When a Will Isn’t Enough to Avoid Conflict: Remember Your Personal Property

“When the parents are gone, there’s all kinds of unforeseen stuff they leave us with, stuff they never intended.” – Ira Glass, in This American Life, Episode 763: “Left Behind”

If you grew up with siblings, you probably remember some sibling rivalry. That rivalry can continue well into adulthood, especially after the parents are gone. In many families, parents are like the glue that keeps the family together. Once their gone, old issues can resurface, especially when it comes to dividing the parents’ personal property.  That’s why it’s important to have a plan for how you want your personal, sentimental property distributed to the people that you love. If you don’t, that can make an already tough situation so much worse.

This American Life, a popular podcast, recently featured a family with such a story. Eleven adult siblings needed to divide their dead parents’ stuff. But they didn’t all get along. Although their parents (who were both attorneys) had wills, they didn’t list in their will which child would get which items. They left all that to the kids, saying simply, everyone should get an equal amount. So the siblings invented a remarkably elaborate cheat-proof system to divide up the remains of their childhood. In the end, it was a system that played off the siblings’ natural suspicions towards each other and did nothing to bring them closer together after losing their parents.

Here’s a quote from the narrator:

“What they have left to them is just these things, right? And this mandate– to get along well enough one last time to split it up amongst themselves. And they don’t want to screw it up. They want to honor their parents’ last request. But they know it’s going to be tough for them, given how they are sometimes with each other.”

This is an example of incomplete planning that can lead to conflict after you’re gone. If the parents in this story had left a personal property memorandum that referred back to their Wills, that could have reduced the strain on their children, especially the estate’s executor. It would have also saved a lot of time and conflict….and their relationships with each other.

You can listen to this story (16 minute run time) here.

Or you can read the transcript here. 

 

This article is a service of attorney Myrna Serrano Setty. Myrna doesn’t just draft documents, she ensures you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why Myrna offers a Planning Session, during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. Call our office today to schedule a Planning Session. Mention this article to find out how to get this session at no charge. Call us at (813) 514-2946.

Check out another blog post about embracing the emotional side of estate planning. Here

Update: Aretha Franklin’s Estate. 3 Handwritten Wills Found

In August 2018, music legend, Aretha Franklin, died of pancreatic cancer. At her death, her estate was worth over $80 million and it appeared that she died without a will or trust.  (We wrote about this in this article here.)

Recently, we learned that three handwritten wills were found in her home. The latest one is dated March 2014 and it was found inside a spiral notebook, under cushions. The document appears to give the famous singer’s assets to family members. However, the writing is difficult to decipher and there are words scratched out and notes scribbled in the margins.

It is unclear if this is a valid will under Michigan law.  A court hearing is scheduled next month to determine the validity of that document.

Even if the Court determines that the will is valid, there’s still the issue of federal taxes. The Internal Revenue Service is auditing many years of Franklin’s tax returns, according to the estate. It filed a claim in December for more than $6 million in taxes.

Ms. Franklin’s family remains hopeful that wise choices can be made on behalf of her rich legacy, her family and her estate.  Sadly, we may never know what her wishes were.

This article is a service of attorney Myrna Serrano Setty. Myrna doesn’t just draft documents. She ensures you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why Myrna offers a Planning Session, during which you’ll get more financially organized than you’ve ever been before, and make all the best choices for the people you love. Begin  by calling our office today to schedule a Planning Session. Mention this article to find out how to get this $500 session at no charge.

Call us today at (813) 514-2946 to get started.

Four Critical Estate Planning Tasks to Complete Before Your Vacation

Four Critical Estate Planning Tasks to Complete Before Your Vacation

Going on vacation involves lots of planning: packing luggage, buying plane tickets, making hotel reservations, and confirming rental vehicles. But one thing many people forget to do is plan for the worst. Traveling, especially in foreign destinations, means you’ll likely be at greater risk than usual for illness, injury, and even death. So you need a solid and updated estate plan in place before taking your next trip.

Without a solid estate plan, your family could face a legal nightmare if something happens to you while you’re away.

#1 Make sure your beneficiary designations are up-to-date

Some of your most valuable assets, like life insurance policies and retirement accounts, do not transfer via a will or trust. Instead, they have beneficiary designations that allow you to name the person (or persons) you’d like to inherit the asset upon your death. It’s important that you name a primary beneficiary and at least one alternate beneficiary in case the primary dies before you. Moreover, these designations must be regularly reviewed and updated, especially following major life events like marriage, divorce, and having children.

#2 Create financial and health power of attorney documents

Unforeseen illness and injury can leave you incapacitated and unable to make critical decisions about your own well-being. Given this, you must grant someone the legal authority to make those decisions on your behalf through power of attorney. You need two such documents: medical power of attorney (in Florida it’s called a Designation of Health Care Surrogate) and financial durable power of attorney. Medical power of attorney gives the person of your choice the authority to make your healthcare decisions for you, while durable financial power of attorney gives someone the authority to manage your finances. As with beneficiary designations, these decision makers can change over time, so before you leave for vacation, be sure both documents are current.

#3 Legally Name guardians for your minor children

If you’re the parent of minor children, your most important planning task is to legally document guardians to care for your kids in case you die or become incapacitated. These are the people whom you trust to care for your children—and potentially raise them to adulthood—if something should happen to you. Given the monumental importance of this decision, we’ve created a comprehensive system called the Kids Protection Plan that guides you step-by-step through the process of creating the legal documents naming these guardians. Do you need help choosing guardians? We can support you with that.

#4 Organize your digital assets

If you’re like most people, you probably have dozens of digital accounts like email, social media, cloud storage, and cryptocurrency. If these assets aren’t properly inventoried and accounted for, they’ll likely be lost forever if something happens to you. At minimum, you should write down the location and passwords for each account, and ensure someone you trust knows what to do with these digital assets in the event of your death or incapacity. To make this process easier, consider using LastPass or a similar service that stores and organizes your passwords.

Complete your vacation planning now


If you have a vacation planned, be sure to add these  items to your to-do list before leaving. And if you need help completing any of these tasks—or would simply like us to double check the plan you have in place, contact us now.

We recommend you complete these tasks at least 8 weeks before you depart. However, if your trip is sooner than that, call and let us know you need a rush Planning Session, and we’ll do our best to fit you in as soon as possible. Contact us today to get started. 

This article is a service of attorney Myrna Serrano Setty. Myrna does MORE than just draft documents. Myrna ensures you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Planning Session, during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love.

Call us at (813) 514-2946 to schedule a Planning Session.
Ask how to get this valuable session at no charge.

Part 2: Questions to Consider When Choosing Life Insurance Beneficiaries

Part 2: Questions to Consider When Choosing Life Insurance Beneficiaries

In the first part of this series, we discussed the first three set of questions you should ask yourself when selecting a life insurance beneficiary. Here we cover the final part.

Choosing a life insurance policy beneficiary sounds pretty easy. Because there’s so much that can go wrong, it can actually be more complicated thank you think!

For example, when buying a life insurance policy, your primary goal is most likely to make the named beneficiary’s life better or easier in some way in the aftermath of your death.  But if you don’t consider all of the unique circumstances involved with your choice, you might actually end up creating additional problems for your loved ones.

Last time, we discussed the first set of questions you should ask yourself when choosing a life insurance beneficiary. Here we cover the remaining three:

Are any of your beneficiaries minors?

Technically you can list a minor child as a life insurance policy beneficiary. But it’s a bad idea!  Insurance carriers will not allow a minor child to receive the insurance benefits directly until they reach the age of majority—which can be as old as 21 depending on the state.

If you have a minor named as your beneficiary when you die, then the proceeds would be distributed to a court-appointed custodian tasked with managing the funds, often at a financial cost to your beneficiary. And this is true even if the minor has a living parent. This means that even the child’s other living birth parent would have to go to court to be appointed as custodian if he or she wanted to manage the funds. And, in some cases, that parent would not be able to be appointed (for example, if they have poor credit), and the court would appoint a paid fiduciary to hold the funds.

Rather than naming a minor child as beneficiary, it’s better to set up a trust for your child to receive the insurance proceeds. That way, you get to choose who would manage your child’s inheritance, and how and when the insurance proceeds would be used and distributed.

Would the money negatively affect a beneficiary?

When considering how your insurance funds might help a beneficiary in your absence, you also need to consider how it might potentially cause harm. This is particularly true in the case of young adults.

For example, think about what could go wrong if an 18 year old suddenly receives a huge windfall of cash. At best, the 18 year old might blow through the money in a short period of time. At worst, getting all that money at once could lead to actual physical harm (even death), as could be the case for someone with substance-abuse issues.

To help mitigate these potential complications, some life insurance companies allow your death benefit to be paid out in installments over a period of time, giving you some control over when your beneficiary receives the money. However, as discussed earlier, if you set up a trust to receive the insurance payment, you would have total control over the conditions that must be met for proceeds to be used or distributed. For example, you could build the trust so that the insurance proceeds would be kept in trust for beneficiary’s use inside the trust, yet still keep the funds totally protected from future creditors, lawsuits, and/or divorce.

Is the beneficiary eligible for government benefits?

Considering how your life insurance money might negatively affect a beneficiary is absolutely critical when it comes to those with special needs. If you leave the money directly to someone with special needs, an insurance payout could disqualify your beneficiary from receiving government benefits.

Under federal law, if someone with special needs receives a gift or inheritance of more than $2,000, they can be disqualified for Supplemental Security Income and Medicaid. Since life insurance proceeds are considered inheritance under the law, an individual with special needs SHOULD NEVER be named as beneficiary

To avoid disqualifying an individual with special needs from receiving government benefits, you would create a “special needs” trust to receive the proceeds. In this way, the money will not go directly to the beneficiary upon your death, but be managed by the trustee you name and dispersed per the trust’s terms without affecting benefit eligibility.

The rules governing special needs trusts are quite complicated and can vary greatly from state to state, so if you have a child who has special needs, meet with us to ensure you have the proper planning in place, not just for your insurance proceeds, but for the lifetime of care your child may need.

Make sure you’ve considered all potential circumstances.

These are just a few of the questions you should consider when choosing a life insurance beneficiary. Consult with us as  to be sure you’ve thought through all possible circumstances.

And if you think you may need to create a trust—special needs or otherwise—to receive the proceeds of your life insurance, meet with us, so we can properly review all of your assets and consider how to best leave behind what you have in a way that will create the most benefit—and the least challenges—for the people you love. Schedule your  Planning Session today.

This article is a service of attorney Myrna Serrano Setty. Myrna doesn’t just draft documents. Myrna ensures you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why our firm offers Planning Session, during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love.

Call us today at (813) 514-2946 to schedule a  Planning Session. Ask how you can get this valuable session at no charge.

Part 1: Questions to Consider When Choosing Life Insurance Beneficiaries

Part 1: Questions to Consider When Choosing Life Insurance Beneficiaries

Choosing a beneficiary for your life insurance policy sounds pretty straightforward. You’re just deciding who will receive the policy’s proceeds when you die, right?

But it’s a bit more complicated than that. Keep in mind that naming someone as your life insurance beneficiary really has nothing to do with you. Why? Because you should consider how that money will affect your beneficiary’s life once you’re gone.

It’s very likely that if you’ve purchased life insurance, you did so to make someone’s  life better or easier in some way. But unless you consider all of the unique circumstances involved with your choice, you might actually end up creating additional problems for your loved ones.

Here are a few important questions you should ask yourself when choosing your life insurance beneficiary:

What are your goals? 

The first thing to consider is the “real” reason you’re buying life insurance. On the surface, the reason may simply be because it’s the responsible thing for adults to do. But we recommend you dig deeper to discover what you ultimately intend to accomplish with your life insurance.

Are you married and looking to replace your income for your spouse and kids after death? Are you single without kids and just trying to cover the costs of your funeral? Are you leaving behind money for your grand-kids’ college fund? Are you intending to make sure your business continues after you’re gone? Or will your life insurance cover a future estate-tax burden?

The real reason you’re investing in life insurance is something only you can answer. The answer is critical, because it is what determines how much and what kind of life insurance you should have in the first place. And by first clearly understanding what you’re actually intending  to accomplish with the policy, you’ll be in a much better position to make your ultimate decision—who to choose as beneficiary.

What are your beneficiary options?

Your insurance company will ask you to name your top choice to get the money after your death. This is the primary beneficiary. If you fail to name a beneficiary, the insurance company will distribute the proceeds to your estate upon your death. If your estate is the beneficiary of your life insurance, that means a probate court judge will direct where your insurance money goes at the completion of the probate process.

And this process can tie your life insurance proceeds up in court for months or even years. To keep this from happening to your loved ones, be sure to name at least one primary beneficiary.

In case your primary beneficiary dies before you, you should also name at least one contingent (alternate) beneficiary. For maximum protection, you should probably name more than one contingent beneficiary in case both your primary and secondary choices have died before you. Yet, even these seemingly straightforward choices are often more complicated than they appear due to the options available.

For example, you can name multiple primary beneficiaries, like your children, and have the proceeds divided among them in whatever way you wish. Also, the beneficiary doesn’t necessarily have to be a person. You can name a charity, nonprofit, or business as the primary (or contingent) beneficiary.

When choosing your beneficiaries, you should ultimately base your decision on which person(s) or organization(s) you think would most benefit from the money. In general, you can designate one or more of the following examples as beneficiaries:

  • One person
  • Two or more people (you decide how money is split among them)
  • A trust you’ve created
  • Your estate
  • A charity, nonprofit, or business

Do you have minor children?

If you name a minor child as a primary or contingent beneficiary (and he or she ends up receiving the policy proceeds), a legal guardian must be appointed to manage the funds until the child comes of age. This can lead to numerous complications (which we’ll discuss in detail next week in Part Two), so you should definitely consult with an experienced estate planning attorney if you’re considering this option.

Does your state have community-property laws?

If you’re married, you’ll likely choose your spouse as the primary beneficiary. But unless you live in a state with community-property laws, you can technically choose anyone: a close friend, your favorite charity, or simply the person you think needs the money most.

That said, if you do live in a community-property state, your spouse is entitled to the policy proceeds and will have to sign a form waiving his or her rights to the insurance money  if you want to name someone else as beneficiary. Currently, community-property states include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.

Next week, we’ll continue with Part Two in this series discussing the remaining three questions to consider when naming beneficiaries for your life insurance policy.

 

The Law Firm of Myrna Serrano Setty, P.A. can guide you to make informed, educated, and empowered choices to plan for yourself and the ones you love most. Contact us today to get started with a Planning Session.

Myrna doesn’t just draft documents, she ensures you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Planning Session,  during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. You can begin by calling our office today to schedule a Planning Session and mention this article to find out how to get this valuable session at no charge.

A Trust Just for Your Retirement Account. Is it right for you?

Unlike most of your assets, individual retirement accounts (IRAs) do not pass to your family through a will. Instead, upon your death, your IRA will pass directly to the people you named via your IRA beneficiary designation form.

Unless you take extra steps, the named beneficiary can do whatever he or she wants with the account’s funds once you’re gone. The beneficiary could cash out some or all of the IRA and spend it, invest the funds in other securities, or leave the money in the IRA for as long as possible.

So that’s why you might not want your heirs to receive your retirement savings all at once. One way to prevent this is to designate your IRA into a trust.

But you can’t just use any trust to hold an IRA. You’ll need to set up a special type of revocable trust specifically designed to act as the beneficiary of your IRA upon your death. Such a trust is referred to by different names—Standalone Retirement Trust, IRA Living Trust, IRA Inheritor’s Trust, IRA Stretch Trust—but for this article, we’re simply going to call it an IRA Trust.

IRA Trusts offer a number of valuable benefits to both you and your beneficiaries. If you have significant assets invested through one or more IRA accounts, you might want to consider the following advantages of adding an IRA Trust to your estate plan.

Protection from creditors, lawsuits, & divorce

While IRAs are typically protected from creditors while you’re alive, once you die and the funds pass to your beneficiaries, the IRA can lose its protected status when your beneficiary distributes the funds to him or herself. One way to counteract this is to leave your retirement assets through an IRA Trust, in which case your IRA funds will be shielded from creditors as long as they remain in the trust.

IRA Trusts are also useful if you’re in a second (or more) marriage and want your IRA assets to be used for the benefit of your surviving spouse while he or she is living, and then to distributed or be held for the benefit of your children from a prior marriage after your surviving spouse passes. This would ensure that your surviving spouse cannot divert retirement assets to a new spouse, to his or her children from a prior marriage, or lose them to a creditor before the funds ultimately get to your children.

Protection from the beneficiary’s own bad decisions

An IRA Trust can also help protect the beneficiary from his or her own poor money-management skills and spending habits. If the IRA passes to your beneficiary directly, there’s nothing stopping him or her from quickly blowing through the wealth you’ve worked your whole life to build.

When you create an IRA Trust, however, you can add restrictions to the trust’s terms that control when the money is distributed as well as how it is to be spent. For example, you might stipulate that the beneficiary can only access the funds at a certain age or upon the completion of college. Or you might stipulate that the assets can only be used for healthcare needs or a home purchase. With our support,  you can get as creative as you want with the trust’s terms.

Tax savings

One of the primary benefits of traditional IRAs is that they offer a period of tax-deferred growth, or tax-free growth in the case of a Roth IRA. Yet if the IRA passes directly to your beneficiary at your death and is immediately cashed out, the beneficiary can lose out on potentially massive tax savings.

Not only will the beneficiary have to pay taxes on the total amount of the IRA in the year it was withdrawn, but he or she will also lose the ability to “stretch out” the required minimum distributions (RMDs) over their life expectancy.

A properly drafted IRA Trust can ensure the IRA funds are not all withdrawn at once and the RMDs are stretched out over the beneficiary’s lifetime. Depending on the age of the beneficiary, this gives the IRA years—potentially even decades—of additional tax-deferred or tax-free growth.

Minors

If you want to name a minor child as the beneficiary of your IRA, they can’t inherit the account until they reach the age of majority. So without a trust, you’ll have to name a guardian or conservator to manage the IRA until the child comes of age.

When the beneficiary reaches the age of majority, he or she can withdraw all of the IRA funds at once—and as we’ve seen, this can have serious disadvantages. With an IRA Trust, however, you name a trustee to handle the IRA management until the child comes of age. At that point, the IRA Trust’s terms can stipulate how and when the funds are distributed. Or the terms can even ensure the funds are held for the lifetime of your beneficiary, to be invested by your beneficiary through the trust.

See if an IRA Trust is right for you.

While IRA Trusts can have major benefits, they’re not the best option for everyone. Laws regarding IRA Trusts vary widely from state to state, so in some places, they’ll be more effective than others. Plus, the value of IRA Trusts also varies greatly depending on your specific family situation, so not everyone will want to put these trusts in place.

Consult with us to find out if an IRA Trust is the most suitable option for passing on your retirement savings to benefit your family. But of course, if what you need is your foundational estate planning documents (like your Will, Power of Attorney, Health Care Directives), we can help you with that first!

Attorney Myrna Serrano Setty doesn’t just draft documents, she helps you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why our firm offers a Planning Session. The Planning Session helps you get more financially organized than ever and helps you make the best choices for the people you love.  Start by calling us today to schedule a Planning Session and mention this article to learn how to get this $500 session for free.

Contact us at (813) 514-2946 or info@serranosetty.com.

 

Can An Adult Child Be Liable for a Parent’s Nursing Home Bill?

Although a nursing home cannot require a child to be personally liable for their parent’s nursing home bill, there are circumstances in which children can end up having to pay.

This is a major reason why it is important to read any admission agreements carefully before signing.

Federal regulations prevent a nursing home from requiring a third party to be personally liable as a condition of admission. However, children of nursing home residents often sign the nursing home admission agreement as the “responsible party.” This is a confusing term and it isn’t always clear from the contract what it means.

Typically, the responsible party is agreeing to do everything in his or her power to make sure that the resident pays the nursing home from the resident’s funds.

If the resident runs out of funds, the responsible party may be required to apply for Medicaid on the resident’s behalf. If the responsible party doesn’t follow through on applying for Medicaid or provide the state with all the information needed to determine Medicaid eligibility, the nursing home may sue the responsible party for breach of contract. In addition, if a responsible party misuses a resident’s funds instead of paying the resident’s bill, the nursing home may also sue the responsible party. In both these circumstances, the responsible party may end up having to pay the nursing home out of his or her own funds.

In a case in New York, a son signed an admission agreement for his mother as the responsible party. After the mother died, the nursing home sued the son for breach of contract, arguing that he failed to apply for Medicaid or use his mother’s money to pay the nursing home and that he fraudulently transferred her money to himself. The court ruled that the son could be liable for breach of contract even though the admission agreement did not require the son to use his own funds to pay the nursing home. (Jewish Home Lifecare v. Ast, N.Y. Sup. Ct., New York Cty., No. 161001/14, July 17,2015).

Although it is against the law to require a child to sign an admission agreement as the person who guarantees payment, it is important to read the contract carefully because some nursing homes still have language in their contracts that violates the regulations. If possible, consult with your attorney before signing an admission agreement.

Another way children may be liable for a nursing home bill is through filial responsibility laws.

These laws obligate adult children to provide necessities like food, clothing, housing, and medical attention for their indigent parents. Filial responsibility laws have been rarely enforced, but as it has become more difficult to qualify for Medicaid, states are more likely to use them. Pennsylvania is one state that has used filial responsibility laws aggressively.

We recommend that your Health Care Directives explicitly lay down a financial liability shield for your agents.

This one provision can save great grief and money.

Attorney Myrna Serrano Setty doesn’t just draft documents, she helps you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why our firm offers a Planning Session. The Planning Session helps you get more financially organized than ever and helps you make the best choices for the people you love.  Start by calling us today to schedule a Planning Session. Mention this article to learn how to get this $500 session for free.

Call us at (813) 514-2946 or email us at info@serranosetty.com.

Getting Paid to Take Care of a Sick Family Member

Caring for a sick family member is difficult work, but it doesn’t necessarily have to be unpaid work. There are programs available that allow Medicaid recipients to hire family members as caregivers.

All 50 states have programs that provide pay to family caregivers. The programs vary by state, but are generally available to Medicaid recipients, although there are also some non-Medicaid-related programs.

Medicaid’s program began as “cash and counseling,” but is now often called “self-directed,” “consumer-directed,” or “participant-directed” care. The first step is to apply for Medicaid through a home-based Medicaid program. Medicaid is available only to low-income seniors, and each state has different eligibility requirements. Medicaid application approval can take months, and there also may be a waiting list to receive benefits under the program.

The state Medicaid agency usually conducts an assessment to determine the recipient’s care needs—e.g., how much help the Medicaid recipient needs with activities of daily living such as bathing, dressing, eating, and moving. Once the assessment is complete, the state draws up a budget, and the recipient can use the allotted funds to pay for goods or services related to care, including paying a caregiver. Each state offers different benefits coverage.

Recipients can choose to pay a family member as a caregiver, but states vary on which family members are allowed.

For example, most states prevent caregivers from hiring a spouse, and some states do not allow recipients to hire a caregiver who lives with them. Most programs allow ex-spouses, in-laws, children, and grandchildren to serve as paid caregivers, but states typically require that family caregivers be paid less than the market rate in order to prevent fraud.

In addition to Medicaid programs, some states have non-Medicaid programs that also allow for self-directed care. These programs may have different eligibility requirements than Medicaid and are different in each state. Family caregivers can also be paid using a “caregiver contract,” increasingly used as part of Medicaid planning.

In some states, veterans who need long-term care also have the option to pay family caregivers. In 37 states, veterans who receive the standard medical benefits package from the Veterans Administration and require nursing home-level care may apply for Veteran-Directed Care. The program provides veterans with a flexible budget for at-home services that can be managed by the veteran or the family caregiver. In addition, if a veteran or surviving spouse of a veteran qualifies for Aid & Attendance benefits, they can receive a supplement to their pension to help pay for a caregiver, who can be a family member. All of these programs vary by state.

This article is a service of attorney Myrna Serrano Setty. Myrna doesn’t just draft documents. She helps you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Planning Session, which will help you get more financially organized than ever before and help you make the best choices for the people you love. Call us today to schedule a Planning Session. Mention this article and learn how to get this valuable session for free.

Overlooking This Basic Part of Your Estate Plan Can Be Tragic

The recent death of the CEO of QuadrigaCX, a major cryptocurrency exchange in Canada, demonstrates a basic, yet often-overlooked, principal of effective estate planning:

If you become incapacitated or die, if your heirs don’t know how to find or access your assets, those assets are as good as gone. Indeed, it’s as if those assets never existed at all.

In the case of QuadrigaCX’s owner Gerald Cotten, the lost assets were purportedly worth $145 million. That represented the vast majority of the company’s crypto holdings.

The hefty sum effectively vanished after Cotten died without leaving instructions for how to access the digital currency’s security passcodes. The crypto holdings were owned by some 115,000 clients, who used the exchange to buy and store their digital coins.

An untimely death and a cold wallet

Cotten, age 30, died suddenly while traveling in India during December 2018. In January 2019, QuardigaCX filed for bankruptcy to protect itself from creditors, including all of the customers with crypto stored in the company’s electronic vault.

Ironically, the digital assets were lost in part because Cotten followed a security practice designed for protection. Most of the company’s cryptocurrency holdings were stored in a “cold wallet,” or one that isn’t connected to the Internet. The use of a cold wallet is a common practice, since “hot wallets,” or those connected to the internet, are a frequent target of hackers.

This typically would’ve been a smart move, but Cotten reportedly stored the cold wallet on an encrypted laptop that only he knew how to get into.

According to Cotten’s widow, Jennifer Roberston, following multiple searches, she has been unable to find the passwords that will open the laptop and provide access to the company’s cold wallet. QuadrigaCX even brought in IT experts to get into Cotten’s laptop, but so far, all attempts have been unsuccessful.

Canadian financial authorities and independent auditors are currently investigating the case. Some have even speculated that Cotten’s death was faked as part of a nefarious scheme connected to QuadrigaCX. Whether it ultimately turns out to be a simple case of carelessness or something more malicious, the lesson remains the same:

From cryptocurrency to safety deposit boxes and everything in between, your family must know how to find and access every asset you own, otherwise it could be lost forever.

In fact, there’s a total of more than $58 billion of unclaimed assets from across the country held by the State Department of Unclaimed Property. Much of that massive sum got there because someone died and their family didn’t know they owned the asset.

Incomplete estate planning

Another puzzling fact is that upon first glance, Cotten was diligent in his estate planning. Indeed, Cotten named Roberston as his estate’s executor and left her instructions for the complete distribution of his assets, including a private jet and multiple properties in Canada.

He even left behind $100,000 for the care of his dogs. But he forgot to forget to include the passcodes that would unlock his company’s vast crypto assets. Most people holding crypto assets haven’t taken the proper steps to ensure their heirs will know how to access these assets upon their incapacity or death.

Given this, if you own any digital currency like Bitcoin, be sure to call us to make certain these assets have been correctly included in your estate plan. Indeed, if you have any assets that might potentially be overlooked in the event of your incapacity or death, contact us now.

Easily avoidable

What makes this loss so tragic is that it could have been so easily avoided. Whether you own a lot (or very little), your plan must include a comprehensive inventory all of your assets. And as Cotten’s case shows, this inventory must also include a detailed instructions for how your heirs can find and access every asset.

At our firm, a comprehensive asset inventory like this is a standard part of every estate plan we create. And whether it’s cryptocurrency, social media accounts, or online payment platforms like PayPal, this inventory will include detailed instructions for accessing all of your digital assets and their passcodes. Contact us today to get started with a Planning Session.

Attorney Myrna Serrano Setty doesn’t just draft documents, she helps you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why our firm offers a Planning Session. The Planning Session helps you get more financially organized than ever and helps you make the best choices for the people you love.  Start by calling us today to schedule a Planning Session and mention this article to learn how to get this $500 session for free.