money (Dec. 19, 2021) “From Facebook to iTunes to Amazon, You Need A Digital Will!”

Estate Planning and Cryptocurrency

The increase of people investing in digital assets has not been matched by an increase in the number of people preparing to pass on these assets, which can be of considerable value. This new class of assets requires a new kind of estate planning, according to the article “Cryptocurrency and Estate Planning: What Digital Investors Should Know” from Forbes.

Cryptocurrency is digital currency used to buy online goods and services and traded in several markets. Cryptocurrency is not issued by any government. Instead, it’s created and managed through blockchain, a technology comprised of decentralized computers used to record and manage transactions. Users claim cryptocurrency is extremely secure. Sometimes, cryptocurrency is so secure that a lost password can cause the owner to lose millions.

The most popular cryptocurrencies are Bitcoin, Ethereum, Dogecoin and Binance Coin, although there are many others, and it seems like a new cryptocurrency is always being introduced. The total value is estimated at $1.35 trillion.

Another digital asset class gaining in popularity is the NFT, or non-fungible token, used to buy and sell digital art. Each NFT, which is also supported by blockchain technology, can be anything digital, like music or artwork files. The buyer of an NFT owns the exclusive original and the artist, in some cases, retains proprietary rights to feature the artwork or make copies of it. Numerous NFTs have already sold for millions.

Owning digital assets without a plan for passing them along to the next generation, could leave heirs empty handed.

Even if your family knows you own cryptocurrency, and even if they know your passwords or have access to the digital wallet where you keep your passwords, they still may not be able to access your accounts. Probate for digital assets is still very new to the courts, and if you can avoid probate for this asset class, you should.

Blockchain technology, the system behind cryptocurrency and NFTs, requires a private key to access each account, typically in the form of a long passcode. Just as you would not put account numbers into a will, you should never put passcodes or usernames in a last will and testament to prevent them from becoming part of the public record. However, only by understanding how each currency works after the original owner dies and preparing to provide the information to your executor, can your heirs receive these assets.

The nature of cryptocurrency is decentralization. There is no governing body that oversees or regulates cryptocurrency. Laws around cryptocurrency are still evolving, so your estate plan may benefit from a trust to protect digital assets.

Don’t neglect to have the necessary discussion with your heirs, including a knowledge transfer of the step-by-step process they’ll need to know to access your digital assets. An estate planning attorney with experience with digital assets and your state’s laws about digital assets will help protect these assets and ensure they are passed to the next generation without evaporating into cyberspace.

Reference: Forbes (July 21, 2021) “Cryptocurrency and Estate Planning: What Digital Investors Should Know”

What are Digital Assets in an Estate?

Planning for what would happen to our intangible, digital assets in the event of incapacity or death is now as important as planning for traditional assets, like real property, IRAs, and investment accounts. How to accomplish estate planning for digital assets is explained in the article, aptly named, “Estate planning for your digital assets” from the Baltimore Business Journal.

Digital asset is the term used to describe all electronically stored information and online accounts. Some digital assets have monetary value, like cryptocurrency and accounts with gaming or gambling winnings, and some may be transferrable to heirs. These include bank accounts, domains, event tickets, airline miles, etc.

Ownership issues are part of the confusion about digital assets. Your social media accounts, family photos, emails and even business records, may be on platforms where the content itself is considered to belong to you, but the platform strictly controls access and may not permit anyone but the original owner to gain control.

Until recently, there was little legal guidance in managing a person digital files and accounts in the event of incapacity and death. Accessing accounts, managing contents and understanding the owner, user and licensing agreements have become complex issues.

In 2014, the Uniform Law Commission proposed the Uniform Fiduciary Access to Digital Assets Act (UFADAA) to provide fiduciaries with some clarity and direction. The law, which was revised in 2015 and is now referred to as RUFADAA (Revised UFADAA) was created as a guideline for states and almost every state has adopted these laws, providing estate planning attorneys with the legal guidelines to help create a digital estate plan.

A digital estate plan starts with considering how many digital accounts you actually own—everything from online banking, music files, books, businesses, emails, apps, utility and bill payment programs. What would happen if you were incapacitated? Would a trusted person have the credentials and technical knowledge to access and manage your digital accounts? What would you want them to do with them? In case of your demise, who would you want to have ownership or access to your digital assets?

Once you have created a comprehensive list of all of your assets—digital and otherwise—an estate planning attorney will be able to update your estate planning documents to include your digital assets. You may need only a will, or you may need any of the many planning tools and strategies available, depending upon the type, location and value of your assets.

Not having a digital asset estate plan leaves your estate vulnerable to many problems, including costs. Identity theft against deceased people is rampant, once their death is noted online. The ability to pay bills to keep a household running may take hours of detective work on your surviving spouse’s part. If your executor doesn’t know about accounts with automatic payments, your estate could give up hundreds or thousands in charges without anyone’s knowledge.

There are more complex digital assets, including cryptocurrency and NFTs (Non-Fungible Tokens) with values from a few hundred dollars to millions of dollars. The rules on the valuation, sale and transfers of these assets are as yet largely undefined. There are also many reports of people who lose large sums because of a lack of planning for these assets.

Speak with your estate planning attorney about your state’s laws concerning digital assets and protect them with an estate plan that includes this new asset class.

Reference: Baltimore Business Journal (Sep. 16, 2021) “Estate planning for your digital assets”

What are Typical Estate Planning Documents?

For many people, eight documents form the foundation of an estate plan. It’s not that difficult a project as it seems, explains the article “8 Documents That Are Essential to Planning Your Estate” from msn.com. When you’ve completed your estate plan, you’ll also gain the peace of mind of knowing that you’ve done what was needed to protect your family. It’s well worth the effort.

Last will and testament. This is the basic document that gives you the ability to tell your family what you want to happen with your assets. It is used to name an executor—a person who will be in charge of managing your estate. Your will is also where you name a guardian who will be in charge of raising minor children. You can use the will to convey funeral instructions, but you may want to do that in a separate document, in case your will isn’t found right away. Your estate planning attorney will help you figure out the best way to handle that.

What happens if you don’t have a will? In that case, a probate court will determine who will be your executor. It might be a spouse, a grown child, or someone you don’t know or would not want to handle your estate. It’s best to have a will and select your executor yourself. When your estate goes through probate, all of the information in your will becomes part of the public record, so don’t put anything in your will, like passwords or account numbers.

Revocable living trust. Trusts are used to pass assets and property without going through probate. Your estate planning attorney will help create the trust and you’ll decide who will be in charge of it upon your death. You can be the trustee while you are living, but then you lose any estate tax benefits. If you have substantial property or wealth, trusts are a good tool to control assets and save on estate taxes.

Beneficiary designations. Any time you purchase a new insurance policy or a retirement plan, you are asked to name a beneficiary. If your first job came with a retirement plan, you likely also named a beneficiary for that plan. These designations allow the assets to pass directly to the beneficiary upon your death. They aren’t included in your will and they don’t go through probate. The biggest problem with beneficiary designations? Neglecting to update them through the many changes in life. Review and update your beneficiary designations on a regular basis.

Durable power of attorney. This document allows you to name the person to act on your behalf, if you become incapacitated because of illness or injury. They can manage your legal and financial affairs. Here’s an important point: if you become incapacitated, you cannot assign this role to someone. It needs to be done when you are legally competent.

Health care power of attorney and living will. The health care power of attorney lets someone else make medical decisions on your behalf, if you are too sick to do so yourself. The living will gives you the opportunity to explain what kind of care you do or do not want if you are close to death. If the idea of staying alive on a heart machine makes you unhappy, for instance, you can document your wishes, so loved ones don’t have to wonder what you want.

Digital assets. Much of our lives are lived online, and we have assets that won’t be found in a search of the attic or basement. Each online platform that you use may have a directive process, where you can clearly state who you want to have access to your digital assets and what you would like to have happen to them upon your death.

A letter of intent. Writing a letter of intent is a way to convey your wishes to loved ones for what you’d like to happen after you die. It may not be legally enforceable, like a will or a trust, but your loved ones will appreciate knowing what you want for funeral planning or a memorial service.

List of important documents. Sparing your family a post-mortem scavenger hunt is a gift to the living. Make a list of documents and make sure they know where important documents can be found. Include a list of routine bills, the professionals you rely on, including contact information and account numbers. Some families use a briefcase to store the important papers, but a fireproof and waterproof safe is more secure.

Reference: msn.com (June 19, 2021) “8 Documents That Are Essential to Planning Your Estate”

Your Will and Estate Planning Checklist

Dying without a last will creates additional costs and eliminates any chance your wishes for loved ones will be followed after your death. Typically, people think about last wills when they marry or have children, and then do not think about last wills or estate plans until they retire. While a last will is important, there are other estate planning documents that are just as important, says the recent article “10 Steps to Writing a Will” from U.S. News & World Report.

Most assets, including retirement accounts and insurance policy proceeds, can be transferred to heirs outside of a will, if they have designated beneficiaries. However, the outcome of an estate may be more impacted by Power of Attorney for financial matters and Medical Power of Attorney documents.

Here are ten specific tasks that need to be completed for your last will to be effective. Remember, if the will does not comply with your state’s estate law, it can be declared invalid.

  1. Find an estate planning attorney who is experienced with the laws of your state.
  2. Select beneficiaries for your last will.
  3. Check beneficiaries on non-probate assets to make sure they are current.
  4. Decide who will be the executor of your last will.
  5. Name a guardian for minor children, if yours are still young.
  6. Make a letter describing possessions and who you want to receive them. Be very specific.

There are also tasks for your own care while you are living, in case of incapacity:

  1. Name a person for the Power of Attorney role. They will be your representative for legal and financial matters, but only while you are living.
  2. Name a person for the Medical Power of Attorney to make decisions on your behalf, if you cannot.
  3. Create an Advance Directive, also known as a Living Will, to explain your wishes for medical care, particularly concerning end-of-life care.
  4. Discuss these roles and their responsibilities with the people you have chosen, and make sure they are willing to serve.

Be realistic about the people you are naming to receive your property. If you have a child who is not good with managing money, a trust can be set up to distribute assets according to your wishes: by age or accomplishments, like finishing college, going to rehab, or maintaining a steady work history.

Do not forget to tell family members where they can find your last will and other estate documents. You should also talk with them about your digital assets. If accounts are protected by passwords or facial recognition, find out if the digital platform has a process for your executor to legally obtain access to your digital assets.

Finally, do not neglect updating your last will every three to four years or anytime you have a major life event. An estate plan is like a house: it needs regular maintenance. Old last wills can disinherit family members or lead to the wrong person being in charge of your estate. An experienced estate planning attorney will make the process easier and straightforward for you and your loved ones.

Reference: U.S. News & World Report (May 13, 2021) “10 Steps to Writing a Will”

How Do I Address Digital Assets in Estate Planning?

Many states consider the digital accounts you have and access online to be no different from the tangible personal property you own, like cars, real estate and jewelry.

Los Altos (CA) Online’s recent article entitled “Creating an estate plan for your digital assets” says that you can control what happens to these digital assets after you die. However, you need to take specific actions to ensure that your wishes are followed. Let’s look at how to do it:

  1. Create an inventory. With everything you have online these days, you should categorize your digital assets. They might include online data storage accounts; emails, texts and contacts; social media accounts; and shopping accounts. You should identify all your financial accounts – bank, brokerage and retirement and bank credit card. However, those should be addressed through your estate planning documents in the traditional manner.
  2. Determine who you want to receive your digital assets after you are gone. Think through who gets what, just like your tangible property.
  3. Designate a fiduciary. This is a trusted agent named in your will or trust with the authority to access your digital assets. It can be the same individual for all of them but need not be. You should also include in an addendum your wishes for the disposition of each asset. Work with an experienced estate attorney to make certain that your estate documents accurately reflect your intentions.
  4. Determine the fiduciary’s ability to access your digital assets. Social media terms of service agreements (TOSAs) usually state that all posted content becomes the property of the custodian (the service provider), and nearly all TOSAs prohibit third-party access to digital assets after the user dies. However, if your will or trust explicitly grants a fiduciary access, the TOSA will no longer prevail. The custodian will be required to allow access to the digital assets by the fiduciary. The custodian has the right, however, to require evidence of the fiduciary’s authority, and could make the process difficult.

Another option is to leave the fiduciary a list of login IDs and passwords for the sites and/or the data – assuming, of course, that you strongly trust the person you’ve appointed as fiduciary. You can make a list on paper or use password-generator application which requires a master password. You should also be certain to include instructions for any two-factor authentication you may have set up.

Don’t list any user IDs and passwords in your will because they would become visible as a public record after death.

Reference: Los Altos (CA) Online (May 5, 2021) “Creating an estate plan for your digital assets”

What Is the Purpose of an Estate Plan?

No one wants to think about becoming seriously ill or dying, but scrambling to get an estate plan and healthcare documents done while in the hospital or nursing home is a bad alternative, says a recent article titled “The Essentials You Need for an Estate Plan” from Kiplinger. Not having an estate plan in place can create enormous costs for the estate, including taxes, and delay the transfer of assets to heirs.

If you would like to avoid the cost, stress and possibility of your spouse or children having to go to court to get all of this done while you are incapacitated, it is time to have an estate plan created. Here are the basics:

A Will, a Living Will, Power of Attorney and a Beneficiary Check-Up. People think of a will when they think of an estate plan, but that’s only part of the plan. The will gives instructions for what you want to happen to assets, who will be in charge of your estate—the executor—and who will be in charge of any minor children—the guardian. No will? This is known as dying intestate, and probate courts will make all of these decisions for you, based on state law.

However, a will is not enough. Beneficiary designations determine who receives assets from certain types of property. This includes life insurance policies, qualified retirement accounts, annuities, and any account that provides the opportunity to name a beneficiary. These instructions supersede the will, so make sure that they are up to date. If you fail to name a beneficiary, then the asset is considered part of your estate. If you fail to update your beneficiaries, then the person you may have wanted to receive the assets forty years ago will receive it.

Some banks and brokerage accounts may have an option of a Transfer on Death (TOD) agreement. This allows you to plan out asset distribution outside of the will, speeding the distribution of assets.

A Living Will or Advance Directive is used to communicate in advance what you would want to happen if you are alive but unable to make decisions for yourself. It names an agent to make serious medical decisions on your behalf, like being kept on life support or having surgery. Not having the right to make medical decisions for a loved one requires petitioning the court.

Financial Power of Attorney names an attorney in fact to manage finances, paying bills and overseeing investments. Without a POA, your family can’t take action on your financial matters, like paying bills, overseeing the maintenance of your home, etc. If the court appoints a non-family member to manage this task, the family may see the estate evaporate.

Creating a trust is part of most people’s estate plan. A trust is a means of leaving assets for a minor child, or someone who cannot be trusted to manage money. The trust is a legal entity that inherits money when you pass, and a trustee, who you name in the trust documents, manages everything, according to the terms of the trust.

Today’s estate plan needs to include digital assets. You need to give someone legal authority to manage social media accounts, websites, email and any other digital property you own.

The time to create an estate plan, or review and update an existing estate plan, is now. COVID has awakened many people to the inevitability of severe illness and death. Planning for the future today protects the ones you love tomorrow.

Reference: Kiplinger (April 21, 2021) “The Essentials You Need for an Estate Plan”

How Digital Assets Figure into Estate Planning

Yahoo Finance’s recent article entitled “Who inherits your selfies when you die?” laments that the internet ruins everything, and a simple death is no exception.

If asked to close out a family member’s estate, it now includes social media accounts, cloud storage and frequent flyer miles.

Digital assets are files created electronically. They exist as data held on a digital storage drive or computer hard drive.

However, items made by hand can become a digital asset, such as a painting or handwritten notes become digital assets, if they’re scanned and uploaded to a computer.

It can also be images, photos, videos, files containing text, spreadsheets, or slide decks.

The first time anyone has to deal with the laws and rules about incapacity and death, is when a loved one becomes ill or has passed away. It’s an emotionally tough time, and they’re likely to be grieving when trying to make important decisions on a project they know nothing about.

Know that we no longer solely have a paper trail to our lives. Think about the number of digital accounts you log into to manage your household and personal finances.

It’s significant, and an executor’s role is now dependent on knowing and finding both our physical and digital lives.

Your executor won’t know what you have, unless you tell them in advance.

Your home office is paperless and behind a locked screen. We all have wishes and preferences about those assets, and these wishes and preferences need to be documented and shared.

Today’s home office is a digital home office. We will soon have the same spectrum of choices in estate planning for our digital assets, as we have for our physical ones.

However, right now, there aren’t a lot of pre-planning options.

You should create a list of your digital assets and passwords, so others you trust will know where to find them. Back up data should be stored in the cloud to a local computer or storage device.

Ask an experienced estate planning attorney about how to organize and address your digital assets in your estate plan.

Reference: Yahoo Finance (April 16, 2021) “Who inherits your selfies when you die?”