In Part I of our blog series for young families, we focused on outlining planning considerations that can help determine which type of estate plan is optimal. In Part II of this series, we outline some tailored options that may help families customize their plan more thoroughly.
1. Uniform Transfer to Minors Act.
A minor cannot own assets until he or she achieves the age of majority. Because of this, parents of minor children in Illinois must select a guardian of the estate to manage a minor’s assets until he or she achieves the age of majority. The guardian is subject to strict oversight by a court. Thus, families may opt to create minor’s trusts and transfer assets after their children achieve the age of majority to avoid some of the court costs and fees associated with a guardianship.
However, setting up a trust may require an investment of cost and effort that exceeds what is practicable for some young families. If this is true for your family, then an intermediate option that may prove worthwhile is to proactively set up a custodial account under the Illinois Uniform Transfer to Minors Act (“UTMA”). A UTMA account provides a simple, inexpensive option to transfer assets and property to a minor. The account is under the management of a custodian until the minor becomes 21. The custodian is chosen by the individual(s) who set(s) up the UTMA account.
There are key advantages to such an account. For starters, a custodial account set up under the UTMA increases the age of majority from 18 (under a guardianship) to 21. Thus, your child has additional years to mature before he or she inherits assets. Additionally, a custodian generally does not require court oversight, which may result in less court time and expenses.
But there are also key risks that should be discussed with a financial advisor or estate planning attorney. Notably, any assets transferred to a UTMA are irrevocable. In light of this inflexibility, parents should consider whether they want to set up a UTMA account today or empower their executor of their will to do so upon administration of their wills. Additionally, assets placed in a custodial account are subject to a federal gift tax. Thus, it is advisable to engage in some reflection with an experienced counselor before you make the leap so that you do not incur unnecessary taxes and headache.
2. Digital Assets.
Estate planning encompasses not just tangible property like real estate but also digital assets like credit card rewards points and frequent flier miles. It is therefore vital that you put the proper estate planning provisions in place to ensure that your digital assets are effectively protected and passed on in the event of your incapacity or death. Here are some best practices:
a. Create an inventory of your digital accounts.
You can either compile a list of all your log-in and password credentials or take advantage of password managers that store this information in a centralized repository. Popular choices are Dashlane, LastPass and 1Password.
b. Determine the level of access you want your fiduciary to have.
As you compile this information, consider the level of access you want your fiduciary to have. If you want your fiduciary to have limited access, then you may not want to share your log-in and password credentials with them. Rather, you should work with your e
state planning attorney and the particular service provider to limit the fiduciary’s access.
c. Investigate whether your service provider has options.
Some service providers like Google, Facebook, and Instagram have tools in place that allow you to easily designate access to others in the event of your death. If such a tool is offered, you should use it to document who you want to have access to these accounts. Carefully read through any terms to determine what access your fiduciary will have.