A couple of months ago we wrote an article about the top reasons to update your will (The Top 10 Reasons to Update Your Will ). As we discussed there, it is really important to update your will if there has been a major change in your life, such as giving birth, marriage, or divorce.
It makes sense and most of us are aware that we need to take this step. Unfortunately even though we understand the importance of the issue, we still end up failing to take action. Having an outdated will is one of the top estate planning mistakes most of us make.
What can go wrong?
If nothing has changed from the time you created your will in terms of you family status, having kids, or your financial situation, then you might be good to go with the current version of your will. But in any other case you definitely must consider updating your estate plan.
We found three great examples to illustrate what can go wrong.
This example is taken from RI Article Hub.
“Bill had a family trust holding significant assets. After divorcing his wife Marlene, Bill inadvertently left Marlene in the family trust deed as the controller (appointor) of the trust.
When Bill unexpectedly passed away, Marlene was left in control of the family trust. She wound up the trust and transferred the trust assets to herself.”
This example is taken from one of ILP + McChain Miller Nissman articles.
“The story of “Brandon and Emily” has been featured in The National Law Review. Prior to their marriage, Brandon received a multi-million dollar settlement as the result of an accident. Although Brandon and Emily signed a prenuptial agreement prior to getting married, after they had been married for some time, Brandon added Emily as an 80% beneficiary. That would have been fine if Emily had not filed for divorce. A short time later, Brandon died suddenly. Even though they were no longer a couple, Emily received $14.4 million.”
The last example is taken from AARP.org and it shows that even celebrities can make this mistake.
“ After actor Heath Ledger died in January 2008, reports surfaced that he had failed to update an old will created before his daughter was born. As a result, Ledger’s entire $20 million estate went to his parents and three sisters. “
At this point you are probably realizing how important it is to update your will. Just go to the office of your estate planner attorney and talk about it. Don`t forget to safely store the new version of your will in AfterVault.com, so your family can find it when they need it the most.
Have you ever wonder if there is a difference between a standard will and the professional estate planning. Recently we stumbled upon an image that compares the two and shows the difference.
This image is created by the Duxroe Lawyers and provides a great overview on the topic. That is why we decided to share it with you.
- Protects your children’s inheritance against their later divorce
- Protects your children’s inheritance from your spouse re-marrying
- Can save your children tax
- Can save your children’s inheritance from a challenge to your estate
- Can include super, family trusts and insurance money to save administration costs and delays
- Can include overseas savings and assets
- Can protect your children from wasting their inheritance
- Is prepared by experienced lawyers who understand what can go wrong with estates
- Does not protect your children’s inheritance against their later divorce
- Does not protect your children’s inheritance from your spouse re-marrying
- Does not consider any tax saving options
- Does not protect your children’s inheritance from a challenge to your estate
- Does not include super, family trusts and insurance money to save administration costs and delays
- Does not include overseas savings and assets
- Does not protect your children from wasting their inheritance
- Usually done by non-lawyers or junior lawyers
You can think about your will as an element or part of your Estate Planning. And you should be aware that some of your assets do not get inherited through a will, such as Life Insurance Proceeds, Bank Accounts or Retirement Plans.
Now you know the difference and no matter what you decide to do, don`t forget to make sure your family can find this information. You can safely store all your vital infromation in AfterVault.com
This week we want to share with you some interesting facts about Estate Planing.
1. Living wills, which allow people to control their end-of-life medical treatment, are a recent estate planning mechanism. California became the first state to allow living wills in September 1976.
2. The “will of Uah” is the oldest known will in existence, and it was found in a tomb in Egypt. It dates back to 2548 BC, and leaves all property to his wife, Teta.
3. Historians found a power of attorney from 561 BC Mesopotamia.
4. The shortest known wills are only three words long, reading, “all to son” and “all to wife.”
5. The longest will ever probated was 1,066 pages and 95,940 words. An English woman, Frederica Evelyn Stilwell Cook, holds this record.
6. A recent study indicates that approximately 11 percent of Britons have their internet passwords in their last will and testament.
7. Famous Americans who have died without a will include: Sonny Bono, Kurt Cobain, John Denver, Chris Farley, Howard Hughes, and Martin Luther King Jr.
8. In 1829, James Smithson created the Smithsonian Institution through a bequest in his last will and testament.
And… here are two more:
1. In Alberta, Canada, your last will and testament remains valid when you get divorced, but it is automatically invalidated when you get married.
2. Del Close asked that his skill go to Chicago’s Goodman Theatre so that he could be Yorick in Hamlet after his death. No one would remove his head from the body, so he was ultimately cremated intact. The executor of his estate
You might feel confident that your estate will not exceed the estate tax threshold but are you aware that that you or your beneficiaries can still end up paying an inheritance tax?
In this article we’ll tell you more about federal estate tax and inheritance tax.
What is the difference between federal estate tax and inheritance tax?
And is it possible that you’ll need to pay both? The answer is: maybe.
Some states have an inheritance or estate tax. This means that you or your beneficiaries might be liable for state tax after you receive money or property from the estate of a deceased person. Importantly, an inheritance tax is the responsibility of the beneficiaries not of the estate. See the chart below to see if your state currently has such a tax.
The federal estate tax, however, applies to all estates regardless of what any state residency issues. The estate itself is responsible for this tax, not the beneficiaries. The majority of estates in the U.S. have no applicable estate tax. Currently, only estates with a value greater than $11 million are responsible for the federal estate tax.
Am I subject to an inheritance tax?
In twelve U.S. states you must pay an estate tax. Six states impose an inheritance tax. And in Maryland you have to pay both. The chart below shows more details.
Am I a subject to the federal estate tax?
The bad news is that every estate in the USA is subject to the federal estate tax. The good news is that only a few estates have to pay it. In 2018 the exemption is $11,180,000. Hence if the value of the estate does not exceed $11.18 million the estate will pass to its heirs and beneficiaries free from federal estate taxes. And if the estate exceeds this value, only the value over this amount will be taxed.
Make sure to store your vital information in AfterVault.com so your family will have everything they need when they need it in one simple step.
Please note that tax laws change and we here at AfterVault are not tax attorneys and our advice is not a good sub.
We got a question for you?
Have you ever wondered about what happens to your Facebook stuff when you die? What about your Dropbox, your Twitter, your Instagram, even your PayPal… What happens to these digital assets when you are gone?
We wondered the same thing, that is why we put together a resource – a Digital Assets Estate Planning Checklist. It has answers to all these questions and some avenues for things that you can do about it.
Use our checklist to identify all your online assets in less than an hour.
Get it for free here:
Store them safely
Once you have all those digital assets identified, the next step is to safely store them for you or for your loved ones. Create a vault with AfterVault.com and record each asset in its predefined AfterVault category.
Leave clear instructions
Don’t forget to state your wishes regarding your digital assets. Make sure the people you love know what you want them to do.
Is there a way to protect my digital assets if I die?
Estate planning is even more essential for business owners. In fact, your business insurance might even require that you have some sort of plan in place to ensure that your business can continue even if you are gone. And by putting your affairs in order you can best protect both your family and your business.
Business Succession Planning
Think about what could happen if you don’t have a will. Just like your personal assets, your business assets will most likely pass to the next-of-kin. This might not be a big issue if your beneficiary is knowledgeable about the business. But what if he or she doesn’t know anything about running your business? This could lead to many problems with stakeholders and employees. Don’t leave your business in an ambiguous state. Make sure you specify, legally, just exactly who you want to take the helm if something happens to you.
What can you do?
We’ll talk about a couple of important techniques here but, as always, the easiest and safest thing you can do is to contact an experienced estate planner to lead you through the process.
As a business owner, one of the most powerful tools you can use is a buy-sell agreement. This type of agreement controls how ownership is transferred in the event that you become unable to run your business for any reason. This type of instrument is a legally binding agreement used to reallocate a share of a business if an owner dies or leaves the business. Using such an agreement you can also allocate portions of the business to more than one person.
If you want your heirs to have money but not control the business, you should look into purchasing buy-sell insurance. In essence, this provides the money and a framework for your business partners to buy out your share of the company’s net worth from your heirs thus providing for smoother business continuity.
It’s also important that you create a written succession plan. In this plan, you will designate a successor, recommend if the business should be sold, specify exactly what the business owns and what it owes, and provide a detailed list of accounts.
How can you make sure the right information will pass to the right people?
AfterVault makes this really easy. You can add one additional vault in your account, specially focused on your business needs. With only one click you can invite your business guardian. All the information you put into your vaults is well organized, highly secure, and available to you 24/7 from everywhere in the world. So if you go on a business trip to the other side of the world you can still upload, alter, or access your documents.
In your estate plan make sure you specify which assets belong to the family and which are business assets. This could save your family a lot of problems if the business’ creditors try to seek money from family assets to cover business debts.