What Is an Ethical Will?
Mother's Day in elegant type surrounded by pink flowers. ** Note: Shallow depth of field

What Is an Ethical Will?

Scenes like this have taken place across the country since March, and many patients and loved ones have had strained conversations over phone or video calls, struggling to find the right words and hoping that their words can be heard. However, it’s impossible to share all of the family’s thoughts during this most trying of times, says a recent article “The Importance of Writing an Ethical Will—for You and to Those You Love” from The Wall Street Journal.

The increasing interest in estate planning during the pandemic has seen many Americans waking up to the realization they must get their estate plans in order. They focus on preparing wills, health care proxies and powers of attorney, which are important. However, there is another document that needs to be completed. It’s called an “ethical will.”

The ethical will is a statement used to transmit an individual’s basic values, history and legacy they would like to leave behind. It’s usually directed to children and grandchildren, but it can have a larger audience as well, and be shared with the friends who have become like family over a lifetime, or to communities, like houses of worship or civic groups.

The act of writing an ethical will reveals things the writer may not have even been aware of or leads to connections being made that had never been imagined. It is a chance to preserve parts of the person’s history, as well as the history of their ancestors. It is a wonderful gift to share your deepest wishes with those who are so important to you. An ethical will can bond people and generations, whether the letter is shared while you are living or after you have passed and lead to a sense of belonging to something bigger than each individual.

One of the most famous ethical wills was written by Shalom Aleichem, the famous Yiddish writer, and was printed in The New York Times after his death in 1916. While prepared as a last will and testament, it was a wonderful story that shared his values. He suggested that family and friends meet every year on the anniversary of his death, select a joyous story from the many he had written and read it aloud and “let my name be mentioned by them with laughter rather than not be mentioned at all.”

Even those of us who are not skilled writers have thoughts and wishes and history to share with our loved ones. Here are some questions to consider, when preparing your ethical will:

  • Who is it directed to?
  • Were there specific people and events who influenced your life?
  • What family history or stories would you want to pass on to the next generation?
  • What ethical or religious values are important to you?

While you work on completing a new estate plan, or updating an existing plan, take a moment to consider your ethical will and what you would like to share with your loved ones. The time to complete your estate plan and your ethical will is now.

Reference: The Wall Street Journal (Nov. 17, 2020) “The Importance of Writing an Ethical Will—for You and to Those You Love”

Make Sure Your Estate Plan Protects Digital Assets
shows tablet

Make Sure Your Estate Plan Protects Digital Assets

Today’s estate plan needs to expressly declare an “agent” or a “fiduciary” to gain access and control of “digital assets” in case of incapacity or death. If your estate plan has not been updated in the last four or five years, it’s likely that your digital assets are unprotected, advises the article “Properly addressing digital assets on your estate plan” from Southern Nevada Business Weekly.

Digital assets have value not only to owners, but to family members, beneficiaries and heirs. Some assets have sentimental value, like videos and photos, while others, like business records, URLs and gaming accounts, have financial value. Failing to address these issues in an estate plan could result in your executor and heirs being denied access and control of digital assets during incapacity or death.

Here are some examples of digital assets:

  • Email accounts–contain communications and history, including information about other digital assets.
  • Social media accounts/apps: Facebook, Twitter, Pinterest, YouTube, TikTok, etc.
  • Photo Sharing Accounts: Instagram, Shutterfly, Snapfish, Flickr, etc.
  • Gaming and Gambling Accounts/Apps: DraftKings, Esports Entertainment
  • E-Commerce Accounts/Apps: Amazon, PayPal, Etsy, PayPal, Venmo, etc.
  • Financial Accounts/Apps: Banks, Scottrade, E*Trade
  • Retail Accounts: Any store, online shopping that has a username and a password
  • Security Information: Two factor authentication, mobile phone PIN/PW, facial recognition, etc.

Here’s a little-known fact: without the proper legal authority to access these assets, the “agent” or “fiduciary” could be committing a crime. The Consumer Fraud and Abuse Act provides that it is a federal crime to access a computer and obtain information without authorization or when exceeding authorized access.

Most states have adopted the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA 2017). The Act contains specific language to be used in wills, trusts or power of attorney to name a “designated recipient” or “fiduciary” to access, control, transfer, or close digital assets upon incapacity or after death. RUFADDA also provides specific procedures for companies to disclose digital assets to a designated recipient or fiduciary.

If your estate planning assets do not address the issue of digital assets or do not use the specific language of RUFADDA, or generally if your estate planning documents were created before 2017, it’s time for a review that includes digital assets.

Even if all you have is a personal email account, you have digital assets to protect. It’s not a big problem to address them in your estate plan but can become a bigger program if they are neglected.

Reference: Southern Nevada Business Weekly (Sep. 17, 2020)“Properly addressing digital assets on your estate plan”

Why Everyone Needs an Estate Plan

Financial planners know that most people need to have estate plans, no matter how much or even how little money they have, as explained in this recent article “I’m a financial planner, and there are 3 reasons everyone needs an estate plan no matter how much money you have” from Business Insider. An estate plan includes healthcare directives and identifies guardians for minor children in the event you and your spouse die unexpectedly. It also can be created to avoid your family from having to go through probate court.

Skipping this part of your overall financial and legal life could put you, your assets and your family members at risk. Estate planning is done to protect you and your loved ones. That’s just one reason why everyone needs an estate plan. Having an estate plan protects you while you are living.

An estate plan is more than just a will or a trust. The two most common tools in an estate plan are a will and trust, but that’s just the beginning. A will, or last will and testament, is the document that provides the instructions for your heirs and beneficiaries to follow after you die. Trusts are used to protect assets and enforce your wishes, after you’re gone. However, a good estate plan should also include these documents:

  • An advance healthcare directive or healthcare proxy. These documents stipulate how you want to be treated, if you are alive but so sick or injured that you can’t provide directions. You may want to have a Do Not Resuscitate Order (DNR).
  • Powers of attorney. This legal document outlines who can represent you in legal, medical or financial matters, if you are not able to do so.

The right documents help avoid probate court. If you don’t have a will, any property or possessions must go through the probate system. Your documents and information about your assets become part of the public record and can be seen by anyone. Going through probate opens the door to litigation and disputes, which can further delay settling your estate. Having a will and the proper trusts gives clarity to heirs about what you want.

An estate plan protects your children. If you don’t have a will, a court names the guardian who will raise your children. Instead, decide who you would want. Make sure the person you want to care for your children will accept this responsibility. Trusts are a way to preserve assets for your children. The trust is managed by a trustee after you die and can stipulate specific rules and uses for the assets. For instance, you can provide a certain amount of money for the children, until they reach age 18. At that point, your trust could instruct the trustee to use the money for college expenses. You can be as specific as you wish.

Meet with an estate planning attorney familiar with the laws of your state. An estate planning attorney will know the estate and tax laws that apply to you and your family.

Reference: Business Insider (June 12, 2020) “I’m a financial planner, and there are 3 reasons everyone needs an estate plan no matter how much money you have”

Your Estate Plan Needs to Be Customized

The only thing worse than having no estate plan, is an estate plan created from a ‘fill-in-the-blank’ form, according to the recent article “Don’t settle for a generic estate plan” from The News-Enterprise. Compare having an estate plan created to buying a home. Before you start packing, you think about the kind of house you want and how much you can spend. You also talk with real estate agents and mortgage brokers to get ready.

Even when you find a house you love, you don’t write a check right away. You hire an engineer to inspect the property. You might even bring in contractors for repair estimates. At some point, you contact an insurance agent to learn how much it will cost to protect the house. You rely on professionals, because buying a home is an expensive proposition and you want to be sure it will suit your needs and be a sound investment.

The same process goes for your estate plan. You need the advice of a skilled professional–the estate planning lawyer. Sometimes you want input from trusted family members or friends. There other times when you need the estate planning lawyer to help you get past the emotions that can tangle up an estate plan and anticipate any family dynamics that could become a problem in the future.

An estate planning attorney will also help you to avoid problems you may not anticipate. If the family includes a special needs individual, leaving money to that person could result in their losing government benefits. Giving property to an adult child to try to avoid nursing home costs could backfire, making you ineligible for Medicaid coverage and cause your offspring to have an unexpected tax bill.

Your estate planning lawyer should work with your team of professional advisors, including your financial advisor, accountant and, if you own a business, your business advisor. Think of it this way—you wouldn’t ask your real estate agent to do a termite inspection or repair a faulty chimney. Your estate plan needs to be created and updated by a skilled professional: the estate planning lawyer.

Once your estate plan is completed, it’s not done yet. Make sure that the people who need to have original documents—like a power of attorney—have original documents or tell them where they can be found when needed. Keep in mind that many financial institutions will only accept their own power of attorney forms, so you may need to include those in your estate plan.

Medical documents, like advance directives and healthcare powers of attorney, should be given to the people you selected to make decisions on your behalf. Make a list of the documents in your estate plan and where they can be found.

Preparing an estate plan is not just signing a series of fill-in-the-blank forms. It is a means of protecting and passing down the estate that you have devoted a lifetime to creating, no matter its size.

Reference: The News-Enterprise (June 23, 2020) “Don’t settle for a generic estate plan”

Update Will at These 12 Times in Your Life

Estate planning lawyers hear it all the time—people meaning to update their will, but somehow never getting around to actually getting it done. The only group larger than the ones who mean to “someday,” are the ones who don’t think they ever need to update their documents, says the article “12 Different Times When You Should Update Your Will” from Kiplinger. The problems become abundantly clear when people die, and survivors learn that their will is so out-of-date that it creates a world of problems for a grieving family.

There are some wills that do stand the test of time, but they are far and few between. Families undergo all kinds of changes, and those changes should be reflected in the will. Here are one dozen times in life when wills need to be reviewed:

Welcoming a child to the family. The focus is on naming a guardian and a trustee to oversee their finances. The will should be flexible to accommodate additional children in the future.

Divorce is a possibility. Don’t wait until the divorce is underway to make changes. Do it beforehand. If you die before the divorce is finalized, your spouse will have marital rights to your property. Once you file for divorce, in many states you are not permitted to change your will, until the divorce is finalized. Make no moves here, however, without the advice of your attorney.

Your divorce has been finalized. If you didn’t do it before, update your will now. Don’t neglect updating beneficiaries on life insurance and any other accounts that may have named your ex as a beneficiary.

When your child(ren) marry. You may be able to mitigate the lack of a prenuptial agreement, by creating trusts in your will, so anything you leave your child won’t be considered a marital asset, if his or her marriage goes south.

Your beneficiary has problems with drugs or money. Money left directly to a beneficiary is at risk of being attached by creditors or dissolving into a drug habit. Updating your will to includes trusts that allow a trustee to only distribute funds under optimal circumstances protects your beneficiary and their inheritance.

Named executor or beneficiary dies. Your old will may have a contingency plan for what should happen if a beneficiary or executor dies, but you should probably revisit the plan. If a named executor dies and you don’t update the will, then what happens if the second executor dies?

A young family member grows up. Most people name a parent as their executor, then a spouse or trusted sibling. Two or three decades go by. An adult child may now be ready to take on the task of handling your estate.

New laws go into effect. In recent months, there have been many big changes to the law that impact estate planning, from the SECURE Act to the CARES act. Ask your estate planning attorney every few years, if there have been new laws that are relevant to your estate plan.

An inheritance or a windfall. If you come into a significant amount of money, your tax liability changes. You’ll want to update your will, so you can do efficient tax planning as part of your estate plan.

Can’t find your will? If you can’t find the original will, then you need a new will. Your estate planning attorney will make sure that your new will has language that states revokes all prior wills.

Buying property in another country or moving to another country. Some countries have reciprocity with America. However, transferring property to an heir in one country may be delayed, if the will needs to be probated in another country. Ask your estate planning attorney, if you need wills for each country in which you own property.

Family and friends are enemies. Friends have no rights when it comes to your estate plan. Therefore, if families and friends are fighting, the family member will win. If you suspect that your family may push back to any bequests to friends, consider adding a “No Contest” clause to disinherit family members who try to elbow your friends out of the estate.

Reference: Kiplinger (May 26, 2020) “12 Different Times When You Should Update Your Will”

What Happens when Mom Refuses to Create an Estate Plan?

This is a tough scenario. It happens more often than you’d think. Someone owns a home, investment accounts and an inheritance, but doesn’t want to have an estate plan. They know they need to do something, but keep putting it off—until they die, and the family is left with an expensive and stressful mess. A recent article titled “How to Get a Loved One to Visit an Estate Planning Attorney Before It’s Too Late” from Kiplinger, explains how to help make things right.

Most people put off seeing an estate planning attorney, because they are afraid of death. They may also be overwhelmed by the thought of how much work is involved. They are also worried about what it all might cost. owever, if there is no estate plan, the costs will be far higher for the family.

How do you get the person to understand that they need to move forward?

Talk with the financial professionals the person already uses and trusts, like a CPA or financial advisor. Ask them for a referral to an estate planning attorney they think would be a good fit with the person who doesn’t have an estate plan. It may be easier to hear this message from a CPA, than from an adult child.

Work with that professional to promote the person, usually an older family member, to get comfortable with the idea to talk about their wishes and values with the estate planning attorney. Offer to attend the meeting, or to facilitate the video conference, to make the person feel more comfortable.

An experienced estate planning attorney will have worked with reluctant people before. They’ll know how to put the older person at ease and explore their concerns. When the conversation is pleasant and productive, the person may understand that the process will not be as challenging and that there will be a lot of help along the way.

If there is no trusted team of professionals, then offer to be a part of any conversations with the estate planning attorney to make the introductory discussion easier. Share your own experience in estate planning, and tread lightly.

Trying to force a person to engage in estate planning with a heavy hand, almost always ends up in a stubborn refusal. A gentle approach will always be more successful. Explain how part of the estate plan includes planning for medical decisions while the person is living and is not just about distributing their assets. You should be firm, consistent and kind.

Explaining what their family members will need to go through if there is no will, may or may not have an impact. Some people don’t care, and may simply shrug and say, “It’ll be their problem, not mine.” Consider what or who matters to the person. What if they could leave assets for a favorite grandchild to go to college? That might be more motivating.

One other thing to consider: if the person has an estate plan and it is out of date, that may be just as bad as not having an estate plan at all, especially when the person has been divorced and remarried. Just as many people refuse to have an estate plan, many people fail to update important documents, when they remarry. More than a few spouses come to estate planning attorney’s offices, when a loved one’s life insurance policy is going to their prior spouse. It’s too late to make any changes. A health care directive could also name a former brother-in-law to make important medical decisions. During a time of great duress, it is a bad time to learn that the formerly close in-law, who is now a sworn enemy, is the only one who can speak with doctors. Don’t procrastinate, if any of these issues are present.

Reference: Kiplinger (May 11, 2020) “How to Get a Loved One to Visit an Estate Planning Attorney Before It’s Too Late”

How Does Planning for a Special Needs Child Work?

Funding a Special Needs Trust is just the start of the planning process for families with a family member who has special needs. Strategically planning how to fund the trust, so the parents and child’s needs are met, is as important as the creation of the SNT, says the article “Funding Strategies for Special Needs Trusts” from Advisor Perspectives. Parents need to be mindful of the stability and security of their own financial planning, which is usually challenging.

Parents should keep careful records of their expenses for their child now and project those expenses into the future. Consider what expenses may not be covered by government programs. You should also evaluate the child’s overall health, medical conditions that may require special treatment and the possibility that government resources may not be available. This will provide a clear picture of the child’s needs and how much money will be needed for the SNT.

Ultimately, how much money can be put into the SNT, depends upon the parent’s ability to fund it.

In some cases, it may not be realistic to count on a remaining portion of the parent’s estate to fund the SNT. The parents may need the funds for their own retirement or long-term care. It is possible to fund the trust during the parent’s lifetime, but many SNTs are funded after the parents pass away. Most families care for their child with special needs while they are living. The trust is for when they are gone.

The asset mix to fund the SNT for most families is a combination of retirement assets, non-retirement assets and the family home. The parents need to understand the tax implications of the assets at the time of distribution. An estate planning attorney with experience in SNTs can help with this. The SECURE Act tax law changes no longer allow inherited IRAs to be stretched based on the child’s life expectancy, but a person with a disability may be able to stretch an inherited retirement asset.

Whole or permanent life insurance that insures the parents, allows the creation of an asset on a leveraged basis that provides tax-free death proceeds.

Since the person with a disability will typically have their assets in an SNT, a trust with the correct language—“see-through”—will be able to stretch the assets, which may be more tax efficient, depending on the individual’s income needs.

Revocable SNTs become irrevocable upon the death of both parents. Irrevocable trusts are tax-paying entities and are taxed at a higher rate. Investing assets must be managed very carefully in an irrevocable trust to achieve the maximum tax efficiency.

It takes a village to plan for the secure future of a person with a disability. An experienced elder law attorney will work closely with the parents, their financial advisor and their accountant.

Reference: Advisor Perspectives (April 29, 2020) “Funding Strategies for Special Needs Trusts”

Digital Assets Need to Be Protected In Estate Plans

Most people have an extensive network of digital relationships with retailers, financial institutions and even government agencies. Companies and institutions, from household utilities to grocery delivery services have invested millions in making it easier for consumers to do everything online—and the coronavirus has made our online lives take a giant leap. As a result, explains the article “Supporting Your Clients’ Digital Legacy” from Bloomberg Tax, practically all estates now include digital assets, a new class of assets that hold both financial and sentimental value.

In the last year, there has been a growing number of reports of the number of profiles of people who have died but whose pages are still alive on Facebook, Linked In and similar platforms. Taking down profiles, preserving photos and gaining access to URLs are all part of managing a digital footprint that needs to be planned for as part of an estate plan.

There are a number of laws that could impact a user’s digital estate during life and death. Depending upon the asset and how it is used, determines what happens to it after the owner dies. Fiduciary access laws outline what the executor or attorney is allowed to do with digital assets, and the law varies from one country to another. In the US, almost all states have adopted a version of RUFADAA, the law created by the U.S. Uniform Law Commission. However, all digital assets are also subject to the Terms of Service Agreement (TOSAs) that we click on when signing up for a new app or software. The TOSA may not permit anyone but the account owner to gain access to the account or the assets in the account.

Digital assets are virtual and may be difficult to find without a paper trail. Leaving passwords for the fiduciary seems like the simple solution, but passwords don’t convey user wishes. What if the executor tries to get into an account and is blocked? Unauthorized access, even with a password, is still violating the terms of the TOSAs.

People need to plan for digital assets, just as they do any other asset. Here are some of the questions to consider:

  • What will happen to digital assets with financial value, like loyalty points, travel rewards, cryptocurrency, gaming tokens or the digital assets of a business?
  • Who will be able to get digital assets with sentimental value, like photos, videos and social media accounts?
  • What about privacy and cybersecurity concerns, and identity theft?

What will happen to your digital assets? Facebook and Google offer Legacy Contact and Inactive Manager, online tools they provide to designate third-party account access. Some, but not many, other online platforms have similar tools in place. The best way, for now, may be to make a list of all of your digital accounts and look through them for death or incapacity instructions. It may not be a complete solution, but it’s at least a start.

Reference: Bloomberg Tax (April 10, 2020) “Supporting Your Clients’ Digital Legacy”

Planning for Long-Term Care Before It’s Too Late

Starting to plan for elder care should happen when you are in your 50s or 60s. By the time you are 70, it may be too late. With the national median annual cost of a private room in a nursing facility coming in at more than $100,000, not having a plan can become one of the most expensive mistakes of your financial life. The article “Four steps you can take to safeguard your retirement savings from this risk” from CNBC says that even if care is provided in your own home, the annual median national cost of in-home skilled nursing is $87.50 per visit.

There are fewer and fewer insurance companies that offer long-term care insurance policies, and even with a policy, there are many out-of-pocket costs that also have to be paid. People often fail to prepare for the indirect cost of caregiving, which primarily impacts women who are taking care of older, infirm male spouses and aging parents.

More than 34 million Americans provided unpaid care to older adults in 2015, with an economic value of $522 billion per year.

That’s not including the stress of caring for loved ones, watching them decline and needing increasingly more help from other sources.

The best time to start planning for the later years is around age 60. That’s when most people have experienced their parent’s aging and understand that planning and conversations with loved ones need to take place.

Living Transitions. Do you want to remain at home as long as is practicable, or would you rather move to a continuing care retirement community? If you are planning on aging in place in your home, what changes will need to be made to your home to ensure that you can live there safely? How will you protect yourself from loneliness, if you plan on staying at home?

Driving Transitions. Knowing when to turn in your car keys is a big issue for seniors. How will you get around, if and when you are no longer able to drive safely? What transportation alternatives are there in your community?

Financial Caretaking. Cognitive decline can start as early as age 53, leading people to make mistakes that cost them dearly. Forgetting to pay bills, paying some bills twice, or forgetting accounts, are signs that you may need some help with your financial affairs. Simplify things by having one checking, one savings account and three credit cards: one for public use, one for automatic bill-paying and a third for online purchases.

Healthcare Transitions. If you don’t already have an advance directive, you need to have one created, as part of your overall estate plan. This provides an opportunity for you to state how you want to receive care, if you are not able to communicate your wishes. Not having this document may mean that you are kept alive on a respirator, when your preference is to be allowed to die naturally. You’ll also need a Health Care Power of Attorney, a person you name to make medical decisions on your behalf when you cannot do so. This person does not have to be a spouse or an adult child—sometimes it’s best to have a trusted friend who you will be sure will follow your directions. Make sure this person is willing to serve, even when your documented wishes may be challenged.

Reference: CNBC (Jan. 31, 2020) “Four steps you can take to safeguard your retirement savings from this risk”

Retirement and Estate Planning Work Better Together

So, you’ve been married for a while, and you’re both comfortable with which bank accounts, credit cards and investment accounts are shared and which other accounts are kept separate. However, where the big picture is concerned—like coordinating retirement plans, health coverage and tax planning—you both need to take an active role in planning and making good decisions. In fact, says the article “Couples and Money: When Together is Better” from Kiplinger, the decisions that work well for you as individuals may not be so hot, when they are looked at from a couple’s perspective.

Here’s an example. A man is working at a firm that doesn’t offer a match for his 401(k) contributions, but his wife’s employer does. Instead of contributing to his 401(k) plan, he uses the money to pay off a HELOC (Home Equity Line of Credit) that the couple had taken together to do some upgrades on their home. She contributes enough to her own 401(k) to get her company’s match every year. The goal is to cut their debt and save as much as possible. This worked at that time in the couple’s life.

Ten years later, they are both maxing out their 401(k) savings and working to build short-term savings to send kids to college through the use of 529 College Savings Accounts.

Retirement accounts can never be jointly owned. However, some couples fall into a trap of saving for themselves without considering the overall household. Dual earning couples often run into trouble, when one has a workplace plan and the other does not. The spouse with the workplace plan isn’t thinking that he or she needs to save enough for two people to retire. With two incomes, you might think that both are making retirement a savings priority, but without a 401(k) plan, it’s possible that only one person is saving and only saving enough for themselves.

A general recommendation is that both members of a couple save between 10-15% of their household earnings, rather than their personal earnings, in retirement accounts. Couples should review their respective retirement plans together and plan together. If one has a more generous match, access to a Roth option, or better investment opportunities, they should consider how much the person with the better plan should save.

Couples also need to examine other financial aspects of their lives. Coordinating retirement benefits, reviewing life insurance policies, planning a coordinated strategy for taking Social Security and making informed choices about health care coverage can make a big difference in the family’s financial well-being.

Equally important: making sure that an estate plan is in place. That includes a will that names a guardian for any minor children, a health care proxy and a financial power of attorney. Depending upon the family’s circumstances, that may include trusts or other wealth transfer strategies.

Reference: Kiplinger (Dec. 23, 2019) “Couples and Money: When Together is Better”