By Meg Abney
Cryptocurrencies like Bitcoin have gained popularity with investors for years, and around 16% of Americans now report that they have invested in or traded cryptocurrency (crypto). Most of these cryptocurrencies use decentralized networks based on blockchain technology—essentially a ledger that is enforced by a large network of computers. However, the decentralization that makes crypto so popular also means that failure to plan for death or incapacity can prevent your loved ones from accessing your digital assets. Taking advantage of the blockchain now shouldn’t mean blocking loved ones from inheritance in the future. Read on for some estate-planning tips to help protect your assets. What happens to my crypto when I die or become incapacitated? Like funds in a bank account, cryptocurrency remains wherever it was stored, usually in a digital wallet or with a third-party holder. But unlike a bank account, your executor or agent under a Power of Attorney cannot simply request access to these funds upon your death or incapacity. Instead, you will need a method to provide your executor or agent with your keys and seed phrases. Failure to do so could mean that your loved ones never see these funds. Can I just leave my crypto in a will? Yes, but your executor will still need to gain access to it, and remember that your will becomes public record, so you should not include any sensitive information regarding your cryptocurrency. A simple way to communicate this information is by drafting a separate “access plan” that you keep with your will that describes your digital wallets, passwords, keys, and seed phrases. What is the best way to plan for the future of my crypto? While everyone’s situation is different, establishing a living trust is one of the best ways to ensure that your digital assets are not lost after your death. Some distinct advantages of establishing a trust for your cryptocurrency include:
With a living trust, you continue to maintain control over your cryptocurrency during your lifetime. After death, your successor trustee administers your trust according to your instructions. Setting up a trust involving cryptocurrency can be complicated, so it is best to consult with an experienced estate planning attorney. Please call Jesson & Rains if you have questions.
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By Attorney Kelly Jesson & Meg Abney
Most people are aware that 529 plans are a way to intelligently save for minor’s education with pre-tax dollars. We use the word “minor” because money can be set aside for any beneficiary, not just your child, to use on education. This article contains more details on these accounts so you can determine whether these plans are right for you. What can 529 funds be spent on?
What can 529 funds not be spent on?
Can a 529 plan affect the ability to get financial aid/needs-based scholarships? Yes. If the student or parent owns the 529 plan, on the FAFSA form, it counts as an asset. If a grandparent owns the 529 plan, it is not reported on the first year, but if money from the plan is used to pay for the student’s education, it must be reported as “untaxed income to the student” which may affect the ability to get aid in future years. What happens if the beneficiary does not need the money? When money is contributed to a 529 Plan, the account owner retains control of the money in the account, even when the beneficiary is no longer a minor. There is no expiration date on the account, and there is no age limit by which funds must be withdrawn. Withdrawals for non-authorized expenses are penalized and taxed, similar to early withdrawals from a retirement account. 529 plans cannot have multiple beneficiaries at the same time, but they can be split into two in the event you want to make distributions to more than one beneficiary. If the account owner dies, who decides what happens to the account how the funds are to be spent? It depends on the terms of the particular 529 plan. Sometimes the terms of a 529 plan will provide that the beneficiary becomes the new owner of the account upon the owner's death. However, this is not common practice. Usually, the enrollment application for a 529 plan asks the owner to name a successor owner. This person becomes the new owner and even has the ability to change the account's beneficiary and make nonqualified withdrawals. For more control, it is better to name a trustee as the successor owner since the actions of the trustee are bound by the terms of the trust. If no successor is listed, and the account holder dies, the former owner’s executor will become the new account holder. The executor will usually have the same powers over the account as the original owner. By Attorney Kelly Jesson
This year, make a resolution to prioritize estate planning. Estate planning allows you to gain control and peace of mind over difficult and unpredictable situations. We have previously written about the difficulties caused by dying without a will in North Carolina and the pitfalls of the probate process in North Carolina; however, many of the “worst-case” scenarios can be avoided with proper planning. Let us help you make 2022 the year you plan for emergency scenarios and protect your business and personal assets for the benefit of your loved ones through estate planning. Unfortunately, COVID-19 has shown us that there are no guarantees, but it has also highlighted what is most important to each of us: family. Estate planning allows you to plan for what happens when you pass away, including naming a trusted person to handle your final affairs, name guardians for minor children, and distribute your assets according to your wishes. In addition to planning for death, our office drafts durable and health care powers of attorneys, where you can name agents to make both financial and medical decisions for you if you are incapacitated and cannot communicate. There is no reason to wait to do planning, and as the pandemic continues to be a part of our “new normal,” you should get a plan in place before it is ever needed. If you do become incapacitated or ill, it may be more difficult or impossible to get documents in place, as you must have testamentary capacity to create valid estate planning documents. Some of our clients delay estate planning because they do not have any friends or family members they trust to serve in fiduciary roles. In some circumstances, members of the firm may serve in these roles for the client if the client feels comfortable. It is better for you to take control and name someone yourself than to have the government appoint someone in an emergency or when you pass away. We want to help you take CONTROL in 2022! Please call Jesson & Rains if you have questions about getting your estate plan in order or updating an existing estate plan. While You Build, We Protect. By Associate Attorney Danielle Nodar
The holiday season always comes with numerous reminders about giving the perfect gift to express love and gratitude to our loved ones. This season of giving also inspires increased donations to charitable organizations. However, many people are not aware that they can use their estate plan as a tool for charitable giving and how these gifts can have benefits that extend beyond the charity, such as minimizing taxes during one’s lifetime or after death. For lifetime gifts, the Taxpayer Certainty and Disaster Tax Relief Act of 2020 provides several provisions to help individuals who give to Section 501(c)(3) tax exempt charitable organizations through the end of 2021. One change impacts the majority of taxpayers: those who elect the standard deduction. Ordinarily, these individuals cannot claim a deduction for contributions to a charitable organization, but the law now allows these individuals, including married individuals filing separate returns, to claim a deduction of up to $300 for cash contributions made to qualifying charities during 2021. For married couples filing jointly, this amount increases to $600. There are certain cash contributions that may not qualify, including gifts to private foundations or donations carried over from previous years, so it is important to work with your tax preparer to ensure that this gift qualifies. There are also many methods of including a charity in one’s estate plan. A charity can be a named beneficiary in a will or trust, with the terms of the will or trust designating the asset being distributed and the charitable purpose of the gift. Your named Trustee or Executor will be responsible for making the distribution to the charity. When considering what to give to a charitable organization, it is important to remember that your gift can go beyond cash, but can include assets like a stock portfolio, artwork, a car, or even real estate. Another way to include charitable giving in your estate plan is by naming a charity as a beneficiary of life insurance policies, annuities, IRAs, or other retirement plans. Depending on the other assets you have at death and their value, these gifts may have tax benefits to your loved ones or estate. For example, naming a charity as the beneficiary of a retirement accounts may be a wise choice for some individuals as retirement accounts are some of the highest taxed assets in any estate. By gifting your retirement account, your estate tax burden is reduced because your estate will receive a federal estate tax charitable deduction on the value that is held in the account. Furthermore, the charity does not have to pay income taxes on this gift. Finally, when making a charitable gift through an estate plan, there may be benefits to your estate and loved ones. Gifts, during life or at death, to Section 501(c)(3) charities do not count towards the total taxable value of your estate. Thus, naming a charity as a beneficiary will reduce the value of your estate at the time of death, which can lower or eliminate the amount of estate taxes owed by your estate. During this season of giving, we recommend that you not only think of the legacy you can leave your loved ones, but also the gift that can be made to a charitable cause during your lifetime or after your death. Contact Jesson & Rains for assistance with considering your options for charitable giving in your estate plan. By Associate Attorney Danielle Nodar
Financial Planning Month is observed in October, and it is a great time to reassess your finances, budgets, and plan for achieving financial goals before the holiday season and beginning of a new year. When creating an estate plan for clients, we look beyond planning for death or incapacity through estate planning documents and discuss a client’s current financial plan and strategy. As we are not financial planners or advisors, we often advise our estate planning clients to work closely with financial professionals so that their estate plan works with their financial plan and goals. One of the advantages of working with a financial professional is they can help you find the right balance that works for you so that you can save for the future, pay off debts, and provide for your loved ones if you pass away. The plan that you create with your financial planner oftentimes works in conjunction with your estate plan. For example, a financial planner can assist you with planning and saving for retirement. This works to assist you with goals for your lifetime, but also with your estate plan because you can designate a beneficiary (either an individual person or an entity like a trust or charity) to receive any remaining retirement funds when you die. The beneficiary of your choosing will receive the remaining retirement funds, even if your will says otherwise, as funds distributed using a beneficiary designation pass to a beneficiary outside of probate. Furthermore, there are different distribution timelines and tax consequences depending on whether you name a spouse, minor child, disabled person, or charity as a beneficiary. Another important factor of financial planning is exploring life insurance. Just like retirement, life insurance is distributed directly to the beneficiary you name and does not pass through the probate estate. However, life insurance does not have the same restrictions on use of funds as retirement can (unless a trust is the beneficiary), is oftentimes passed to loved ones tax free, and is usually distributed more quickly. This can result in a tremendous burden being lifted as your loved one will receive money for expenses like funeral expenses, medical bills, or even a mortgage payment while they are grieving. It can also ease the burden of paying back your debts. If you pass away with debt, some of your assets may be included in your probate estate to pay those final debts, which can result in your loved ones not inheriting anything if your estate is insolvent. Life insurance will get to the beneficiary regardless of probate assets. It is important to discuss the strategies and tools for creating a financial plan that alleviates stress for you and your loved ones while building wealth for your future. If you would like a referral for a financial planner, please reach out to Jesson & Rains. We feel strongly about the peace of mind these professionals can provide and believe it is an important part of the estate planning process. By Associate Attorney Danielle Nodar
There are plenty of things new parents need to tackle on their to-do list to provide the best environment and future for their child. However, one big thing that often gets overlooked is planning for the unexpected with estate planning. Some of the factors new parents should keep in mind when considering estate planning are: 1) Naming a Guardian for Minors One of the most important considerations a parent can make is naming a legal guardian for their minor children. A guardian is the person who will assume responsibility for all aspects of your child’s care if they are under eighteen when you pass away. This person will make all medical decisions, educational decisions, and step into the role of the parent in the eyes of the law. In North Carolina, the only way a parent can designate a guardian is through their Last Will and Testament. A guardian named in a will is usually appointed by a court unless the person is unfit or incapable. Without a named guardian in a will, a court chooses the guardian based on its determination of what is in the best interest of your child. This may result in loved ones arguing over your children or the guardian being someone you would not have chosen. 2) Managing Inheritance for Minors with Trusts If you leave assets outright to a minor child, those assets will be kept in a custodial account to be managed by a surviving parent or legal guardian. The adult in charge will manage the money for the child’s benefit until the child turns eighteen or twenty-one and inherits the remaining assets outright. Even when a child reaches the age of majority, many parents worry about a child’s ability to manage finances on their own, especially if it is a large amount of money being inherited. To have more control over your child’s inheritance, many parents set up a trust for the benefit of their children. Parents can create a trust with either 1) a revocable living trust, which is a separate trust agreement that is funded by the parent with their assets during their lifetime or 2) a testamentary trust, which is created in a will and only goes into effect at the death of the parent. Both types of trusts allow the parents to name a Trustee to manage any inherited assets for children until the child inherits outright at a later age, such as twenty-five, for example. The Trustee will manage the assets and make distributions of the funds for your children’s health, education, maintenance, and support according to the terms of the trust. You can determine how much discretion you give the Trustee is managing the trust, and you can also provide them with clear guidelines of what are permissible expenses. 3) Updating Beneficiaries on Financial Accounts If you have accounts that allow you to name a beneficiary, such as life insurance, retirement, or investment accounts, those funds will automatically go to the named beneficiary, even if your will names different beneficiaries. If you are creating or updating your will to include children, it is important to review your beneficiary designations to make sure that those assets will go where you want them to and that your plan works with both your will and beneficiary designations. 4) Updating Your Living Documents Another key part of estate planning is naming who would make legal or medical decisions for you in an emergency where you cannot make those decisions for yourself. By naming agents under a healthcare power of attorney and durable power of attorney, you can ensure that if you become incapacitated, someone you trust can access your funds to care for you and your child and make medical decisions for you until you recover. 5) Considering Life Insurance Many new parents consider life insurance to ensure funds are available for your children’s needs if they pass away while their children are still young. There are many factors to consider when looking into life insurance but finding a trusted insurance professional to assess your family’s specific needs is the first step in the process. Finally, if you do create a trust for your child, you can name the trust as a beneficiary of the life insurance policy, which would allow those funds to be used by the Trustee for your child’s benefit according to the trust’s terms. If you have questions about how to create or update your estate plan to best protect your family, please call Jesson & Rains! |
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