How many readers have made list of assets and liabilities that they have given to the executor of their will. Only 30% of Americans have a will, and I venture to guess that many fewer have made this list for the executor. More than ever, you risk losing your assets after your death for failure of the executor to know where your assets are.
In the old days, if an executor did not know where assets were, he would wait until the end of the year when 1099s came in from banks and financial institutions and track down the assets from there. Many executors would go from bank to bank in the town where the person died and ask if the decedent had an account in said bank. Lost safe deposit boxes could be discovered when the annual fee request came in the mail. Lost insurance policies could be found, when the annual payment request came in the mail.
But more and more, people are receiving their statements online, and opening accounts in institutions that are not brick and mortar. Failure to know where the assets are and affirmatively go online to get the decedent’s 1099s could result in false tax returns with unreported income. It could be disastrous for the estate.
One might track down accounts by looking at a person’s emails and search history, but there are multiple problems. The first is that now most computers work with facial id or pin numbers. How would one even get into a person’s computer without id. Then you have to get into a person’s email box. You might know his email address, but not his password. How to access?
Aside from all this is a person’s digital assets on social media. Should a facebook account remain open after a person’s death, so that his friends can continue to comment, and the relatives can be included in the social group? Instagram, twitter. One might want to close all of these accounts so that they are not hijacked by hackers. But one must either go on to the account information for each account and chose what one wants done with his account after death, who he wants to access said accounts and then the executor has to know how to work the accounts to take over the accounts or close them.
See the problem? The only answer: A master list with all one’s online accounts with account numbers, user ids and passwords. It must be given to your proposed executor or at least your closest relatives.
Now is a good time for you to cull the information as you gather account statements for your accountant. Make an extra copy and put them in a folder together with online ids and passwords to accounts. If you don’t tell anyone where your safe deposit box and life insurance is, he/she just may not find these items.
Please remember that as you are on a mad dash to throw away “junk” in the new year, you must retain receipts for capital improvements on your house UNTIL YOU SELL THE HOUSE, yes decades. It can save you tens of thousands if not hundreds of thousands of dollars in savings on capital gains when you sell your house. Example: You buy your house for $50,000 and sell if for $150,000, you now have capital gains of $100,000. The tax rate for arguments sake is 20%, so that’s $20,000 in capital gains you have to pay. But let’s say over the years that you owned your home, you put in home improvements of $40,000 and kept the receipts. Now your capital gains is $100,000-$40,000= $60,000 in capital gains and a tax of $12,000. You saved $8,000, just by keeping your receipts. Don’t throw that allowance away so easily.
Take your receipts and a copy of the deed of your home and put it together with your financial statements for your executor. A little homework now, can you save you thousands later.
Lenore has been practicing Trust and estate/elder for 25 years. She has her LLM masters in Taxation, and has offices in New York and New Jersey. You can contact her via telephone at (516)569-4671 or by email at Ldavis@lenoredavis.com.