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Forgotten Elements in Estate Plans

After hearing the words “estate plan,” some people may think of a will or a trust. These are important legal documents, but there is so much more to consider when thinking about estate planning.

When considering how complex estate planning can be, it is understandable that some elements may be overlooked. While the following components are often forgotten, their importance should not be minimized.

Incapacity planning

We like to think that we’re invulnerable, but we’re all susceptible to facing a serious injury that could leave us incapacitated. Having a living will gives you the power to specify which types of end-of-life medical care you want to receive. Naming a power of attorney allows you to choose someone to make medical and financial decisions on your behalf if you’re unable to do so on your own.

Choosing the best executor

The executor is the person responsible for settling your estate after your death. This is an important role, and it is something that should be carefully considered when naming someone. Some families simply choose their oldest child to serve as the executor of their estate. The oldest child may be the best person for this role, but that isn’t always the case. Rather than defaulting to someone, look for someone with a good temperament and is willing to carry out the responsibilities of the role.

Digital asset planning

As technology advances, our lives are becoming increasingly digitized. While people often remember to include their non-digital assets in their estate plan, many people are forgetting to plan for their digital assets, too. Digital currencies and files that are stored on your computer, including photos and music, should be included in your estate plan. Having a list of passwords that will allow people to access your accounts after your death is also a good idea.

Regularly reviewing beneficiary designations

When you opened a retirement account or purchased a life insurance policy, you were likely prompted to name a beneficiary. These beneficiary designations specify who is entitled to receive the money in your account or the death benefits on an insurance policy if you die. The beneficiary designation will trump what is written in your will, so it is critical that the designation is up to date.

Estate planning is about so much more than simply deciding where your belongings go after you die. A complete estate plan should protect your finances, your family and your independence. Ensuring these four elements are part of your estate plan can help you accomplish those goals.

Digital Files After Death, What Happens to Your Digital Legacy?

Millennials Need Estate Plans Too

Millennials Need Estate Plans Too

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Life has changed. The millennial generation is marrying older and having children later, often due to an increased focus on education, career success, and life experiences before settling down. As a result, many of the milestones that prompt individuals to engage in estate planning – a spouse, children, accumulation of wealth, poor health – are not occurring until much later in life. Without an obligation to support a spouse and children, or identify a guardian, there may not appear to be a need for a will, life insurance, or any other estate planning; however, “unattached” millennials may have more of a need than they realize. Consider a cohabitating partner who would be without any inheritance rights in the absence of a will, parents who would have no access to an incapacitated adult son’s medical information without a written HIPAA authorization or advance medical directive; and what about beloved pets – who will care for them? The reality is that everyone, even millenials, needs to think about estate planning.

Incapacity. An estate plan involves planning for both death and disability. Anyone, regardless of age, should consider that incapacity could occur at anytime and, without the appropriate documents, loved ones would be without access to medical records or control over medical treatment. An advance medical directive (or a similar state-specific document) may designate your wishes in the event of a terminal condition or permanent vegetative state, as well as appoint an individual who will make health care decisions for you if you cannot make them yourself. Also, without an advance medical directive in place, a non-spouse partner or, if none, a parent or other family member may not be informed, let alone have the ability to make decisions for you, in the event of a medical emergency.

Digital Assets. In the age of social media, smartphones, cloud storage, and a general push toward paper reduction, digital assets (e.g., email, photos, social media accounts, text messages, and cloud files) are central to millennial life. Accordingly, special attention needs to be paid to access and management of these assets in the event of death or incapacity. A growing number of states have passed statutes that pertain to a fiduciary’s ability to access digital assets, which provide for the designation of a person under a durable power attorney or will who may have access to and control of digital assets. Even without these documents, many account carriers allow you to name a survivor or other individual who may have control over or limited access to your account in the event of death or incapacity.

Pets. While naming a guardian for a child is a common incentive for many parents to execute an estate plan, it may be less likely for pet owners to consider that an estate plan may designate what happens to a pet when they pass. With millennials having children later in life, pet ownership among the generation is fairly commonplace, thus plans for care of beloved pets is an important reason to consider an estate plan. At a minimum, a pet owner should consider designating who will care for or adopt the pet and, depending on state law, funds also may be set aside for care of the pet.

Access to and Distribution of Assets. For unmarried couples, in the absence of a durable financial power of attorney, a long-term partner may not have any rights to access property of a disabled partner and, in the absence of a will, state intestacy statutes will not protect property rights of partners as they do spouses. Under a durable financial power of attorney, a designated agent may have access to and control over individually owned assets during the owner’s incapacity which, among other powers, may enable an individual to continue to pay a mortgage or rent on behalf of an incapacitated partner. By executing a will, a partner, regardless of marital status may be the designated beneficiary of assets, whereas state intestacy status may only give survivorship rights to a spouse by marriage.

Asset Titling and Beneficiary Designations. Appropriate asset titling and beneficiary designations also may ensure that unmarried partners have continued rights over property of an incapacitated or deceased partner. With respect to bank accounts, if titled as joint accounts with rights of survivorship, a partner will have continued access to the account, which also will pass to the survivor by operation of law. Alternatively, a pay-on-death form or transfer-on-death form (for bank accounts), or beneficiary designation form (for retirement accounts or life insurance) also may be signed which designates how an asset will be paid when the account holder or owner passes. Some states also permit real property to pass at an owner’s death according to a transfer on death deed recorded during the owner’s lifetime.

A millennial’s lifestyle may not appear to necessitate an estate plan, yet when considering the absence of statutory protection for unmarried couples and the types of assets that millennials often hold, an estate plan is just as (if not more) important than for previous generations.

Most estate plans aren't dealing with digital assets properly

Most estate plans aren’t dealing with digital assets properly

Most estate plans aren’t dealing with digital assets properly

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Estate planning is an unpopular topic because it often deals with the harsh realities of loss and death. Far too many people do not have an updated estate plan that meets their current needs, goals or desires. However, having a written estate plan in place is crucial to protecting your client’s family, wealth and their own peace of mind. Technology, often seen as a means to ease our burdens, has created new challenges for estate planning. In fact, the need for estate planning for digital assets has rendered many of the existing estate plans, wills and trusts in the United States ill-equipped to handle the full range of an individual’s assets.

So, what are digital assets? Most likely, when you hear “digital assets,” what first comes to mind are smart phones and computers. However, digital assets are not these storage and display devices, but rather, the information stored on them and online. For example, the information and property stored on Facebook, Gmail, Yahoo, Twitter, blogs, business or personal websites and online banking accounts would be considered digital assets.

Are your client’s digital assets valuable? At first glance, you might think your clients do not need to worry about these accounts because they are not valuable; however, you would be wrong. Many of these accounts have financial information or contain important communications, photos and videos. For some clients, their digitals assets, like a blog or website, may even drive their small business income. Other digital assets like BitCoin, frequent flier miles or other online rewards points have clearer financial value. It is also becoming more and more popular to purchase songs, movies, books or other assets online in a purely digital form, such as with iTunes. All of these assets have either financial or sentimental value. In some cases, digital assets left unattended, while perhaps offering no financial benefit to the client or their heirs, could still represent a financial risk. For instance, if the client has online shopping accounts with stored credit card information, you should make sure these accounts are accounted for and properly managed in case of death or incapacity. Unfortunately, online theft, including post-mortem online theft, has been steadily increasing.

What makes estate planning for digital assets so challenging? The law often lags behind technology; as far as digital assets are concerned, estate planning is still years behind. This is leaving many estates ill-equipped to deal with digital assets. Traditional wills are not designed to handle the full complexities of digital assets. Digital assets are usually secured by an online login and password, which are not traditionally contained in a will or trust. Instead, the individual must track the accounts and the accompanying login information so that the estate can access the accounts. Additionally, many digital assets are non-transferable upon death, meaning the client cannot leave the account or property to their heirs. The terms of service agreement that the individual clicked when he or she originally set up the account, most likely without reading it first, typically has language discussing the transferability of the account. As a result, many people are surprised to discover that they might not own their account, but instead merely have a life-time lease to use the account.

Despite the hurdles, some recent state laws, based on the Revised Uniform Fiduciary Access to Digital Assets Act, are starting to at least allow fiduciaries to have access an individual’s digital assets if the trust, power of attorney document or will specifically grant such fiduciary access to the accounts. Many estate plans are silent when it comes to digital assets, treating them the same as all other assets, which under many state laws, is not the case. Instead, fiduciary digital asset access needs to be specifically addressed in any estate planning or advanced directive document.

Most wills and trusts need to be updated to specifically provide for language that grants fiduciary access to digital assets, and to include explicit directions about what to do with these assets. Make sure all fiduciary and estate planning documents specifically grant the fiduciary and estate access to digital assets. Furthermore, the client should do an accounting of all of his or her online accounts and access information. Without a comprehensive list and the most current access information, an estate may not be able to manage the accounts properly. Furthermore, the client should give instructions on what he or she wants to happen to each account. The client may want some accounts like a credit card or banking account to be closed and then deleted. But, they might want other accounts like Facebook memorialized. Still other accounts, like a small business website, may be assigned to their heirs, so that the business can continue uninterrupted after the client’s death.

Digital assets are fast becoming the way of the world, and today’s digital estate planning needs to catch up fast. While the laws are slowly changing to provide access to digital assets, individuals still need to do the planning needed to ensure that their digital assets are properly managed and dispersed upon incompetency or death. Advisers can add a lot of value here by just bringing the topic up with their clients and making sure that the estate planning attorney updates the proper documents so that the client’s digital assets will be properly handled upon death or incapacity.

Jamie Hopkins is a professor of tax at the American College’s Retirement Income Certified -Professional program. Follow him on Twitter @RetirementRisks.

7 Tips to Managing Your Digital Footprint Before the Hereafter

7 Tips to Managing Your Digital Footprint Before the Hereafter

7 Tips to Managing Your Digital Footprint Before the Hereafter

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In last week’s blog, we discussed the potential hazards your heirs may face by not planning ahead to manage the chain of custody regarding your digital assets by incorporating them into your estate plans. Whether they have sentimental or monetary value, managing the inheritance of your digital footprint is as critical as your other real property.

It is advisable to consult an attorney for help with your estate plan and your digital footprint. However, here are seven tips for how to prepare now for the handling of your digital assets after death.:

  1. Create an Inventory: Create inventories of your electronic data, with log-on IDs and passwords will ensure that anything you own online is accounted for and can be managed. Like other sensitive data, you need to keep that information somewhere safe; and keep it current and secure.
  2. Use a Password Manager: Programs like LastPass allow you to inventory and share access information with your executor without having to disclose the information in a public document like a will. By having one password that catalogs your digital assets and how to access them, it’s like having a master key and digital net worth statement all in one.
  3. Consider an Online Vault: Cloud services like Dropbox or Everplans will allow your executor to have access to all your digital estate planning documents, insurance planning documents, tax returns, etc., in one place. It makes the executor’s job much easier.
  4. Get Specific: Write your digital-asset plan into your estate documents. Be very clear about it rather than relying on the generic powers of an executor or a general definition of assets to assume that includes digital assets. The more specific you are about your intent and that you want your executor to have access, the better.
  5. Detail and Parcel Out: Consider writing both a broad statement of intent for digital assets as well as specific directions for each account. Create a memorandum addressed to your executor and heirs indicating the intentions regarding specific digital accounts. However, to avoid the problem of forgetting to include an account, you need two statements, because technology is dynamic — and because you may have several accounts unaccounted for in your plans — it’s recommended that you include a general statement of intention to encompass all other accounts — past, present, and future — belonging to the decedent.
  6. Specificity and Consideration: Think carefully and be specific about what you want your executor to have access to. Do you want him to have the ability to read all of your email messages? If not, be clear about it.
  7. Pick your Executor Carefully: Consider who you are choosing to grant information to as they’ll have access to your online accounts. Remember, also, that they’ll need at least some tech savvy to deal with those accounts because they’re going to have access to some very personal information.

For more information on incorporating digital assets into your estate plans, contact the Estate Planning attorneys at Resnick Law online or by calling (248) 642-5400.

Don't Let Your Digital Assets Die With You

Don’t Let Your Digital Assets Die With You

This is not your father’s estate plan. No, your parents never had to worry about usernames, passwords and TOSAs (terms of service agreements). Their estate plans likely focused on the disposition of traditional assets – a house, bank and brokerage accounts, and the like – and were likely fairly straightforward.

But, increasingly, as our lives have become more virtual, you’ll have to think about how your loved ones and your fiduciaries can legally gain access to your digital assets should you die or become incapacitated, according to Suzanne Brown Walsh, a trusts and estates attorney with Murtha Cullina LLP.

Where to begin?

Getting a handle on digital assets requires a knowledge of one, traditional estate planning and traditional estate settlement; two, digital assets; and three, the difference between traditional assets and digital assets.

Traditional estate planning and estate administration typically involves the naming of a fiduciary, an executor for your will, a trustee for your trusts and a personal agent for a power of attorney. In the world of traditional estate planning and estate administration, those fiduciaries have the ability to manage or distribute traditional assets and accounts, bank and brokerage accounts, retirement accounts, property and the like when you die or become disabled.

But that’s not the case when it comes to digital assets. A digital asset is something that exists online and is probably intangible. It might be, for instance, an asset with mere sentimental and no monetary value such as a photo or voicemail, or it might be an asset that has monetary value, according to Walsh.

 

It could be, for instance, a blog or a domain that you own; digital currencies, such as bitcoin; accounts with iTunes, Amazon, LinkedIn, Twitter, Facebook; as well as reward programs and credit card points, according to William Bissett, a certified financial planner with Pinnacle Advisory Group and founder of Principled Heart.

And the big difference between your traditional assets and your digital assets is this: there are federal and state laws that protect digital assets and may impede fiduciary access to them. What’s more, technology providers have their own privacy and terms of use policies that may govern your digital assets and make access to those assets difficult or impossible.

“There are federal privacy laws that protect the companies that provide us with emails and certain other online services from disclosing our private information to anyone else, including our families and fiduciaries,” says Walsh. “So that means if we die or become incapable, the people who are managing our assets can’t call up Google and ask for access to our email accounts.”

The federal privacy laws do, however, allow companies to provide access to online accounts to third parties with their customer’s lawful consent, Walsh says.

So what do you need to do?

Given these complications, Walsh recommends that owners of digital assets draft – with the help of an estate-planning attorney – documents that give a personal agent or representative the ability to access online accounts in the event of the owner’s death or incapacity.

 

Those would include a digital asset authorization and consent form, durable powers of attorney, and trustee authority over settlor’s digital estate. See samples here.

“We suggest that our clients sign it and give their fiduciaries and their agents under power of attorney their lawful consent to access their online accounts that might be subject to these privacy laws,” says Walsh.

Another to-do is to create an inventory of your digital assets, user names and passwords (My Digital Audit is one example of a digital asset inventory form). You should also consider using a commercial DEP service, such as those found at The Digital Beyond. One such service stores all your user names and passwords and only requires that you remember one user name and password. “That way, if (you) get hit by the beer truck, (your) family will only have to remember one user name and password,” Walsh says.

In the event of your death or incapacity, Walsh also suggests that your loved ones and fiduciaries become familiar with such websites as Mylennium.com, which contains an index of many online sites with links to information such as the TOSA, privacy policy and termination information. See Domain Information Resources. Also, consider using commercial services such as Directive Communications Systems, which will assist in identifying and managing all types of online accounts. See a resource page here.

Also consider that some online companies, chief among them Google and Facebook, have policies that give you the ability to dictate who can look after your account in the event of death, incapacity or inactivity.

 

You can appoint a legacy contact, someone you choose to look after your account if it’s memorialized, on Facebook, for instance. See “What is a legacy contact on Facebook?”

And Google has an Inactive Account Manager, which is a way for users to share parts of their account data or notify someone if they’ve been inactive for a certain period of time. See About Inactive Account Manager.

Why do you need to plan your digital afterlife?

To be fair, you might question the need to plan for your digital afterlife. But there are many reasons, according to Walsh.

One, your digital assets might be worth a lot of money, and you’ll want to make sure you there’s no financial loss to your estate, says Walsh. In 2013, for instance, McAfee noted the average U.S. consumer had digital assets they valued at $35,000.

To boot, you don’t want to lose your story, your photos and the like. “In my world, we often find that families will fight over things that have no financial value but have the greatest sentimental value,” says Walsh. “Often digital photos are the most important digital asset. You don’t want to lose the story line that we now have in our social media accounts.”

Bissett shares that point of view. “The plan for pictures used to be that they kids will get them from the shoebox in the hall closet,” he says. “That was fine, but today they aren’t only in the shoebox. They sit online with a username and a password separating your loved ones from them – if they even know about them at all.”

 

Also, you might want to protect secrets from being revealed, a mistress or child born out of wedlock, for instance.

You’ll naturally want to avoid identity theft.

And lastly, you’ll want to make things easier for your families and fiduciaries to gain access to your digital assets in the event of death or incapacity. “Many Baby Boomers grew up in a time where they lived next door to their grandparents, had Sunday dinner ‘with the family, knew the President of the only bank in town, and saw everyone at church on Sunday,” says Bissett. “When someone died, it simply meant making a few phone calls. That is no longer the case and the legal world doesn’t support that anymore. It’s your responsibility to put things together in such a manner where someone can act like they lived next door.”

The laws they are changing

You’ll also need to know that digital asset laws are changing, and for the better. Walsh and others, for instance, have worked on something called the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA).

RUFADAA, which has been described by at least one expert as most important law you’ve never heard of, gives estate planners and fiduciaries greater ability to access and to manage digital assets, before and after death, according to Walsh. Read this post by Jeffrey Levine, chief retirement strategist at Ed Slott & Co., for more insight.