Digital Afterlife: An Estate Plan For Your Facebook Account

Did you ever wonder what happens to your digital footprint when you pass away? Well you should, particularly if you are part of the 77 percent of Americans who go online every day. As the internet has become more of an integral part of our lives, our information — pictures, videos, financial, emails, social media accounts, and other personal information — is constantly being stored online. All of this information is known as your “digital assets.” While the internet has made our lives easier by allowing us to access our information with the simple push of a button, it may be difficult for our loved ones to do the same once we are gone.

 

Digital Estate Planning

Digital assets encompass any of your information that you store or use online — this includes social media accounts such as Facebook. While you may not consider these digital assets as having much monetary value, they store critical information or have sentimental value. Consequently, when you plan for your estate you should include your digital assets because they are an asset owned by you. Indeed, when it comes to your digital assets you will have to make special advanced arrangements so your executor — the person in charge of your estate when you pass away — can access them upon your passing. Many online providers, such as Facebook, Google, and Yahoo!, have specific procedures for handling your account upon your passing.  In order to ensure that your wishes are carried out, you must follow their rules. Strictly speaking, providing usernames and passwords to another person, even your executor or successor trustee, may be a violation of the terms of service for many online accounts, and could cause trouble for your executor or successor trustee. You should also consider access to your computer and back-up hard drives, tablets, and smartphones. Being proactive is key when it comes to your digital assets so that they may be accessed when needed. And, as with any estate plan, regularly revisiting your plan for your digital assets is key.

 

Coordinating Your Digital Assets With Your Estate Plans

Depending on where you live your digital estate plan may need to be formalized into a legal document. You can then name an executor specifically for your digital assets or, alternatively, name someone with whom your traditional executor can work with in order to settle your digital estate. Make sure to instruct your executor as to the location of your digital asset inventory for easy access. Keep in mind that because your will becomes a public document upon your death due to probate, you should never put any of your username or password information in your will. Instead, have your will refer to an outside document that contains all the needed information regarding your digital assets.

If you have questions about handling your digital assets and how they fit in with your existing estate plan, give us a call.  As with any estate plan, make sure to keep us and any financial advisors you have up to date on the status of your digital assets so that we can ensure your overall plan properly handles them and adapts to any changes in the law or circumstances.

Retirement Planning for Business Owners

For many employees, saving for retirement is usually a matter of simply participating in their employer’s 401(k) plan and perhaps opening an IRA for some extra savings.

But, when you’re the owner of a business, planning for retirement requires proactivity and strategy. It’s not just the dizzying array of choices for retirement accounts, there’s also planning for the business itself. Who will run the business after your retirement? Additionally, your estate plan must integrate into your retirement and business transition strategy.

Owners of businesses (like employees and everyone else) want to make sure they will have enough money in retirement. Business owners recognize the value of their businesses, so they are often tempted to reinvest everything into the enterprise, thinking that will be their “retirement plan.” However, this might be a mistake.

 

Retirement Accounts for Business Owners

Rather than placing all your eggs in one basket, it makes sense to have some “backup” strategies in place. There are many retirement account options open to business owners. Although the number of options can make things confusing, a tax and financial professional can often quickly make a recommendation for you.

For example, you may consider opening a 401(k), SEP-IRA, SIMPLE, or pension plan. This can reduce your income taxes now, while simultaneously placing some of your wealth outside your business. From a financial perspective, these account are tax-deferred, so the investment growth avoids taxation until you retire, which greatly boosts returns. The “best” plan really depends on how much income your business earns, how stable your earnings are, how many employees you have, and how generous you want to be with those employees. You must consider how generous you’ll be with employees because the law requires most tax-deferred plans to be “fair” to all employees. For example, you can’t open a pension or 401(k) for yourself only and exclude all of your full-time employees. When making this decision, consider that many employees value being able to save for their retirement and your generosity may be repaid with harder work and loyalty from the employees.

Depending on how many employees you have, you may even consider “self-directed” investment options, which can allow you to invest some or all of your retirement funds into “alternative” investments, such as precious metals, private lending arrangements, real estate, other closely held businesses, etc. These self-directed accounts are not for everyone, but for the right person, they open up a wide world of investment opportunities. The tax rules surrounding self-directed tax-deferred accounts are very complex and penalties can be incredibly high. So, if you choose to do self-directed investments, always work with a qualified tax advisor.

Outside of your business, you can likely contribute to an IRA or a Roth IRA. This can allow you to add more money to your retirement basket, especially if you’ve maximized your 401(k), SEP, or SIMPLE plan. Like the other tax-deferred accounts, self-directed IRAs are also an option, opening up a broad world of investment options.

As a business owner, you likely have a great deal of control over your health insurance decisions. If you’re relatively young and healthy or otherwise an infrequent user of health care services, consider using a high deductible health plan (HDHP) and a health savings account (HSA) to add additional money to your savings. These plans let you set aside money in the HSA which can be invested in a manner similar to IRAs. At any time after you setup the account, you can withdraw your contributions and earnings, tax-free, to pay for qualified medical expenses. And, after you turn 65, the money can be used for whatever purpose you want, although income tax will need to be paid on the distributions.

 

Selling or Transferring the Business

Many business owners dream of a financially lucrative “exit” when a business is sold, taken public, or otherwise transferred at a significant profit for the owner. This does not happen by accident – a business owner must first create and sustain a profitable enterprise that can be sold. Then, legal and tax strategies must be coordinated to minimize the burdensome hit of taxes and avoid the common legal risks that can happen when businesses are sold. When a business is sold, the net proceeds can form a significant component of the owner’s retirement. When supplemented by one or more of the retirement accounts discussed above, this can be a great outcome for a business owner.

On the other hand, other businesses are “family” businesses where children or grandchildren will one day become owners. Like their counterparts who will sell their businesses, these business owners must also focus on creating and sustaining a profitable enterprise, but the source of retirement money is a little less clear. In these cases, clearly thinking through the transition plan to the next generation is essential. Although the business can be given to the next generation through a trust or outright, there are also transition options to allow for children, grandchildren, or even employees to gradually buy-out the owner, if the owner needs or wants to obtain a portion of the retirement nest egg from the business.

 

The Importance of Estate Planning

Regardless of which retirement accounts (401(k), SEP, SIMPLE, IRAs, HSAs) you select, it is wise to integrate them into your estate planning. You’ve probably already considered who you want to take over your business after you retire (perhaps a son or daughter or a sale to a third party). For your retirement accounts, an IRA trust is a special trust designed to maximize the financial benefit, minimize the income tax burden, and provide robust asset protection for your family. These trusts integrate with the rest of your comprehensive estate plan to fully protect your family, provide privacy, all while minimizing taxes and costs.

 

Leverage the Team Approach

Let us work with you, your business advisors or consultants, your tax advisor, and your financial advisor to develop a comprehensive retirement, business transition, and estate planning strategy. When we work collaboratively, we can focus on setting aside assets for retirement, saving as much tax possible, while freeing you to do what you do best – build your business!

Give us a call today so we can help you craft a retirement, business transition, and estate planning strategy.

Finding the Right Fit: Questions For Prospective Wills and Trusts Attorneys

It goes without saying that estate planning is incredibly important and is more than just having a will or a trust. Estate planning offers a sense of security for you and your loved ones that your wishes will be carried out. With such an important and personal endeavor, selecting the right Wills and Trusts Attorney is crucial.

Doing your homework, familiarizing yourself with the options and asking questions will be critical to getting someone who’s actively looking out for your interests.

There are several key factors you should consider when interviewing potential attorneys and ultimately deciding which one to hire.

Funding a Trust

Will your estate planner help with funding your trust (or otherwise aligning asset ownership with your plan)? How much of the funding process will they do for you?

For some clients, this can be a critical service due to the complexity of assets he or she may own that need to be accounted for. Having someone thorough and reliable in this part of the process will make it easier to ensure your estate plan works as designed.

Organization and Payment

What does your estate planning process look like? How long will it take until the entire process is complete? When is payment due and how do I pay?

These questions may seem simple, but, not unlike when you pay for home repairs, it’s important to have an idea of the end date of the process. It is also important to know when you are expected to provide information and payment so that you are not the cause of any delays. Additionally, you never want surprises when it comes to payment amounts or dates. It is common to put down a retainer or deposit with an attorney, but it’s always important to know ahead of time.

Long-term Access

What long-term plans do you have for your firm? Will you or another attorney in your firm be around to help me in the future?

Creating a will or trust isn’t a one-and-done process. Wills and trusts are frequently revisited over the years because of changes in your circumstances and in the law. If at all possible, it’s best to have the same attorneys working with you. Although you can switch attorneys or firms each time you need an update, attorneys with plans to continue to offer services into the future can be a safer bet to ensuring continuity in your estate planning.

Planning for the Future

Can you help my family members if I become sick or when I die? Just because an attorney prepares estate planning documents, does not mean that they will help with estate or trust administration. Having the attorney who prepared your estate planning documents assist your family during times of incapacity or at your death can be extremely helpful. Since he or she is already aware of your wishes and will have a copy of your documents, addressing these difficult situations can be quicker and involve less hassle.

Have Questions? Let Us Answer Them

There’s no reason to get overwhelmed by the choice of a wills and trusts attorney. Asking just a few simple, but critical, questions can help you find someone who’s on the same page. Give us a call today to schedule an appointment.  We would be happy to answer these questions and any others you may have.

What to Do with Your Beloved Collection

Whether your beloved collection consists of artwork, books, cars, music, or other significant items, you should not forget about this valuable asset when estate planning. You have likely spent quite some time — whether years or your entire life — building your collection; you should not leave its fate to the whims of others. Estate planning is a great way to share the value and meaning of these much-loved items with those you leave behind. Through your estate plan, you can explain to your loved ones why you collected these items in the first place as well as the meaning or value they have for you.

Who Should Get My Prized Collection?

There are several options for you when it comes to your collection. You may already know of a family member or friend who shares your interest and will genuinely enjoy the collection. Knowing specifically who is going to be receiving your collection may be part of the peace of mind you are looking to achieve with the preparation of your estate planning.

Depending on the type of collection, a charity — such as a library, museum, or other non-profit organization — might be a better option for your collection. The expense and time involved in selling, as well as the opportunity cost of wealth transfer, may make charitable giving the best and most efficient tax solution.

Because some collections are best experienced as a whole, while others may be just as enjoyable and valuable if divided up, you should consider what works best before gifting your items. Sometimes valuable collections can be lent out to organizations on a temporary basis which results in cash flow that does not have the same tax costs of a full-blown sale or the tax benefits of a donation.

Document Your Collection

Finally, it is essential to legally document your collection in order to conduct proper estate planning. Make sure to provide your family, as well as your executor, personal representative, or trustee, with clear direction not only on what your estate includes but what should be done with these assets upon your death. And while you are taking an inventory of your beloved collection, make sure to let your estate planning attorney and financial advisors know the extent and value of your collection.

We Can Help

We can help you integrate your beloved collection into your overall estate plan. This can be done in a number of different ways including a specific or charitable gift, or even a personal property memorandum. Do not let the time and effort you have spent building your collection go to waste. Give us a call today to learn about the options available to you so the next generation can share in the joy of your collection.