Planning for control of your personal information after you die used to be as simple as telling someone about the desk drawer or the fireproof box or the safe deposit box at the local bank. But in the era of smartphones and cloud computing services, that same stuff may be stored in digital formats on servers scattered across the globe. 

What happens to your digital life after you have passed? Does it just automatically go away? Most people today have numerous online accounts. They have email accounts for work and personal use, accounts on sites like Facebook and Twitter, and some people also have blogs or even their own websites. If you check the privacy policies on the sites where you have accounts, you will notice that most sites will not give out any information about your accounts without your prior permission and some will not give out information without a court order. Your digital life may or may not go on without you, so you must plan ahead of time.

As a recent New York Times article, “How to Digitally Avoid Taking It to the Grave,” points out, if you do not plan ahead regarding how someone else can access your accounts after you pass away, then you risk the loss of those accounts. In other cases, accounts you would want to carry on might disappear. It depends on the policies of the sites where you have accounts. Some states have passed laws granting executors access to digital accounts after the owners pass away, and there is an effort underway to pass a uniform law in every state.

However, until the law catches up with today’s current digital environment, you need to have a plan. At a minimum, you should make sure that a list exists of your digital accounts. You should make sure someone will be able to find the passwords for those accounts. You also need to store that information somewhere it can be found by someone you trust. This could be done by including that information in your will, but that could make updating the digital information cumbersome. You could also give that information to a trusted individual before you pass away. You do not need to tell them now what your passwords are. You just need to tell them where to find the information.

Reference: New York Times (July 2, 2014) “How to Digitally Avoid Taking It to the Grave”

Today’s low interest rates create special problems for those focused on income, including retirees and the income beneficiaries of trusts.

Prolonged periods of low interest rates can result in low trust income, creating conflict among beneficiaries. Many trusts are set up in a way that creates two different groups of beneficiaries. The first group are income beneficiaries who have a right to the current income the trust property generates. Another group are remainder beneficiaries. They get what is left in the trust when the trust ends. Income beneficiaries naturally want the income maximized and remainder beneficiaries want the principal maximized.

As Forbespoints out, in an article titled “With Interest Rates Low, Here’s How To Boost Income From A Trust,” low interest rates make it difficult for trustees to keep both groups happy. There simply are not enough good investment vehicles available to keep both groups of beneficiaries happy in low interest rate environments. The solution is known as the power to adjust. This allows trustees to reclassify trust assets. Forbes has an example of how it can work: “By utilizing the power to adjust, trustees are able to invest in the best total return portfolio without regard to the amount of income it generates; so, for example, in the current low-rate climate, this may result in a portfolio that is primarily equity.  The power to adjust allows the trustee to take a certain amount of principal, reclassify the assets as income, and distribute the assets to the income beneficiary.”

The power to adjust is legal in all but three states. Utah recognizes the power to adjust but doens have a limit as to what a trustee can do. Non-expert trustees should consult with attorneys and financial advisors about how they can use the power to adjust to keep competing groups of beneficiaries happy.

Reference: Forbes (July 2, 2014) “With Interest Rates Low, Here’s How To Boost Income From A Trust”

After graduating from college, and even law school, the thought of drafting your estate plan probably did not make the top twenty on your “to-do” list, and why should it? The only thing most young professionals have when they first start out is debt. However, after you land your first job, preparing your estate plan needs to move quickly to the top of that elusive “to do” list.

Regardless of your age, you might not think you have very much –  but you probably have enough to want to have a say in who gets what.Young people may not view estate planning as a necessity when just starting their careers, but the reality is they should plan how their assets will be distributed in case something were to happen to them.

Estate planning is more than just deciding how your assets will be distributed. That is a large part of it, but there are other documents every good estate plan should include. A recent article in the National Law Review, titled “Five Estate Planning Documents Every Young Professional Should Have,” lists the documents that it suggests for every recent college graduates.  Some of the suggested documents do not apply for Utahns.  The following is a list of document that I believe is more applicable:

• General Durable Power of Attorney – This is a simple document that lets you choose who will handle your finances in case you are in an accident or get ill and cannot do it yourself.

• Utah Advanced Health Care Directive – This is a statutory document that replaces the “living will”, and which allows you to appoint an agent to make health care decisions when you are not capable of make those decisions for yourself.
• Will – Your will does not have to be complicated. However, if you want your property or any piece of it to go to someone in particular, then you need a will to make that happen.
• Beneficiary Designation – On many of your financial accounts, such as the retirement account (401k, 403b retirement plan) and life insurance your first employer gives you, designating a beneficiary allows you to decide who gets the assets of the account after you pass away.
• Simple Revocable Living Trust.  The size of your estate should not be the determinative factor in having a Revocable Living Trust.  Not only does it avoid probate, it can provide a separate vehicle for the management of assets.  Statistics tell us that many of us will suffer some period of incapacity during our lifetime.  With a living trust, a trustee can simply be authorized to continue the management of your property in case of your disability.  This can all be accomplished without court involvement and without the costs associated with a guardianship or conservatorship.

Estate planning is for everyone, recent graduates included.

Reference: National Law Review (July 7, 2014) “Five Estate Planning Documents Every Young Professional Should Have”

If Lou Reed had used a revocable living trust, and transferred his assets into the trust during his life, then all of this information would have been kept private.  No one would know how much he had, whom he left it to, or how much his executors were charging.

When a celebrity passes away, reporters scramble to find out how much money the celebrity had and how it will be distributed. But how exactly are they getting the information? Is it in-depth investigative journalism … or a common estate planning mistake?

Recently, the New York Post has had story after story about the specific details of Lou Reed’s estate plan. We know how much he had when he passed away. We know how much money his intellectual property interests have earned for his estate since he passed away. We also know how much money each of Reed’s heirs will receive. How do we know so much?

As Forbespoints out, in an article titled “Lou Reed Walked on the Wild Side With His Estate Planning,” we know what we know about Lou Reed’s estate because his entire estate plan consisted of a single will. That will had to be submitted to a public probate process, which allows reporters to gain access to the details. If Reed had used a different estate planning tool, such as a Revocable Living Trust, it would be much more difficult for reporters to find out the details.

You might not care whether your estate is made public after you pass away, since you will not be around to deal with any consequences. However, you should consider whether your heirs would want other people to know exactly how much they inherited. It might violate their privacy.

Reference: Forbes (July 10, 2014)  “Lou Reed Walked on the Wild Side With His Estate Planning”

When people die, their assets (cash, real property, investments, savings, car and so on) become the property of their estates. And each estate is obliged to pay all debts, costs, taxes and other liabilities due before it distributes what’s left over, according to the deceased’s wishes, to the beneficiary or beneficiaries. 

Credit card debt is no stranger to the American family. In fact, it’s no longer surprising to find out that someone has more credit card debt than assets. But how does that impact one’s estate? Unfortunately, credit card debt does not automatically disappear when the debtor passes away. It still needs to be paid by the estate if possible.

The Deseret News discusses the different possibilities in a story titled “What Happens to Credit Card Debt When Someone Dies?” Basically, any credit card debt will have to be paid out of any assets the estate has. The debt must be paid before any heirs can inherit. The good news is that in most cases no one will inherit the debt. If there are not enough assets in the estate to pay the debt, then in essence the debt ceases to exist. However, there are some exceptions. In community property states, a surviving spouse will be responsible for any unpaid credit card debt. A joint owner of the credit card account would also still be responsible for paying off any remaining debt in the account.

It is important to understand how your debts will be paid off after you pass away. If you have credit card debt, or any other type of debt, speak to an estate planning attorney about what you might be able to do today to plan for paying off your debts while still leaving some assets for your heirs to inherit.

Reference: Deseret News (July 18, 2014) “What Happens to Credit Card Debt When Someone Dies?”