As individuals embark on the journey of estate planning, they find themselves engaged in a delicate balancing act. Their objective is to strike a harmonious equilibrium between minimizing income and estate taxes, safeguarding their assets from potential creditors, and ensuring that their loved ones receive the utmost benefit. To achieve this equilibrium, it is necessary to explore the available legal and financial instruments that can bring their estate plan to fruition.
One crucial consideration when creating an estate plan is the reduction of income and estate taxes. These taxes can significantly diminish the amount of wealth and property received by beneficiaries. To minimize estate taxes, various strategies can be employed, such as gifting assets to loved ones or establishing trusts on their behalf. Additionally, leveraging tax-advantaged investment accounts can be an effective means of reducing income taxes. The optimal approach will depend on an individual's unique financial circumstances and the desired outcomes of their estate plan.
For those seeking to reduce the amount of money and property subject to estate tax, making gifts during their lifetime can prove advantageous. The current annual gift tax exclusion for 2023 allows for $17,000 per recipient ($34,000 for married couples making joint gifts), and individuals can give away up to a total of $12.92 million during their lifetime without triggering federal estate tax. By transferring accounts and property, the income tax burden can also be shifted to recipients who may find themselves in lower tax brackets, resulting in reduced tax liabilities on generated income. However, it is important to consider the potential capital gains tax implications for recipients if the value of the assets appreciates significantly. Additionally, once assets are transferred, individuals lose control over how the money is spent or how the property is utilized, and the assets may become vulnerable to the creditors or divorcing spouses of their loved ones.
Creating trusts is another avenue for tax savings. Trusts serve as legal entities that can hold and manage accounts and property on behalf of beneficiaries. By utilizing irrevocable trusts, income taxes on the trust's generated income can be paid by the trust itself as a separate entity, thereby allowing the trust's accounts and property to grow free from estate taxes for the beneficiaries. However, establishing such trusts may necessitate the use of annual gift tax exclusions or lifetime gift and estate tax exclusions. Certain types of irrevocable trusts can also provide asset protection, as the transferred accounts and property are considered separate entities. Nonetheless, relinquishing control over the trust becomes a requirement going forward.
Optimizing tax savings can also be achieved through the utilization of tax-advantaged investment accounts like IRAs and 401(k)s. These accounts offer opportunities to defer taxes on contributions and investment earnings until retirement, potentially resulting in a lower tax bracket during distribution. Roth IRAs and Roth 401(k)s provide an alternative by allowing after-tax contributions and tax-free withdrawals of earnings. By thoughtfully considering and utilizing these diverse investment accounts, individuals can potentially maximize tax savings and increase the overall value of their estate.
In addition to tax considerations, it is crucial to contemplate protecting assets from potential creditors when developing an estate plan. Insufficient asset protection measures may expose accounts and property to seizure for debt repayment or legal judgments against individuals or their beneficiaries.
One way to safeguard your accounts and property from creditors, including potential Nevada estate tax implications, is by establishing a trust with specific provisions. Trusts can be structured to create a level of separation between your assets and any potential creditors. For example, if your loved ones have a history of overspending or face potential creditors, incorporating a spendthrift trust into a revocable or irrevocable trust can be beneficial. This type of trust restricts beneficiary access to the trust's accounts and property, making it more difficult for creditors to seize them.
However, it's important to note that a spendthrift provision alone does not offer adequate protection from creditors. To further enhance creditor protection, a discretionary trust can be utilized. In a discretionary trust, the trustee has the discretion to determine when and how to distribute money and property to the beneficiary, thereby preventing distributions vulnerable to seizure by creditors. The choice of trustee is crucial for the level of creditor protection. An independent trustee, not related to or subservient to the beneficiary, is ideal. A well-drafted discretionary trust limits the beneficiary's access to the trust's accounts, property, and income. If the trust retains the income generated by its assets and doesn't distribute it to the beneficiary, the income may be taxed at the trust's income tax rate, unless the trust is structured in a way that holds the trustmaker responsible for the tax liability. Both provisions can be incorporated into either a revocable or irrevocable trust.
It's worth noting that different tax rules apply to trusts and individuals when it comes to income tax. Individuals are subject to a graduated tax system, with tax rates increasing as income rises. For the tax year 2023, individuals face a maximum marginal tax rate of 37 percent, which is applicable to income surpassing $523,600 for individuals and $628,300 for married couples filing jointly. Conversely, trusts are governed by a compressed tax bracket system, where any income over $13,451 is subject to the top marginal tax rate of 37 percent. Consequently, trusts may face a higher tax rate on the same amount of income compared to individuals in similar tax brackets.
For individuals aiming to safeguard their accounts and property from their own creditors, specific types of irrevocable trusts should be considered. As previously discussed, an irrevocable trust entails surrendering control over the assets held within it, potentially resulting in a higher tax liability on the trust's income if it remains undistributed to beneficiaries or lacks a structure to hold the trustmaker responsible for the income tax obligation.
While saving on taxes and protecting assets from creditors are vital aspects of estate planning, giving beneficiaries maximum access to their inheritance is also important. This is particularly relevant if you want to support their needs and provide flexibility in how they utilize their inheritance. To achieve this, you can structure your estate plan in a way that allows unhindered distributions to beneficiaries. Options include creating a revocable living trust with lenient distribution instructions or outright giving assets to beneficiaries during your lifetime or at your death. However, providing unrestricted access to inheritance carries certain risks. Beneficiaries might be tempted to spend the money unwisely or mishandle the property, potentially making them targets for fraud or manipulation. Moreover, this approach may expose them to creditors and legal claims like divorce. Thus, it's crucial to carefully consider the advantages and disadvantages of granting maximum access to beneficiaries and implement safeguards to mitigate potential risks.
Estate planning requires a thoughtful balance of various factors and interests. Evaluating your goals and priorities and determining the most suitable approach is essential. We are dedicated to assisting you throughout this intricate process, guaranteeing that you achieve the desired equilibrium. Contact us today to begin or review your estate plan, taking into account Nevada estate tax.
Ensuring you have a well-designed strategy to safeguard your valuable assets and property is of utmost importance, and this often requires utilizing tailored tools that suit your unique circumstances. One option to explore within your estate planning is the inclusion of a limited liability company (LLC) to safeguard certain accounts and property.
Understanding a limited liability company (LLC)
A limited liability company (LLC) is a business structure that allows for the ownership of diverse accounts and property. Its ownership rests with the members who contribute either funds or assets to the LLC. The nature of an LLC can vary based on the number of individuals involved, resulting in either a single-member or multi-member configuration. The management of the LLC can be conducted by individual members or by a manager elected by the members.
Expanding the scope of ownership for an LLC
An LLC can own more than just a business. It can also hold various types of accounts and property, such as:
Real estate: Whether it's a second home, rental property, or a property passed down for generations, an LLC can own it.
Investments: An LLC can be used to pool the funds of multiple individuals and invest in assets with a larger volume.
Expensive or high-risk assets: Items like airplanes and boats can be owned by an LLC to provide liability protection.
The advantages of including an LLC in your estate plan
Asset Protection
Including an LLC in your estate plan can offer several benefits, with asset protection being one of the key considerations. As an LLC is considered a separate legal entity, its creditors typically can only pursue the LLC's assets and property, not those of the LLC members. Properly setting up and maintaining the LLC can help prevent personal creditors of the members from accessing the LLC's accounts and property to satisfy their claims. Please keep in mind that certain states may not offer the same degree of protection against personal creditors for single-member LLCs. In such cases, personal creditors may pursue the LLC interests to satisfy their claims, as there are no other members who would be negatively impacted by the seizure of the LLC's assets and property.
Probate Avoidance
When your assets are owned by an LLC, any property or accounts transferred to it during your lifetime, or transferred through operation of law upon your death, can bypass the costly and time-consuming probate process. Probate only handles the transfer of assets that were solely owned by you at the time of your death. By utilizing an LLC, the accounts and property are owned by the LLC, not by you. However, if you hold membership interest in your name, the transfer of this interest at the time of your death may require going through the probate process.
Incorporating an LLC into your estate plan
The process of incorporating an LLC into your estate plan involves creating the LLC during your lifetime and transferring your accounts and property to the LLC or designating it as the beneficiary of your accounts and property upon your death. You can also purchase property or open accounts in the name of the LLC. As the individual establishing the LLC, you will assume the role of a member, and depending on the chosen management structure, you may have the opportunity to oversee the operations of the LLC. If you are married, your spouse can also become a member, and you have the flexibility to include additional members in the LLC at a later stage. However, adding members who don't contribute their money or property may result in gift tax consequences. The LLC will own the accounts and property, and it will operate as a separate entity from its members, providing a level of asset protection. Upon your death, the transfer of ownership interest in the LLC may be the only necessary step, and the accounts and property owned by the LLC will remain under its ownership.
Operating Agreement for LLCs in Estate Planning
LLCs generally have an operating agreement that sets out the rules for managing and transferring a member's interest in the LLC. If you currently own an LLC without an operating agreement or need to update it, it is recommended that you contact an experienced business law attorney with expertise in estate planning as soon as possible. When incorporating estate planning into your operating agreement, consider including the following provisions:
1. The identification of the LLC members.
2. The percentage of ownership each member holds.
3. The procedure for resolving conflicts between members.
4. Any restrictions on a member's ability to transfer their membership interest, including transfers to a trust.
5. The fate of a member's interest if they pass away (in most cases, the terms of the operating agreement govern).
Trust Agreement for LLC Membership Interest
A Trust Agreement can provide an additional layer of protection for your LLC membership interest within your estate plan. By transferring your membership interest to a revocable living trust, you can act as the creator, trustee, and beneficiary of the trust. This arrangement allows you to continue managing the LLC and enjoying its benefits as the trustee of the trust, rather than as an individual. Since the trust becomes the owner of the membership interest, transferring it won't require going through the probate process, as the trust itself doesn't die. Even after your death, the trust can continue to own the membership interest as specified in its instructions. It can include provisions for a successor trustee to manage the LLC on behalf of the trust's beneficiaries. Alternatively, you can instruct the trust to distribute the membership interest to a designated beneficiary at a specified time or upon your death, granting them control over the membership interest. If you're considering creating a trust agreement, it's advisable to seek the assistance of an experienced estate planning attorney to ensure it aligns with your goals and objectives.
Best Practices for Using an LLC in Estate Planning
To fully capitalize on the advantages offered by an LLC in your estate plan, it's crucial to adhere to all the rules and regulations associated with its operation. Since an LLC is a separate legal entity, it should be treated as such. This entails following specific formalities, such as submitting your annual report to the relevant state government office and maintaining distinct records of all transactions and meetings involving the LLC. It's equally important to keep your personal finances and assets separate from those of the LLC. Avoid using the LLC's bank account as your personal fund to maintain clear separation and protect the integrity of the LLC.
Commencing January 1, 2024, reporting companies that are classified as LLCs will need to submit a Beneficial Ownership Information Report to the Financial Crimes Enforcement Network of the Department of the Treasury. This report should include the name, birthdate, address, and unique identification number of all beneficial owners of the LLC, along with an acceptable identification document's image and issuing jurisdiction. A beneficial owner is an individual who possesses or exercises significant control over 25% or more of the ownership interest in the company. For LLCs formed after January 1, 2024, company applicants must provide their name, birthdate, address, unique identification number, issuing jurisdiction, and image of an acceptable identification document. A company applicant refers to the individual who creates the entity or registers it to do business in the United States (for foreign reporting companies) or the person mainly responsible for directing or controlling another individual's submission of the document.
What are your next steps in estate planning?
If you aim to protect your assets and secure your family's future, taking the necessary steps is paramount. Crafting a well-designed estate plan tailored to your unique needs can be instrumental in achieving your objectives. If you're interested in learning more about how incorporating an LLC can assist you in.
When it comes to estate planning and legacy planning, most individuals focus on passing down their assets to their children and heirs. However, for those seeking to establish a legacy that will endure for generations, the concept of a dynasty trust becomes particularly intriguing.
A dynasty trust, an integral part of estate planning, is an irrevocable trust that offers similar tax advantages and asset protection as other trust types, but with a remarkable distinction—it can span multiple generations. Often referred to as perpetual trusts, dynasty trusts are meticulously designed to last indefinitely, as long as the trust's assets remain intact. Given the long-term nature of a dynasty trust, it is imperative to establish it with utmost care and attention to detail. Once the trust is in place, its rules generally cannot be altered, underscoring the importance of getting everything right from the beginning.
Setting up a dynasty trust follows a process akin to that of any other trust. The grantor, who serves as the trust's creator, transfers funds and assets into the trust during their lifetime or, in the case of a testamentary dynasty trust, after their death. Once the trust is funded, it becomes irrevocable, and the rules established by the grantor become fixed. Modifying these rules is only possible under specific state laws that govern trust modifications.
When establishing a dynasty trust, thoughtful consideration must be given to selecting the most suitable trustee. It is common practice to appoint an independent trustee, such as a bank or trust company, to administer the trust throughout its existence. Although a beneficiary can serve as a trustee, this approach may give rise to potential issues concerning taxes and creditor protection. A beneficiary-controlled trust can have significant implications for income and estate taxes, depending on the extent of the beneficiary's powers. It can also impact the level of asset protection provided to the beneficiary and expose family wealth to the risk of misappropriation. On the other hand, a corporate trustee, such as the dynasty trust itself, possesses indefinite legal life and can ensure uninterrupted administration across generations. Corporate trustees typically charge an annual fee based on the value of assets held in the trust.
While trusts are generally beneficial for individuals across various financial backgrounds, there are exceptions, and the dynasty trust is one of them. Establishing a dynasty trust does not necessitate grand dynastic aspirations akin to illustrious families like the Medici or the House of Windsor. However, it is most commonly utilized by families with substantial wealth. While there are no legal requirements regarding the minimum amount of funds needed to establish a dynasty trust, from a practical perspective, it is typically suitable for those with sufficient wealth and assets capable of sustaining multiple generations, taking into account the financial needs and responsibilities of the beneficiaries. Grantors who are concerned about future generations beyond their children often opt for dynasty trusts as part of their estate and legacy planning. Additionally, dynasty trusts can prove invaluable for families that own a family business and desire to maintain its continuity within the family lineage.
Statistics reveal that many family businesses fail to survive beyond the second or third generation, but a dynasty trust can significantly enhance the chances of success. By placing shares of the business into the trust, the grantor can provide for multiple generations of beneficiaries while ensuring the seamless continuation of business operations through professional trustee management. The trustee assumes responsibility for managing the business affairs and maintaining continuity, while the beneficiaries reap financial benefits. Furthermore, the grantor can include specific terms within the trust to guarantee competent business management, such as mandating the trustee to establish an advisory council functioning as a board of directors.
In the realm of estate planning and legacy planning, one of the notable advantages of establishing a dynasty trust is the potential for significant tax benefits. By leveraging the federal estate tax exemption amount (which currently stands at $12.06 million per individual in 2022, or twice that amount for couples) to fund a dynasty trust, you can effectively transfer money and property directly to your grandchildren while avoiding gift or generation-skipping transfer (GST) taxes. To achieve this, you would place accounts and property into the trust and file a gift tax return to allocate appropriate tax exemptions to the trust or pay a portion of the wealth transfer tax. This strategic approach ensures that these assets are not included in your taxable estate, nor in the taxable estates of your beneficiaries, provided that the trust is fully exempt from GST tax.
Furthermore, utilizing trust funds to cover a beneficiary's living expenses or investing in a home for their benefit can also help reduce their taxable estate. Additionally, when a dynasty trust is properly drafted, accounts and property left to your loved ones within the trust can enjoy protection from creditors and divorce courts. In contrast, gifting money outright may not offer these same protective benefits.
It is worth noting that dynasty trusts are not available in every state due to the rule against perpetuities, a common law principle that restricts the duration of controlled property interests, including those established within trusts. This rule, which was not specifically created for trusts, aims to prevent individuals from exerting control over property ownership for an extended period after their demise through legal instruments like deeds and trusts. However, many states have modified or even eliminated this rule, as its interpretation can be complex. With the guidance of an experienced estate planning attorney, you may be able to establish a trust in a state where you do not reside, taking advantage of more favorable laws.
If you are considering the establishment of a dynasty trust, our firm can connect you with a skilled estate planning attorney who can guide you through the process. During your consultation, crucial factors such as selecting a trustee and beneficiaries, implementing tax and creditor protection strategies, understanding state laws pertaining to perpetual trusts, and aligning the dynasty trust with your comprehensive estate plan will be thoroughly discussed. Taking this initial step will enable you to secure your legacy and ensure the preservation of your wealth for future generations. To embark on this journey, please reach out to us, and we will be delighted to assist you.
When Elvis Presley, the King of Rock and Roll, passed away in 1977, he left behind a complicated legacy, just like his famous dance moves. His estate, including the iconic Graceland, eventually ended up in the hands of his only child, Lisa Marie Presley. However, the future of Elvis's legacy and the fate of his estate face challenges ahead. These challenges involve Lisa Marie's personal financial issues, a significant age gap among her children, and even a legal dispute initiated by her mother, Priscilla Presley. The unfolding of this captivating saga will determine the course of Elvis's rockin' legacy.
From Elvis to Lisa Marie: Inheritance and Financial Legacy
Lisa Marie, born in 1968 to the legendary rock and roll icon Elvis Presley and his wife Priscilla Presley, had to face the tragic loss of her father at a young age. Sadly, Elvis passed away at forty-two due to a heart attack. Fast forward to January 2023, and Lisa Marie herself succumbed to heart problems at the age of fifty-four.
Despite Elvis's untimely departure, his legacy has continued to thrive, with his estate earning an impressive $400 million in the previous year alone. The value of the estate skyrocketed to over $1 billion, thanks in part to the 2022 Elvis biopic movie. This created a substantial financial legacy for Lisa Marie to inherit.
The Elvis Presley Trust
When Elvis Presley passed away, his estate was placed in a trust with Lisa Marie, his grandmother, and his father as beneficiaries. According to the trust, Lisa Marie's inheritance was held in trust until she turned twenty-five in February 1993. After that, the trust dissolved automatically, and Lisa Marie inherited $100 million, including Graceland, her childhood home.
Today, Graceland stands as a museum and popular tourist attraction, generating over $10 million annually. To manage Graceland and the rest of Elvis's estate, which includes Elvis Presley Enterprises, Inc. (EPE), Lisa Marie established the Elvis Presley Trust. Until 2005, Lisa Marie served as the owner and chairperson of EPE's board, but she later sold 85 percent of its assets.
Graceland and the Living Trust
Graceland, the iconic mansion that was once Elvis Presley's residence, has become a symbol of his legacy and a beloved tourist destination. After Lisa Marie inherited it, she made it clear that Graceland would always remain within the family.
Lisa Marie's children, Riley Keough, Harper Lockwood, and Finley Lockwood, are set to inherit her fortune and properties through a living trust. However, Lisa Marie's son, Benjamin Keough, tragically passed away in 2020.
Considering that it's unclear whether Lisa Marie had a separate will in place, the living trust, an estate planning document, will play a significant role in determining the distribution of her assets. Through the living trust, individuals can transfer ownership of accounts and property to a separate entity, the trust, which they control while alive. The trust also names a successor trustee to manage the accounts and property after their passing.
Priscilla Presley's Trust Challenge
A challenge to Lisa Marie's living trust has emerged from an unexpected source—her own mother, Priscilla Presley. The legal dispute revolves around a 2016 amendment to the trust, which removed Priscilla and a former business manager as trustees and replaced them with Lisa Marie's daughter, Riley Keough, and her late son, Benjamin Keough.
Navigating the Challenges: Estate Planning and Protecting Your Legacy
Priscilla's claim challenges the validity of the living trust amendment, citing violations of legal requirements. She highlights the lack of proper notification, absence of witnesses or notarization, and even a misspelling of her name in the document. Adding to her concerns, Priscilla alleges that her daughter's signature appears suspiciously different from her usual signature. Consequently, she has sought the court's intervention to invalidate the amendment that removed her as the trustee.
Lisa Marie's Financial Struggles
Recent legal documents indicate that Lisa Marie faced financial challenges before her passing, despite inheriting $100 million at the age of twenty-five. She held approximately $95,000 in cash and possessed various assets such as bonds and stocks valued at $715,000. Although she earned over $100,000 per month from EPE, she also carried a $1 million tax debt and incurred monthly expenses of $92,000. Furthermore, her ex-husband, Michael Lockwood, reopened a lawsuit seeking $4,600 per month in child support.
By 2016, Lisa Marie's $100 million trust had significantly dwindled to just $14,000 in cash. Her former manager, Barry Siegel, faced allegations of mismanaging her finances, which resulted in a decline of her wealth. Court records reveal that Lisa Marie was burdened with a $16.67 million debt at that time. However, in 2019, Siegel countered the claims and asserted that the sale of her 85 percent stake in EPE helped resolve over $20 million in debts.
Potential Legal Challenges for the Lisa Marie Presley Estate
The legal ambiguity surrounding Lisa Marie's estate gives rise to numerous potential legal issues that will likely require judicial resolution. One such challenge is Priscilla's claim against the living trust amendment. If her challenge is successful, the amendment would be considered void, making Priscilla the successor trustee responsible for managing the trust's assets and funds instead of Lisa Marie's daughter, Riley. This matter would necessitate court intervention for resolution.
Creditor Claims
Although it remains uncertain whether Lisa Marie had outstanding debts, if she did, creditors could make claims against her estate. The estate would need to determine whether to accept or reject these claims. Rejecting them could lead to legal disputes. Creditors hold priority over beneficiaries, which means that Lisa Marie's accounts and property, including Graceland, might need to be sold to satisfy any outstanding debts. Additionally, even after the debts are settled, the estate may still be subject to estate taxes, which could further complicate matters if creditors decide to initiate lawsuits.
Her Daughters' Inheritance
Assuming the estate possesses sufficient funds to settle debts without selling Graceland, Lisa Marie's three daughters, Riley, Harper, and Finley, are poised to inherit the mansion and any remaining property or funds. However, the upkeep and tax costs associated with Graceland surpass $500,000 annually. It remains uncertain whether the daughters would collectively agree to bear these expenses and preserve the Elvis legacy within the family.
The daughters have the option to sell Graceland, but this decision could ignite internal conflicts if even one daughter wishes to pursue a sale. Additionally, crucial details regarding the ages of the daughters and their inheritances remain unknown. Did Lisa Marie establish a trust to hold her twin daughters' inheritances until they reach a specific age, as her father did for her? Or does the trustee possess discretionary power over the funds? Moreover, depending on the outcome of the trust challenge, will the trustee ultimately be Riley or Priscilla?
Furthermore, the question of whether Lisa Marie distributed her estate equally among her daughters remains unclear, as there is no legal requirement for equal distribution.
Control What You Can with an Estate Plan
The sudden and tragic passing of Lisa Marie Presley serves as a reminder that death can come unexpectedly. However, through estate planning, we can exert some control over our legacy.
Crafting a comprehensive estate plan can help alleviate some of the uncertainty and provide peace of mind to both ourselves and our loved ones. If you're ready to start planning for the future, please reach out to our office to schedule a consultation.
Estate planning is an important process that involves making arrangements for the distribution of your assets and property after your passing. While having an estate plan in place is crucial for everyone, people with disabilities need to get in touch with a Reno estate attorney even more.
Disability panels are groups of people who are appointed to oversee the management of an estate plan for an individual with a disability. This group, which may consist of close relatives, dependable friends, financial advisers, and attorneys, works to see that the disabled person's needs and wishes are fulfilled in the event of their incapacitation or passing. This is crucial because people with disabilities could have distinct needs that call for extra care and attention.
Disability panels offer a level of transparency and accountability not often found in conventional estate planning arrangements, which is one of its key advantages. By appointing a panel to manage your estate plan, you can be confident that your wishes are being carried out according to your intentions.
Knowing that there is a plan in place for managing a potential disability, everyone involved can feel more secure and prepared. Also, a disability panel can ensure that, in the event of a handicap, the person's desires are respected and carried out.
It's also worth noting that disability panels can be a valuable tool for estate planning. By including a disability panel in an estate plan, individuals can ensure that their wishes for care and decision-making are respected even if they become disabled. In addition to ensuring that the estate is managed in accordance with their wishes, this can help avoid family disagreements.
Disability panels can help prevent disputes among family members or other parties who may have conflicting interests in your estate. When there is a panel in place to manage your estate, there is less opportunity for disagreements or misunderstandings to arise. This can help ensure that your assets are distributed according to your wishes and can help prevent the unnecessary strain on relationships that can often result from disputes over an estate.
In addition to providing oversight of your estate plan, disability panels can also assist with other aspects of your care. For those with impairments, who might need extra care and attention to preserve their quality of life, this might be particularly crucial.
When choosing members for a disability panel, it is important to consider factors such as trust, competency, and reliability. You want to choose people who will be dedicated to carrying out your intentions and who are capable of administering your estate plan in a competent and ethical manner. This may include family members, close friends, or trusted advisors who have experience with estate planning or disability issues. The correct people must be chosen to serve on the disability panel in order for it to be effective. These people ought to be dependable, aware of the person's requirements and preferences, and capable of cooperating in decision-making. Clear rules and processes for the panel's operation and decision-making should be in place as well.
Disability panels can play a crucial role in estate planning for individuals with disabilities. By designating a panel to manage your estate plan, you can be certain that your wishes are being carried out exactly as you planned and that your assets are being dispersed in a fair and equitable manner. This can provide you and your loved ones peace of mind and help avoid disagreements or misunderstandings that frequently occur in conventional estate planning arrangements. If you or a loved one have a disability, it may be worth considering the benefits of disability panels in managing your estate plan.
For managing your assets and providing for your loved ones after your passing, a trust is a potent tool. Yet, the trustee you choose will have a big influence on how your trust turns out. The trustee is responsible for overseeing and allocating assets in accordance with the conditions of the trust and must possess the skills, moral fortitude, and knowledge required to successfully discharge their obligations and adhere to your objectives.
The first factor to consider when choosing a trustee is their relationship to you and your beneficiaries. This can help guarantee that the trustee is driven to act in everyone's best interests and that they have a profound understanding of the importance of their position.
Another important factor to consider is the trustee's financial and legal expertise. A good trustee should have a strong understanding of financial and legal matters, including tax law, investments, and estate planning. This can ensure that the trust is administered and distributed to maximize its worth and reduce its tax liabilities.
The trustee should also have the time and availability to manage the trust effectively. This entails being willing to embrace the responsibility of acting as a trustee and being flexible enough to devote the necessary amount of time and focus to the assignment. Make sure to discuss this issue with potential trustees upfront to avoid any misunderstandings or conflicts down the road.
Finally, it's important to choose a trustee who possesses personal characteristics that make them trustworthy and reliable. Honesty, reliability, and responsibility are all essential traits for a good trustee. The trustee should be someone you trust implicitly, and who has a reputation for acting with integrity and following through on their commitments.
An individual trustee may have a more personal connection to you and your beneficiaries, and may be better suited to managing smaller trusts or those with less complex asset structures. However, a corporate trustee may offer more expertise and resources, as well as greater objectivity and accountability. The trustee has a right to compensation for their services, and it's crucial to make sure that it's just and reasonable.
Another important consideration is the need for ongoing professional guidance and support. Even the most experienced and capable trustee may need guidance from time to time, particularly when it comes to complex legal or financial matters. This will guarantee that what you want done, gets done.
Another important consideration is making sure your trustee has the knowledge necessary to manage your trust effectively on a legal and financial level. Selecting a trustee with expertise in areas like tax planning, investment management, or estate administration may be suitable depending on the complexity of your estate plan and the assets involved.
It's critical to remember that your selection of trustee is not final. If circumstances change or if you believe your present trustee is not performing up to your standards, you can always change them.
Choosing the right trustee is essential for ensuring the success of your trust. You can make an informed choice that will help ensure that your trust is managed and distributed in a way that reflects your wishes and values by taking into account aspects, like the trustee's relationship to you and your beneficiaries, their financial and legal expertise, their availability and willingness to serve, & their personal characteristics.
Prepare to be amazed! May is not just any ordinary month - it's National Home Remodeling Month, the time of year when the National Association of Home Builders officially recognizes the tremendous value of home improvement projects. Springtime comes with spring cleanings and home improvement projects, but can also be a good time to consider updating your estate planning documents.
If you need to make small updates to your estate planning documents, such as changing the names of beneficiaries or decision makers, you may wonder whether you can take care of these changes on your own or if you should seek the assistance of a professional. Here are some things to consider before choosing which option is best for you:
If Your Name Changes
If you've changed your name due to marriage and/or your own personal preference, and your estate planning documents don't need to be changed, you may only need to keep copies of any legal paperwork reflecting the name change. Keep copies of these documents together with your estate planning documents. If you've remarried and want to change your name in your estate planning information, or if a trust you established has your old name in the title, it's best to consult an industry professional, such as an attorney, to ensure that the name change is properly handled.
If a Beneficiary’s Name Changes
Wondering what you should do if your beneficiary's name changes? Whether it is due to marriage and/or personal preference, staying on top of this information can save you from running into issues later down the road. While updating your estate planning documents is not necessarily critical, it may be necessary for your beneficiary to prove their identity with a court order, marriage certificate, or birth certificate. It is important to avoid making changes directly on your estate planning documents, such as crossing out a name and writing in a new one. This has resulted in confusion and has even prompted litigation in the past. Courts have had to weigh in on these types of edits to estate planning documents to determine their validity and intent. Even though it may seem harmless, unforeseen consequences can often arise when attempting to edit legal documents yourself.
Adding or Removing a Beneficiary
When events occur such as the birth of a child or the passing of a beneficiary, you may wonder if you need to update your estate planning documents. The answer is that it depends on the language in your documents. Some estate planning documents are drafted to anticipate future additions or removals of beneficiaries by name. It is highly important to seek legal advice before making any changes to your estate planning documents, as serious legal consequences can result from attempting to do so on your own.
Making changes without legal advice could result in unintentionally cutting off people from receiving an inheritance or having your property go to those who never intended to benefit. For instance, adding a spouse’s name to the list of children in your estate planning documents could lead to unintended consequences if the spouse remarries after the child’s death. The former in-law could become a beneficiary of the family trust and have certain rights regarding the trust’s administration, including the right to demand a copy of the trust documents and any financial accountancy. Once that share is paid out, the former in-law might use it in a way that it was not originally intended for, causing negative consequences from an innocent and well-meaning attempt to provide for an in-law.
Appointing New Trusted Decision Makers
In some cases, you may want to appoint new individuals to make important decisions about your property if you become incapacitated or pass away. However, it’s important to understand that certain legal documents cannot be amended easily. While it may be tempting to simply cross off the names of the people you want to remove and add new preferred decision-makers, this can actually void the document under certain circumstances.
If you need to make such important changes, it’s best to have the documents redrafted and executed with the same formalities used in the original documents, ensuring that you follow the applicable state law. For instance, your state may require multiple unrelated witnesses to the signing of a modified will, even if the change you’re making is a one-sentence amendment. The same is true for a codicil, which is an amendment to your will. Other legal documents, such as a power of attorney, a trust amendment, or restatement, may also require similar formalities, such as having your signature notarized.
Modifying Distribution Provisions
There may be times when you consider altering the distribution provisions of your will or trust by changing the percentage/fraction shares of your estate. It is important to note that this modification should be avoided when attempting to make such changes on your own. It is always advisable to consult an attorney if you wish to modify the distribution provisions of your will or trust. You must consider this amendment very carefully and execute it with strict documentation. Such a change to your estate planning documents carries the risk that a beneficiary who receives less under the amendment may challenge it and use any argument available to invalidate the changes. An experienced estate planning attorney will know the necessary steps to take to ensure that your legal documents will be honored by your beneficiaries and the courts after you pass away.
As you have seen, remodeling your estate plan without the help of a trained and experienced attorney can lead to many potential issues. When handled properly, these changes don’t have to be expensive. Your attorney can quickly and inexpensively fix some of these small issues by drafting an amendment to your estate planning documents. Other changes may require more work because the issues are considerably more complex than you first realized. In either case, with a legal professional guiding you through the process, you can be confident that you will not be leaving your loved ones with a legal mess to sort out after you are gone.
If you are uncertain about whether you need an attorney to help you modify your estate plan, we encourage you to contact us. We are happy to consult with you and help you determine what changes, if any, you may need to make.
This is the first week of May, which means that it is also Teacher Appreciation Week and we want to celebrate teachers everywhere and express our gratitude. Your commitment to laying the groundwork for tomorrow's leaders is truly inspiring. We believe that everyone deserves a successful future, including you. We want to ensure that you have all of the essential estate planning documents to secure that future. To get that preparation started, we have some frequently asked questions listed about estate planning and how important it is to have a plan in place.
Having a proper legal plan is important for everyone, regardless of wealth. The term 'estate' refers to all of your possessions, such as bank accounts, real estate, household items, and vehicles. Essentially, it encompasses everything that you own. Once you pass away, everything in your estate is bequeathed to someone else.
Estate planning or asset protection planning, involves creating a comprehensive set of instructions for your trusted decision-makers to follow. These instructions are laid out in a series of legal documents that specify what should happen to your assets, finances, and other possessions after you pass away. In addition to distributing your estate, these documents can allow you to nominate a guardian for your minor children, and provide guidance for situations where you are unable to make your own decisions or require end-of-life care. A large number of people choose to work with an estate attorney, like us, to help them with this inheritance planning process.
Planning for retirement is essential to ensure that you are financially prepared for your post-work years. Your retirement plan options will vary depending on the school district you're in, so you may need to conduct a little research to see the basic features of your plan. Defined-benefit plans guarantee a specific payment amount, while defined contribution plans are based on investment results. To understand your plan's rules and requirements, consider the following questions:
The type of account your retirement plan is in decides the regulations that go with it. Understanding the terms and conditions for your specific plan is vital.
To create an effective estate plan, you must identify the documents that make up your plan. Having a will or trust already completed means that you are off to a good start. If you haven't started preparing any of the necessary documents yet though, there is no need to panic as we are here to help you create your comprehensive plan for any situation. As a teacher, you know the importance of having a well-organized plan, and we view your inheritance planning documents as the lesson plans that guide and protect your loved ones.
One part of asset protection planning can be developing a revocable living trust (RLT), which is a trust that you establish during your lifetime, which can be altered at any time until you become incapacitated or pass away. You can either transfer ownership of your accounts and property from yourself as an individual to yourself as the trustee of the trust or name the trust as the beneficiary of your accounts and property (with some exceptions). Although many may believe it, there is no requirement as to how much money and property you need to experience the benefits of a trust. The next step may involve figuring out how to choose a trustee as an RLT allows you to designate a co-trustee or substitute trustee if you become unable to act as trustee for any reason. An RLT also enables you to enjoy your money and property during your lifetime and to designate what will happen to it upon your death, safeguarding it for your chosen beneficiaries.
An RLT is an excellent way to provide instructions to your loved ones about how to handle the money and property owned by the trust. You can specify in the trust document how the money and property should be used during your incapacity and after your death. As an educator, an RLT offers an opportunity to provide younger beneficiaries with teachable moments. You can structure the trust to allocate a specified percentage to your loved one upon reaching a particular age (e.g., one-third at age thirty, one-half at age forty, and the remainder at age fifty). Alternatively, you can use an incentive trust to allow the trustee to give your loved one money only after achieving specific objectives (e.g., successfully completing a post-secondary education, being employed by the same employer for more than a year, being sober for one year, etc.). You can also use your trust to encourage charitable giving by allowing your loved one to select a charity to give a stated amount of money to, providing funding for a mission trip, etc.
Another option for asset protection planning is a Last Will and Testament, which is another option for individuals to carry out their wishes. This document is also referred to as a will. In it, you can name an executor or personal representative who will collect all of your accounts and property, pay off your outstanding debts, and distribute your assets to those you have named. You can also name a guardian for any minor children. Unlike an RLT, this document is only effective after your death and cannot be used during your incapacity. However, it does provide a way to officially express your wishes.
If you choose to distribute your assets through a will, your family will have to go through the probate process, a court-supervised procedure that must be followed to distribute your accounts and property to your beneficiaries after your death. In contrast, with an RLT, probate can be avoided. It's important to note that if you don't have a will, state law will determine who gets your assets.
In the event that you have created an RLT as part of your estate plan, you may also need to create a pour-over will. This document is necessary only if an account or property has not been transferred to your trust during your lifetime or to your trust or another beneficiary upon your death through a beneficiary designation. Similar to a last will and testament, a pour-over will designates a personal representative or executor (usually the same person named as your substitute trustee) and a guardian for any minor children. However, the main difference is that a pour-over will directs that all accounts or property that are subject to probate be transferred to your RLT. While your loved ones will still need to go through probate, your money and property will ultimately end up in the trust and be managed and distributed according to its instructions.
A financial power of attorney allows you to designate a trusted person, referred to as your agent, to manage your financial transactions such as signing checks, opening bank accounts, signing a deed, and other tasks that you may assign. It's similar to assigning tasks to a teacher's aide in a classroom. You can tailor the powers granted to the agent and when they can act on your behalf to meet your specific needs. Failing to name an agent can result in your loved ones having to wait for a court-appointed decision-maker with no input from you.
A medical power of attorney enables you to designate a trusted person to act as your healthcare decision-maker and make medical decisions or communicate your healthcare preferences on your behalf if you become unable to do so, like a stand-in teacher for your healthcare. Without a formal designation, your loved ones would have to seek court appointment for someone to make medical decisions for you, which may not align with your wishes, and the process can be costly, time-consuming, and public, adding to the stress during a challenging time.
An advance directive, also known as a living will, is a teaching guide that communicates your specific wishes regarding end-of-life decisions. It is crucial to thoughtfully consider your desires regarding life-prolonging procedures and clearly convey them to your chosen medical decision-maker. Without these instructions, your medical decision-maker will have to make assumptions about your wishes, which can lead to stress and potential disagreements among your loved ones if their opinions differ.
A Health Insurance Portability and Accountability Act (HIPAA) authorization form allows you to authorize specific individuals to receive information about your medical condition, such as updates on your status or test results. This authorization does not grant decision-making authority to the named individuals; that power belongs to the medical decision-maker you have chosen in your medical power of attorney or the court-appointed individual if you have no valid medical power of attorney. Sharing information with your loved ones can ease anxieties and uncertainties that arise during emergencies. The HIPAA authorization can also help reduce tensions between the medical decision-maker and your loved ones and enable them to understand the reasons behind the decisions made.
Your next task is to contact us so that we can work with you to create a personalized estate plan that will safeguard you and your loved ones. Trusting an estate attorney to help you make the right plan is a great step in the right direction. Preparing a plan will put you at ease knowing your wishes will be honored, all of your assets will be distributed how you'd like, and all of the people you care about are accounted for if you happen to become incapacitated or pass on. Let's work together to create a comprehensive lesson plan for your inheritance planning needs.
Back in 1987, Congress recognized March as Women's History Month to celebrate the incredible contributions of women in American history across various fields. From building a strong and prosperous nation to being the backbone of their families, women have been unstoppable. Yet, in the midst of caring for others, women often neglect their own financial and estate planning. It's high time for women to prioritize themselves by crafting a solid plan that caters to their future needs, which may differ from those of their male counterparts and dependents.
Longer life expectancies. According to Social Security Administration data, in 2021, women had an average life expectancy of 79.5 years compared to 74.2 years for men. As a result, it is important for women to create an estate plan that accounts for additional years of living expenses during retirement, healthcare costs, and possibly long-term care costs. As women age, there may be a greater possibility that they could become incapacitated and need someone to act on their behalf to make financial and healthcare decisions. Documents such as financial and healthcare powers of attorney and living wills authorize a person they trust to make decisions or take action for them if they are not able to act for themselves. Some women may not only own their own assets but also inherit wealth from both their parents and a spouse who dies before them, and if so, they need a financial and estate plan to optimally preserve and transfer this wealth. Because women may outlive their spouses, they also may be responsible for administering their spouse’s estate or become the sole surviving trustee of a joint trust. These duties may be difficult for a woman who is experiencing health issues that often occur at an advanced age, and this possibility should be addressed in their estate planning. For example, a woman concerned that she will be unable to handle administering her trust at an advanced age can name a co-trustee or successor trustee to administer it if she is no longer able to do so.
Lower earnings. According to U.S. Census Bureau data, women continue to earn less than men, and the pay gap widens as they age. In addition, because some women have shorter employment histories due to time off to raise children or care for aging parents, they may have less saved for retirement. As a result, it is important for them to take steps to protect their money and property from lawsuits or creditors’ claims. For example, a woman could transfer her money and property to an irrevocable trust. Because she is no longer the legal owner of the property, a creditor cannot reach it to satisfy claims against her so long as the trust is properly drafted to include appropriate distribution standards and administrative and other provisions. The woman may be a discretionary beneficiary of the trust, and the trustee may distribute the funds she needs for living expenses. Additionally, because they have less money and property during their retirement, women need to have a solid plan in place to make sure that they are able to financially provide for their loved ones upon their death and that unnecessary costs and expenses are minimized to the extent possible.
Care for loved ones. Many women are caregivers for minor children, adult children with special needs, or aging parents. As a result, they are often concerned about who will care for their loved ones if they are no longer able to do so. If a spouse or sibling is not available to provide care, they need to make sure that another family member or trusted individual can be the caregiver (sometimes called a guardian of the person) for their loved one. The same individual—or someone else—can serve as the guardian of the loved one’s estate (sometimes called a conservator or guardian of the estate) to manage the inheritance for their benefit. In the case of a child with special needs, if no family member is able to take on the responsibility of their care, a group home or assisted living facility may be the best choice. A special needs trust may need to be established to ensure that funds are available for the child’s care but do not decrease the amount of government benefits they are eligible to receive.
You have accomplished a lot in your life! Celebrate your accomplishments and contributions during Women’s History Month by contacting us to set up an appointment to create an estate plan that provides for your own future needs and those of the people you love. You deserve the peace of mind that comes with knowing your future is secure.
In October 2022, singer and songwriter Jerry Lee Lewis passed away. He left behind a rock legacy, a big family, and an estate valued in the multi-millions.
We often follow the lives of celebrities and dream of having their lavish lifestyles. Even so, famous folks experience many similar estate planning challenges just like the rest of us. This includes implementing the optimal tax strategy, as well as distributing assets to loved ones when deceased.
Lewis’s passing has prompted many to look back fondly at his music career. Aside from that though, it begs the question: what will shake out with his sizable estate? Let’s play “what if” in the following estate planning scenarios and see which lessons can be learned for celebrities and regular folks alike:
Jerry Lee Lewis lived a long life, passing at the old age of 87. Like other rock icons of the last century (Elvis, Johnny Cash), Lewis’s lifestyle put hard miles on him. Even though he engaged in substance abuse and experienced health problems, he outlived other leading rockers and was deemed “the last man standing from the dawn of rock and roll” by New York Magazine.
You likely have heard his greatest hit, “Great Balls of Fire”, but Lewis had a variety of other hits that earned him four Grammy wins. Lewis was inducted into both the Rock & Roll Hall of Fame and Country Music Hall of Fame. His music career spanned for an astounding seven decades, and he produced over forty albums.
At his death, Lewis left behind his seventh wife, Judith Coglan Lewis, and four of the six surviving children from his marriages. In the years preceding his death, a feud ensued between Lewis and his daughter, Phoebe, and her husband, Ezekiel Loftin. Lewis sued the Phoebe and her husband in 2017 for taking advantage of his financial status. Charges were later dropped.
Lewis had his fair share of financial missteps, filing for bankruptcy in 1988. The filing included more than $3 million in debts. This came from over $2 million in IRS dues, unpaid medical bills, and tens of thousands in attorney fees. Still, his net worth at the time of his death was estimated to be in the range of $10 million and $15.4 million.
As professional estate planning attorneys, we evaluate the life and legacy of Jerry Lee Lewis through the perspective of our field of expertise. While his tumultuous and fast-paced lifestyle may not align with our personal experiences, we recognize the valuable insight it provides in regards to common estate planning issues. In this discourse, we will address several issues related to Lewis's estate that are particularly noteworthy.
Based on what we know about Lewis’s relationship with his daughter, Phoebe, it is likely that he will remove her from any consideration to receive a portion of his assets. Mississippi law permits individuals to disinherit beneficiaries under a legitimate basis. However, it is worth noting that Phoebe has established her own career in the music industry and has done quite well for herself, potentially rendering any inheritance unnecessary.
The distribution of assets for his remaining children is yet to be determined. While most parents opt for equal distribution of assets among their children, the unique circumstances of the Lewis family dynamic require analysis of what is equal versus what is fair.
We can take lessons away from the Lewis family and apply them to our own situation. Each child has financial needs unique to their lives. While some are able to obtain financial freedom, others may struggle. A family’s financial picture can change for better or for worse between the birth of children as well. For instance, a younger child might enjoy a slightly more affluent lifestyle than the older siblings, simply because their parents have worked their way to a better career milestone and are making more money now than they were. This is why dividing assets equally within an estate plan is not always the fairest method for all parties.
Will He Transfer Assets to His Surviving Spouse?
Lewis was married a staggering seven times, and each came with their own controversies. His seventh wife was by his bedside upon his death. Will he distribute assets to her?
In the case that Lewis did not have a will in place, intestate law would take effect. This would automatically make his spouse the primary beneficiary. It’s not a far off scenario – about two thirds of American adults fail to compose a will. Rock icons can fall into this category if they fail to do some basic estate planning before death.
In the case that Lewis did have a will, he still could have left his entire estate, or a portion, to the surviving wife. If he just left a portion, those assets could be given to her as a lump sum, or distributed over time under the management of the estate’s trustee.
Lewis also would have had options deciding the type of trust set up. The pros and cons of these different types are as follows:
Even though death and taxes are certain in life, estate taxes may not fall into this category. It all depends on the breadth of the estate at Lewis’s death, and the amount of the lifetime exemption used.
The lifetime gift and estate tax exemption denotes the maximum amount of wealth that an individual can pass on to their heirs without incurring estate taxes. Such transfers can take place either as gifts throughout a person's lifetime or at the time of their death.
In 2022, the federal lifetime gift and estate tax exemption threshold was $12.06 million, rising to $12.92 million in 2023. Based on the conservative estimate of Lewis's net worth, the value of his estate is lower than the 2022 lifetime exemption limit. Therefore, in the absence of any previous use of his exemption during his lifetime, he may not require workarounds for estate taxes if his spouse does not posses substantial personal assets. It is worth noting that for couples, the exemption amount doubles to $25.84 million in 2023.
Mississippi does not impose an estate tax, so Lewis's estate does not need to worry about such a tax being levied. However, if Lewis had passed away in a state that imposes an estate tax, or if he had owned property in such a state, then his estate might have been subject to an additional tax due to his death. The exemption amount and tax rate for each state's estate tax are determined by that state.
In the case that Lewis's spouse does possesses assets and wealth that surpass the individual gift and estate tax exemption limit, it may behoove her to ask for the deceased spousal unused exclusion (DSUE) amount. The DSUE provision, aimed at helping the surviving spouse, allows the unused exemption amount of the deceased spouse to be transferred to the surviving spouse in case the former did not use up the entire exemption amount. In simpler terms, Lewis's wife would be eligible to receive a DSUE amount of $2.06 million, calculated based on the 2022 exemption of $12.06 million and Lewis's estimated estate value of $10 million.
Based on the 2022 exemption of $12.06 million and an estimated estate value of $10 million, Lewis's wife would be eligible for a DSUE amount of $2.06 million.
It is impossible to know for sure how Jerry Lee Lewis chose to allocate his wealth. His wife and children may be as uninformed as the general public, and there could be unexpected elements in his estate plan that have yet to surface.
The Lewis family requested that instead of sending flowers for his funeral, contributions be made in his name to either the Arthritis Foundation or MusiCares. It raises the question whether Lewis may have chosen to allocate a significant portion of his estate to these or other charitable organizations instead of his family.
Only time will tell how it’ll play out. We may not even get the full story if he left his estate to charity, since it’s common for charity information to stay private.
Ironing out an estate plan is not exclusive to rock-and-roll icons. Regardless of the complexities of your estate, it is essential to develop a plan for the distribution of your assets, settling your debts, and ensuring that your wealth goes to the individuals and causes that matter to you. Contact Anderson, Dorn & Rader’s office today to arrange a consultation with our team of estate planning attorneys and begin planning for the future.
Tune into any major news outlet and you’ll hear about the rise – and tumultuous market behavior – of cryptocurrency. As with any other investment that fluctuates with market activities, there are risks associated with buying and selling. No matter how savvy you may be, if you’re investing in crypto, you need an asset protection plan. The following stories show just that.
Christopher Matthews was a businessman and investor who came from good money on both his mother and father’s sides of the family. He passed away in March 2018, and at that time, his estate was valued at $180 million. A large chunk of that came from a hearty $1.8 million investment in cryptocurrency. He bought his shares through a company we’ll call Wayve.
Matthews death was sudden, and as a result, his estate plan was outdated and didn’t reflect his cryptocurrency trading. After some phone calls with Wayve, it was found that the logins to his crypto accounts were kept on several devices throughout the country, and under other names as well.
Luckily, Wayve worked with Matthews’ lawyers to grant access to these accounts, though this isn’t always the case for account holders with less financial esteem. Even though Matthews’ estate attorneys caught a break with the accessing the accounts, they weren’t as fortunate in distributing the Wayze funds in a timely manner. It was critical that the accounts be liquidated to pay off outstanding debts and other tax obligations.
However, Matthews had a withstanding agreement with Wayze that put a cap on how many cryptocurrency shares could be sold at once. This agreement set back the distribution of affairs because the shares had to be sold over the course of several months. While this allocation process was going on, the remaining money in Matthews’ crypto account values began to plummet (thanks to a large dip in the market). By the end of the allocation process, the accounts lost about two thirds of their value, dropping the total value of the estate to less than half of what it was at the time of Matthews’ death.
Matthews’ surviving benefactors would have been in much better financial shape if he had disclosed his crypto trading activities with the individuals involved in his estate. Essentially, they would have been able to sell off shares sooner and reap the benefits of his investments. Instead, the market dip wiped out a large portion of the investments. Furthermore, an actionable plan should have been in place to avoid relying on the cryptocurrency investments to pay off the outstanding debts in the first place.
Steven Thompson was in tune with the latest trends and became an early Bitcoin investor. He even shared this knowledge with online followers in a 2011 video, which earned him 7,000 Bitcoin. Steve set up a digital hard drive with the company SteelLock to store his Bitcoin – in other words, a digital wallet.
It’s been over a decade since Steven set up his SteelLock, and he’s been busy mining Bitcoin ever since. Unfortunately, he’s forgotten the password that he initially used to configure it, and SteelLock only allows 5 wrong attempts before locking the account. To date, his portfolio amounts to well over $100 million. Unless he can remember the login credentials, he’ll never get to see or sell the money accrued.
The key takeaway is that accounts requiring a password need to be secure, but should also have a backup to enable access in the event of a forgotten password or estate distribution. It’s good practice to establish a plan at the onset of investment activities, because before you know it, a decade of investments will accrue and you may just forget your password when it’s needed most.
Jeff Connely was a Bitcoin miner who died doing what he loved – flying his Cessna in the Alaskan Bush. He was only 26 years old when he passed, and at that time, he owned a sizeable share of Bitcoin. The problem? No one, not even his parents or close friends, knew where he stored it, how much he owned, or how to access it.
The amount he owned would have been a nice influx of money that his loved ones could have managed after his passing. But since he didn’t share the details with his family, the shares he owned, and total amount of funds, went with him in the plane crash. Relatives may be able to estimate your net worth and property assets after your death by sifting through email, bank statements, or physical paperwork at your residence, but this is especially difficult to do with Bitcoin.
It’s not always obvious to loved ones that Bitcoin assets are a serious investment and may be worth an astonishing amount. That’s why a plan needs to be put in place. Let a trustworthy person in your network in on the details of your cryptocurrency activities, and how to access them should the unthinkable happen. Not only that, it’s smart to include details on how you want assets to be used when you’re gone. If you don’t do this, you’re putting your hard-earned investments up to the whims of how much documentation you left behind, and how easily loved ones can access it.
Cryptocurrency is a powerful investment tool that can be leveraged to one’s advantage and build generational wealth. It’s also very new to many of us, so working out a management strategy can be uncharted territory. To be prepared for the unexpected, lean on the knowledge of our estate planning professionals. We can craft a sound cryptocurrency plan to protect you and your loved ones. Whether you’re a seasoned crypto investor, or are considering just diving in, we encourage you to reach out to our advisors to plan for the future.
