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Updating Your Titles, Deeds and Beneficiaries

Many times, when people think about estate planning, they think only of their will and trust. We have tried to educate people on why they need to plan for other situations as well.

Yes, your will and trust help you when you die, but what about when you are still alive and just need a little bit of help. You need to think about your health care directive and your financial power of attorney. Earlier this month, we debuted A Guide to My Life: My Advisors, Digital Assets and Documents which is a guide to help you keep track of your online life that helps your loved ones keep your affairs in order in life and death. There are many, many other facets to estate planning, but today we cover why you need to update the deeds and titles of your assets and the beneficiaries of your financial accounts. Each of those need to be covered separately.

First, let us talk about the deeds on your housing properties. Typically, clients want to avoid probate courts as much as they can so that their loved ones avoid the headache that comes along with it. The stage in life that you currently reside, and your unique situation will make a bit of difference, but as a rule of thumb a Transfer on Death Deed (TODD) is an essential part of your estate plan. For most people, their house is the most valuable asset that they possess, and it is one that many times will drive their estate into probate when they pass away.

So, what does a TODD do? A TODD simply is a type of deed that takes your house and transfers the ownership of the property to a specified person. That means you keep the ownership of the house to yourself and when you die, it goes to your children or some other person rather than a court deciding what happens during the probate process. You then file the deed with the county (usually in the land records department). When you die, your house automatically passes on to the next person with out going through the process. It really is as simple as that.

Some people may have extremely valuable vehicles or boats. You can do the same thing with those assets as well. When it comes to large assets, you can put transfer on death designations on vehicles with the DMV and on boats/yachts with the DNR. They work in the same way as a Transfer on Death Deed with your house.

The last thing we want to talk about is beneficiaries on your financial accounts. This includes everything from your life insurance to your 401(k) to your savings accounts at your bank to your checking account. You want to make sure there is a beneficiary listed. Why you may ask? It is simply to ensure your assets get transferred to the right person or entity. Again, this is a great way to avoid the probate process. Say you are 40 years old and you have $100,000 saved in an IRA, you may want to put your spouse on the account as a beneficiary. That means that there is no need to go to the probate court to decide who gets it. In most cases your spouse would gain access to it anyway if you didn’t designate the beneficiary, but it could take months or years for that to happen and the value of it would likely be substantially decreased because you would have to pay fees to courts and attorneys. In another scenario you may set up a trust for your kids if something happens. If the beneficiary does not get labeled correctly, your accounts again go through probate and your children will not be taken care of the way you want.

The message is simply this, the little things make a difference. The cost is either extraordinarily little or nothing to do these things, but not completing them can be extremely costly and time consuming.

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Protecting Your Digital Assets

Earlier this year, the app developer, NordPass, conducted a survey around online passwords. They found that the average person keeps between 70 to 80 passwords. They must memorize, write down, reset that many passwords just to function in their life online. You may ask, “why is an estate planning law firm talking about passwords?” Honestly, it is a great question. The answer to that is a relatively new term called “Digital Assets”.

Normally when we talk about assets, we only think about physical items or financial accounts. In today’s world, everything seems to be shifting online. We do not get bills in the mail; we get it automatically taken out of our accounts and never see a bill. You can always look up the bill on your online account…which leads us back to your passwords. Nearly every bank and financial company in existence provides you with an online account to access your funds…which leads us back to your passwords. Maybe you were fortunate enough to invest in cryptocurrency like Bitcoin. That is not physical, you must purchase it through an online account…which leads us back to your passwords. Many people are forgoing physical pictures and just saving them online in their own account…which leads us back to your passwords.

So, what does this mean? It means that we need to start thinking about our passwords and our online accounts as assets. They are digital assets and they need to be protected like any other asset. This is a concept called Digital Asset Management. There are services that are out there like NordPass that sell their app to help you do this, but it does not need to be that intricate. It can be as simple as writing down all your passwords. In fact, we have created a document that you can download and fill out. Of course, we have added a few other helpful pieces of information like your closest advisors, your account information and where you keep your physical documents.

We call the document A Guide to My Life: My Advisors, Digital Assets and Documents. As we tell clients, you want to leave a way for someone to step into your shoes and take care of your life if you need help. That could mean that you are stuck in the hospital from COVID-19 for 3 weeks and need to focus on recovering. Even worse, if you die, you want to make things as easy as possible for your loved ones. Having all your affairs in one place is extremely important, especially as our lives become more and more digital. Again, you are collecting digital assets and that is great because it makes your life easier, but it also makes it more difficult for your loved ones to know where everything is kept.

For this document, we suggest printing it out and keeping it in a safe place. We understand that it would be easier to make it a fillable document that you can save on your computer. Frankly, we advise against that for 2 reasons. One, if you have it saved on your computer, someone is going to have to be able to access your computer, which can be difficult if it is password protected itself, and if they do get access, they need to know what to look for and where it is. Secondly, if it is on your computer, it could theoretically be hacked into. If it is hacked, again, your entire life is on there and people you do not want to have access to it will have access to it. Instead, we suggest printing it out, filling it out with pen or pencil and then keeping it in a drawer in your desk or somewhere else that your loved ones will look (or that you’ve told them about).

Even if you decide to use some other form of tacking your digital assets and other important information, we still feel it is important and recommend it to all or our clients. Communication is key with your loved ones and digital asset management is just one more aspect of estate planning that can make life, and death, easier for your loved ones.

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