What Is Estate Planning, and Who Needs It?

What Is Estate Planning, and Who Needs It?

What Is Estate Planning, and Who Needs It?

Click here to view original web page at What Is Estate Planning, and Who Needs It?

Estate Planning

Estate planning is the process of setting up how your assets and property will be distributed upon your death. Through these plans, you can ensure your assets are given to the people and organizations you care about. Additionally, estate plans can minimize the amount of taxes your estate and family will incur once you’re gone. Estate planning is a necessary venture even for those who aren’t particularly wealthy, but it’s also a complicated one. Consider working with a financial advisor if you need help setting up an estate plan or managing inherited money.

What Is Estate Planning?

Estate planning is the series of preparation tasks that dictate how your assets will be dispersed upon your incapacitation or death. Put simply, estate planning means electing heirs for your estate.

Everything you own is part of your estate. That means property like real estate, in addition to cars and other valuables. Your estate also includes financial products, like stocks, bonds, life insurance, retirement savings and bank accounts. Things you share, like joint accounts, count too. Even if something only has sentimental value, you’ll want to specify its bequest. This ensures that your loved ones receive your assets instead of a probate lawyer or the IRS.

Estate planning entails far more than just creating a will. It may also include:

  • Assigning a power of attorney and healthcare proxy to make decisions on your behalf
  • Creating trusts
  • Establishing guardians for living dependents
  • Appointing or updating beneficiaries on life insurance plans and retirement accounts
  • Making funeral arrangement
  • Preparing for estate taxes, potentially by scheduling annual gifting

Steps for Creating an Estate Plan

Before you begin your estate plan, take inventory of your assets. Create a list and include corresponding values for each item. You’ll also need to ask yourself who you want to leave your assets to and how you want to divide them. After you’ve decided all of the above, you can begin the following process:

  1. Draw up your last will and testament. In it, you should name an executor, assign a legal guardian for any minor children and establish any necessary trusts.
  2. Your will doesn’t account for everything. Now, you’ll need to review all your plans, accounts and shared assets to assign or update beneficiaries.
  3. Assign a power of attorney and healthcare proxy to make financial and medical decisions on your behalf if you cannot.
  4. Write a letter that includes any information that hasn’t been accounted for. This may include desired funeral arrangements or the bequest of sentimentally valuable assets.
  5. Ensure that all documents are organized, properly notarized and stored someplace safe, like your attorney’s office or safety deposit box. This includes a list of your digital assets and passwords.

Estate planning is typically an ongoing process. While you should start estate planning as soon as you acquire assets, it likely won’t end there. You should review your estate plan every few years, whenever you experience a life-changing event or in the event that Congress makes any changes to estate tax law. This will ensure your plan reflects your current desires and goals.

How to Choose an Executor

Estate Planning

In addition to drawing up your will and trusts, you’ll also have to choose an executor. Your executor will be responsible for administering your assets after your death and ensuring your final wishes are met. An executor’s duties may include:

  • Filing court papers to begin the probate process
  • Taking inventory of the entirety of the estate
  • Distributing assets to named beneficiaries
  • Filing final personal income tax returns
  • Paying remaining bills, including taxes and funeral costs

Often, people choose a family member, such as a child or spouse, to fill this role. You can also select a friend. What’s important is to make sure you pick someone who is dependable, trustworthy and organized. Also consider a person’s age and health, as you want your executor to be around after you’re gone. If your chosen executor lives in a different state, be sure to check your state’s laws as there may be requirements regarding an out-of-state executor.

Will I Need to Pay Estate Taxes or Inheritance Taxes?

Another big piece of the process is estate taxes. If you don’t plan accordingly, taxes can take a big bite out of your estate. Your assets can be taxed in two ways: estate taxes and inheritance taxes. With estate tax, the tax is taken out of the estate before it’s divided up and distributed to beneficiaries. Inheritance tax, on the other hand, is levied after the inheritance is distributed to beneficiaries. While estate tax is taken directly out of the estate, beneficiaries are responsible for paying inheritance tax.

Inheritance tax is only levied by states, but both the federal government and states may collect estate taxes. As of 2020, the federal estate tax only applies to estates worth more than $11.58 million. Here’s a breakdown of each tax on the state-level:

Estate Tax (13 states)– Connecticut
– Washington, D.C.
– Hawaii
– Illinois
– Maine
– Maryland
– Massachusetts
– Minnesota
– New York
– Oregon
– Rhode Island
– Vermont
– Washington

There are steps you can take to mitigate the estate tax so more of your assets go to your beneficiaries. For instance, you can gift portions of your estate to your family ahead of time instead of waiting until you die to give everything away. Other tactics include setting up an irrevocable life insurance trust, making charitable donations, establishing a family limited partnership and funding a qualified personal residence trust.

Risks of Not Creating an Estate Plan

If you don’t come up with an estate plan, your state will take control upon your incapacitation or death. If you become disabled, the court will determine how your assets will be used to care for you through a conservatorship or guardianship. Similarly, if you die without an estate plan in place, your state will distribute your assets according to its probate laws.

As you might have guessed, these scenarios can have significant downsides, as you will lose control over who is in charge of your care or how your assets are distributed. If you have minor children, the court will take control of their inheritance. In the instance that both you and your spouse died, the court would appoint a guardian for your children.

In other words, estate planning is crucial no matter your age or level of wealth. You want to have a say in where your assets end up and ensure your loved ones are adequately cared for should something happen to you.

DIY Estate Planning vs. Hiring an Estate Planner

Estate Planning

You can do estate planning on your own with thorough research. However, know that there are risks to DIY estate planning and it can be overwhelming. An estate planning professional, like a financial advisor or attorney, can help. A planner has years of education and experience, while you usually only do this once. Estate planning laws are very specific and vary state by state. One mistake and your whole plan could be invalid or work differently than you want.

As your estate grows in size, estate planning becomes more complicated and the need for a professional becomes greater. This is especially true if you have children under the age of 18 who would need to be provided for and taken care of. If you own a business, own property in more than one state or don’t have obvious heirs, an estate planner’s expertise will come in handy.

In addition to elucidating the process and taking work off your hands, an estate planner can help you save money. Federal and state governments tax your asset transfer through estate taxes. A planner can help you to mitigate or avoid these costs, as well as avoid probate and protect your assets from your beneficiaries’ creditors.

How to Find an Estate Planner

If you’ve decided you don’t want to handle estate planning alone, there are a number of ways to find a qualified estate planner. Both estate planning attorneys and financial advisors can be helpful in the process. Ideally, your financial advisor and attorney will work hand-in-hand to make sure you’re making the best estate planning decisions for your situation and have your assets in order.

A lawyer can help you with everything from creating a will and drafting living trusts to developing a plan to minimize estate taxes and preparing powers of attorney. To find an estate planning lawyer, check with the state or local Bar Association. Also take note of certifications, like the National Association of Estate Planners and Councils’ Accredited Estate Planner designation, which indicate expertise in the area.

Your financial advisor can also help you find a qualified attorney to draw up your estate planning documents. Additionally, a financial advisor can help you better define your objectives before legal documents are drafted and also ensure your estate planning documents align with your goals.

Bottom Line

There are few financial endeavors that are more important than creating an estate plan. Having a complete and secure estate plan in place when you pass away will leave your loved ones in a much easier spot. Without an adequate estate plan, you run the risk of forcing your family into an extended trip to the probate courts, where they’ll undoubtedly incur legal fees and may not receive the full inheritance you intended for them.

DIY estate planning, with the help of estate planning software or websites, is an option for simpler estates. But you may be better off working with an advisor or an estate-planning attorney. If you go this route, do your due diligence, asking them about their practice, fees and background. One way to compare multiple financial advisor options is with SmartAsset’s advisor matching tool.

Estate Planning Tips

  • For many Americans, the prospect of planning out your entire estate can seem overwhelming and difficult. That’s where a financial advisor that specializes in estate planning can help. SmartAsset’s advisor matching tool can set you up with three personalized financial advisor options in just 5 minutes.
  • If you have a sizable estate, estate taxes on either the state or federal level could be hefty. However, you can easily plan ahead for taxes to maximize your loved ones’ inheritances. For example, you can gift portions of your estate in advance to heirs, or even set up a trust.

Photo credit: ©iStock.com/DNY59, ©iStock.com/Aslan Alphan, ©iStock.com/Weekend Images Inc.

Becca Stanek is a graduate of DePauw University. Becca is an experienced writer/editor who serves as a retirement expert for SmartAsset. She’s passionate about helping people understand the sometimes daunting ins and outs of personal finance. Becca is a Certified Educator in Personal Finance® (CEPF®) and a member of the Society for Advancing Business Editing and Writing. Her work has also appeared at Time, The Week, Mic and The Washington Monthly. Becca grew up in the Midwest and now lives in New York City.

Website that helps you plan for death finds success with millennials

Website that helps you plan for death finds success with millennials

Website that helps you plan for death finds success with millennials

Click here to view original web page at Website that helps you plan for death finds success with millennials

Liz Eddy has lost track of how many times she’s told the story that led her to co-found Lantern, a website that helps people tackle the complex logistics of losing someone they love and also plan for their own deaths.

That story starts with a phone call on a Saturday morning from a nursing home with news that Eddy’s grandmother had died. Two police officers and a nurse greeted Eddy in the room where her grandmother’s body lay.

“They looked at me and said, ‘What do you want to do?'” recalls Eddy, who was 27 at the time. “I had no idea what to turn to … and really was just thrown into a rapid Google search where I typed in what do you do when someone dies?”

“I was just thrown into a rapid Google search where I typed in what do you do when someone dies?”

Eddy, who lost her father as a child, anticipated this moment. Her grandmother, who was frail, had done some pre-planning. She’d written a will, completed an advanced directive for her medical care, and told Eddy where she kept important paperwork and belongings.

But Eddy quickly learned that there’d been oversights, including how she might close certain accounts, stop auto-refill prescriptions, and find online passwords. Eddy figured she’d rely on a comprehensive online resource that could walk her through what to do but found none. Instead, she embarked on a “scavenger hunt of websites” for answers.

“I fully expected to find something like Lantern,” she says.

In the midst of coping with her grief and trying to settle her grandmother’s affairs, Eddy walked in the door of her best friend Alyssa Ruderman’s home, and said, “We’ve got to do something about death.”

The pair launched Lantern last fall with $890,000 in pre-seed funding. The website offers free checklists for users who need to plan a funeral, help dealing with logistics that follow a funeral, or assistance sorting out their last wishes in advance of their own death. The site has thousands of users, and to Eddy’s surprise, 40 percent of them are 35 and younger.

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Lantern’s appeal to millennials speaks to a number of trends. They may help older parents plan for what happens when they die and then decide to make similar arrangements for themselves. Accustomed to having everything in their lives optimized or organized by a digital tool, the 35-and-under crowd may view online end-of-life planning as a helpful service like any other they use.

In general, talking about dying seems less taboo to many millennials. They encounter the “positive death” movement online, which aims to make conversations about death normal and routine. But millennials also live in a world that seems beset by crisis, whether that’s mass shootings, climate change, or coronavirus. Contemplating what the end looks like is part of being alive.

Anita Hannig, an associate professor of anthropology at Brandeis University who studies death and dying, says people — not just millennials — increasingly want to express their unique selves in death as in life.

The challenge is getting people comfortable enough to consider what that looks like. Eddy and Ruderman have designed Lantern to sound like a compassionate friend who knowingly takes your hand. The site isn’t morbid but instead offers practical information about the choices we can make before we die, like hiring a death doula and how to write a will. Users can compare different burial options, learn how to select life insurance, and explore how they want to be remembered online.

“A lot of people still think that if you’re talking about death too much, there’s an eerie way you’re bringing it about,” Hannig says. “In some ways, having a website like this [is] making death so much more manageable so that you can focus on the actual process of death and dying when it happens.”

Viana McFarland, a 25-year-old New Yorker, discovered Lantern after an employer-sponsored financial planning workshop prompted her to think about what might happen to her belongings and modest savings after she died. After searching Reddit and Google for resources, she found Lantern.

“There were small things I didn’t think about,” McFarland says.

That included the specifics of her burial. McFarland learned that she could let her body decompose in a “mushroom suit,” which hastens the breakdown of a corpse using mushroom spores and other microorganisms. She explored how to donate organs and leave money to the ACLU and Planned Parenthood. Most of all, McFarland wanted to spare her loved ones stress, confusion, and conflict. The time she spent on Lantern felt useful and productive.

“I guess younger people, with more resources at our hands, might become informed sooner or in a different way than our parents and grandparents were,” says McFarland.

More than three dozen articles on Lantern offer advice and insight on common questions. Its checklist offers a step-by-step guide to managing your last wishes. Tasks include making a funeral financial plan, safely storing financial information so it can be accessed by a loved one, and writing a last will and testament.

Website that helps you plan for death finds success with millennials

Lantern is also sentimental. The checklist prompts users to reflect on their legacy, asking about the three best decisions they ever made, what advice they’d give to their younger selves, and what they’d want their grandchildren to know about them.

“These questions were really developed because we started to realize that people don’t ask these questions of their loved ones, and it’s often the thing you think about when they’re gone,” says Eddy, who personally longs to know stories from her father’s life.

While it’s crucial to record the practical and sentimental information, Lantern must also deliver on keeping it secure. The site uses encryption and currently doesn’t collect information it doesn’t feel equipped to protect, such as passwords, wills, and Social Security numbers.

Instead, its business model is based on referring users to services that specialize in certain products, and which Eddy and Ruderman have personally vetted. For estate planning, Lantern recommends Legal Zoom. To help loved ones close online accounts, it suggests the password manager 1Password. Lantern can receive a referral fee when its customers sign up for such services. Eddy and Ruderman are also exploring pitching Lantern to organizations, like life insurance companies and hospitals, whose clients need the information the site has to offer. They’re making the same case to human resources departments who could use Lantern as a benefit for employees who, like McFarland, don’t know how to start end-of-life planning.

Though Lantern will probably offer a premium subscription to users in the future, Eddy and Ruderman are adamant that its basic how-to content and checklists will never be paywalled.

“We don’t think people should not have access to this information because they do not have means,” says Eddy.

The company can take that stand because it’s a public benefit corporation, which means it plans to pursue a mission-driven approach while also seeking a return for investors.

“Our vision is to be the central resource that any one person uses to navigate their life before and after a death.”

Nancy Lublin, an entrepreneur who is the founder and CEO of Crisis Text Line and the former CEO of DoSomething.org, made an angel investment in Lantern. Lublin knows Eddy and Ruderman from their previous roles at Crisis Text Line and DoSomething.org, respectively.

She said in an email that Lantern is poised to serve a “huge untapped market. Millennials, in particular, are bound to find Lantern appealing.

“How the heck are people going to deal when their parents and grandparents (fyi: enormous boomer generations) pass away?” wrote Lublin, noting that millennials use digital tools to find everything from roommates to lovers to marijuana. Of course they’d want something similar to help them manage death.

Eddy and Ruderman are aiming to become the first thing anyone turns to when it’s time to grieve a loved one or plan for the end of their own life.

“Our vision is — and always will be — to be the central resource that any one person uses to navigate their life before and after a death,” says Ruderman. “That is our North Star.”

Eddy is buoyed by the possibility that she’s helping others avoid what she experienced following her grandmother’s death: “You don’t have to be forced to pick the first thing you see on Google,” she says.

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Ask Kip: Create a digital estate plan

Ask Kip: Create a digital estate plan

Ask Kip: Create a digital estate plan

Click here to view original web page at Ask Kip: Create a digital estate plan

Q: What will happen to my social media or other online accounts after I die?

A: What will happen to these online accounts after your death depends on the laws in your state, the types of accounts involved and the terms of service governing the accounts. An executor does not automatically gain access to the accounts unless the deceased person has made specific arrangements. And heirs often find that they don’t have clear authority to access or manage a family member’s accounts. But you can take steps to increase the likelihood that your digital footprint will be handled according to your wishes.

You’ll need to make a list of what you have, name someone to act on your behalf, and provide your designee with access and instructions. Start by creating an inventory of your digital assets, including all of your online accounts. As you create a list of the accounts and their passwords, note your wishes or instructions for any you would like handled in a specific way. For example, you may request that your social media accounts be deleted or that digital photos stored in the cloud be shared with specific people.

Problems may still arise. Passwords expire, people forget to update their lists, and many sites require two-factor authentication that could go to a cell phone or email address that is no longer accessible, says Sharon Hartung, author of Your Digital Undertaker. Or a website’s terms of service agreement may prohibit anyone other than the original user from accessing the account. Many sites delete accounts upon receiving notice that a user has died.

In recent years, most states have adopted the Revised Uniform Fiduciary Access to Digital Assets Act, which allows you to designate a legal representative to access your digital assets after death. You can provide that access through a will, power of attorney or trust.

A small but growing number of online services have started to offer users a way to allow access to their accounts after they die. Facebook, for example, allows users to have their accounts deleted upon death or to designate a digital heir with the right to manage portions of the account, which will be turned into a memorial page. Google will let you select up to 10 trusted contacts who can access your Gmail, photos and more if your account is inactive for several months.

(Kaitlin Pitsker is an associate editor at Kiplinger’s Personal Finance magazine. Send your questions and comments to moneypower@kiplinger.com. And for more on this and similar money topics, visit Kiplinger.com.)

'Cake' Will Sweeten the Process of Dying in the Digital Age

‘Cake’ Will Sweeten the Process of Dying in the Digital Age

‘Cake’ Will Sweeten the Process of Dying in the Digital Age

Cake

A few years ago, ahead of a scheduled operation, I had to hire an attorney to draw up my last will and testament. Per the hospital’s instructions, I was also told to bring a copy of my Advance Directive, or instructions on when to pull the plug. It was scary, grown-up stuff.

As a digital native, it all felt a bit too real. I would have much preferred to sit on my couch, laptop at the ready, with an on-screen AI to talk me through the whole decision-making process and pop it up on the cloud. And that’s exactly what former healthcare executive Suelin Chen built in her Boston-based startup, Cake.

Aware that no one is thrilled about planning for the final exit—or having to talk loved ones through their own wishes—Cake is a no-nonsense online tool. You can lay out: how you’d like to go (hospice versus at home or maybe a remote cabin in the woods); who gets your stuff; the music you’d like at your memorial; and more.

Cake

You can also specify how you want to be remembered digitally. Perhaps you want to allocate funds for annual site management fees, domain registration, or deputizing someone to ensure a Wiki-profile is factually accurate.

I spoke to Chen to find out more. Here are edited and condensed excerpts from our conversation.

Suelin, how did you come up for the idea behind Cake?
With my background in healthcare and business, I saw not only the high costs involved in end-of-life care, but that in our country people often default to enduring more and more medical procedures without fully understanding the value, or the trade-offs. Three out of four people don’t plan for end-of-life, and I get why—the barriers to planning can be really high. Simply put, I saw an opportunity to help people plan better, to make their desires known, before it’s too late.

Because they’re too incapacitated to make their views known?
Right, it’s often brought up too late. Because, when surveyed, 80 percent of people would prefer to die at home—and yet, today, 80 percent of people die in medical facilities.

Suelin Chen, Cake founder
Suelin Chen, Cake founder

Planning for the final exit is a space ripe for disruption, then.
I knew there could be good digital tools for doing this but I couldn’t find any, so I found a great team and built Cake.

Is there also a generational shift? Due to social media, we get to ‘see’ people die, many of whom we might have lost touch with over the years. Death is going to happen to us all. But it feels more ‘visible’ now.
Absolutely. We have a lot of millennials on our platform, and we see that this generation is very pragmatic and perceives less stigma about death than older generations. Previous generations have been remembered through a gravestone or something similar. In time, those degrade. But our digital footprint, the traces of our lives, will persist online. I ask people, when your great-grandchildren search online for you in the future, what do you want them to find?

That’s a deeply unsettling and yet curiously interesting thought. You must have worked with many different partners to bring Cake to life.
Yes, we’ve spent hundreds of hours consulting with experts to develop all our online tools including: estate attorneys, funeral planners, physicians, social workers, and wealth managers.

How does Cake work? This is more than a basic will, right?
Yes, many of our users have done estate planning and have a will but realize that they still have gaps. We provide a personalized, comprehensive, and detailed checklist that helps people understand what planning they still need to do. It’s hard to know what legal fees are reasonable, because there’s a lack of transparency. Many of our users have seen an attorney but want more visibility into the process. It’s not just avoiding taxes on your assets after death (though of course this is very important). It’s also managing how you want to be remembered, your funeral or memorial service, your digital footprint, your digital assets (Bitcoin, etc.)—certainly doing more than putting all your passwords in an Excel doc and locking it (which has been recommended to several of our users).

Cake

How many data points is your AI gathering as it takes a Cake user through personal planning?
It’s fluid [and] really depends on the individual. Our Cake AI prompts you with questions, to capture data around many decisions that need to be made. But there’s also a freeform section for more personal wishes. Some of our users write (almost) novel-length answers to those.

What are some of the more ‘out there’ requests?
Well, every employee at Cake has gone through the process and one of my team members loves the idea of having a tree planted for him. A lot of our users, including me, feel they’d rather have a celebration of life than a somber funeral. One of our users wants to be buried with a 6-pack of Bud Lite. Someone else I know has left instructions to rent out a movie theater for his. Your last wishes should be a true expression of who you are.

How many people have signed up so far?
We don’t reveal exact user numbers.

Fair enough. It’s free to users, so what’s your revenue model?
We make money from affiliate links and from enterprise partners who distribute to their population. For example, we’ve built a Cake back-end for a large healthcare provider, an insurer, a bank, and other institutions. A premium product is also in the works.

You don’t share data with ‘interested parties’ who might want to sell fancy urns then?
No, trust is the most important thing to us. We will never sell or share personally identifiable information with any third party without our users consent.

Cake

Why the name Cake?
It’s a warm, inviting symbol of celebrating and honoring life. Planning is a positive act, a true gift to your loved ones.

You’ve build a web-based service, rather than a mobile app. Why?
It’s much faster to iterate and improve the platform, and doesn’t require any download. We also know that many of our user base is more comfortable with web apps than downloading native applications.

Do you have a tech team in-house or are you partnering with a digital agency on this build?
All in house! We actually have more female than male techies, who span several generations, which I’m very proud of.

Are you wedded to any particular tech tools?
Choosing Microsoft Azure as our hosting platform made it easy for us to implement excellent security and scalability for our product early on, and our code base heavily utilizes the Microsoft .NET stack as well. We recently also switched our internal IT to Office 365 and were early adopters of Microsoft Teams; so I guess we’re fans of Microsoft technologies.

Why are you based in Boston rather than any of the other Silicon cities?
I love Boston. There’s a lot of activity in FinTech, MedTech, and healthcare here. It’s a great place to be, with plenty of talent and financial support from big institutions.

Talking of support, who are your backers?
We raised pre-seed from Pillar VCLaunchCapitalArkitekt Ventures, and Honeycomb.

Finally, what’s next for you?
We have an exciting growth plan for 2019, and a number of new partners in the financial sector that will provide new avenues for growth and new opportunities to add features that enable our users to plan and have peace of mind. Cake is in the FinTech cohort of Mass Challenge 2019, which kicks off orientation on Jan. 18. The initiative is aimed at startups which have an enterprise-ready solution, and helps them partner with large organizations. Cake will be working with MassMutual, Fidelity, and AARP Innovation Labs.