I need to Estate Plan my GMAIL™ Account?

I’m going to date myself, but I still vividly remember signing up for my first “electronic” mail account in the early 90’s when I was a freshman in college. I guess it was memorable because it required traveling down into a dark basement underneath one of the buildings. I picked a really strange address name at the time instead of my name, but I have learned to keep my email identity simple since. Email has been joined by a myriad of other internet services. Everyday someone can upload videos onto the net, pay bills online, connect with others via social media websites like Facebook and Linkedin or just provide your thoughts for the world to see via a blog. Fast forward almost 20 years; the internet has become fully integrated in our lives.

Integration has given birth to a person’s “virtual life.” With a virtual life comes the need for virtual planning just like a real life needs an estate plan; be it a voluntary one or intestate. Many fail to see how their email account would even be part of their estate. But not taking the appropriate steps in your life – be it virtual or not – can create issues down the road. For example, a few years ago, Justin Ellsworth, a U.S. Marine, was killed in Iraq and his family requested access to his Yahoo email account to retrieve pictures, emails, etc. residing in Justin’s account. Yahoo, citing its privacy policy, did not relinquish access to Ellsworth’s family. Eventually, Ellsworth’s parents successfully sued forcing Yahoo to turn Justin’s emails over though only in hard copy format. While this had a positive ending, it cost the Ellsworth’s untold hardship along with a great deal of money in legal fees to gain access to something that normally is only clicks away on a keyboard.

To appropriately plan your virtual life, it is important to understand internet providers’ privacy policies. Here is a quick rundown of the major providers:

• Google: Google mail requires a copy of a death certificate, copy of a power of attorney or birth certificate and a copy of an email sent from the account you are trying to close. A Google account will stay open forever barring a request to delete it.
• Yahoo: Has not changed their policy since the Ellsworth case and there is no right of survivorship and non-transferability. Upon receipt of a death certificate, Yahoo will terminate the account and delete all of the contents. Yahoo accounts only have a ninety (90) day window before deleting an account based on inactivity.
• Hotmail: Falls in between Yahoo and Google. They will grant access to the account after being provided similar information as Google but will eventually delete the account after a year of inactivity.
• MySpace: Will not grant access to anyone to edit or delete any of the content or change the settings but you can request an account to be removed if deemed appropriate.
• Facebook: The account is turned “off” and made into a memorial for the person upon request. Facebook grants no ability to edit, limits access to the site but will remove the “person” based on request from next of kin after being provided similar information as Google.
• Twitter: Has what appears to be no official policy but states they cannot disclose account information or passwords to anyone, even post-death. Twitter will remove an account after given notice with a death certificate and may remove an account based on 6 months of inactivity.

A simple glance reveals that each provider has a slightly different privacy policy with respect to their willingness to open up a user’s account to a non-user. This can mean a number of hurdles someone will need to jump through to access the account because, if you are like me, you have a couple of virtual accounts with several providers, meaning there is no uniform approach.

Well, there has to be a solution. You could simply have a slip of paper listing all your information and store it in your house somewhere readily available. Though, the lack of security sounds like the start of a bad movie.

One practical solution is to keep a list of passwords and similar information on a flash drive or stored on your computer somewhere but name the file something unique – i.e., not “passwords” - and informing a person you trust about the file. Or you could put the flash drive in a safety deposit box making sure someone knows where it is. However, many providers require periodic updating of your password, which means a trip to the bank every time you update a password. Another possibility is to create a power of attorney. That might grant access to some email accounts but would not be a complete solution to trump every provider’s policy.

Where there is a demand for services, new companies will appear to meet those demands including several commercial providers to address this very issue. One commercial service, Legacy Locker, acts like a safe deposit box for your log-ins, account information, etc. Legacy Locker also provides personalized instructions to survivors as to how you want your online identity handled. As this market develops, I would guess more commercial services will open. As I have never used any of these services, I cannot vouch for them personally, but they are options to consider.

With estate planning, most people think about creating a will or trust or protecting their home and do not think about their virtual life. As our lives have become intertwined with technology, the need to plan an “electronic” estate has grown such that ignoring your virtual life can trigger estate issues down the road.

Basics of Estate Planning: Trusts

I have received a number of comments on my newsletter from what I would describe as “estate planning basics” that I thought it would be helpful to expand on the basics. One specific area that I need to expand on is trusts because they have generated the most questions and created the most confusion. I thought a basic run down of how trusts work would be a good idea.

A trust is a simple arrangement that can be employed for managing property or assets to provide some form of income to a beneficiary with one distinctive feature. A trust separates the legal title of the property from the beneficial enjoyment (income) of the property. A trustee holds the legal title to the specific property under a fiduciary duty to manage, invest, safeguard and administers the trust assets and income for the benefit of the beneficiary. The beneficiary holds the equitable title and reaps the benefits from the trustee’s duties. Depending upon the type of trust, a trustee can also be a beneficiary.

There are a variety of different trusts but generally trusts for individuals can be separated into two categories: revocable trusts and irrevocable trusts. Each has certain characteristics that are useful for estate planning purposes, but each type also has a couple of drawbacks. Depending on a person’s financial situation, one type of trust might be more beneficial than the other.

A revocable trust is a living trust that can be modified or revoked by the grantor, or person who establishes the trust and transferred property to it. It provides a great deal of flexibility by the grantor to change the trust if necessary. For example, if you have second thoughts about the terms of the trust or want to add or remove a beneficiary or feel another person would be better served to act as the trustee, you can simply amend the trust terms.

Revocable trusts are a powerful tool in estate planning because upon your passing all the assets in the trust pass directly to the beneficiaries (or a trust to manage those assets depending on the trust terms) instead of probate. However, a basic revocable trust will not protect someone’s assets from the Federal Estate Tax (when it returns in 2011) or from most states that assess a state estate tax. The assets of a revocable trust will also not be protected from creditors’ claims. The reason is simple. In a revocable trust, a person has not relinquished control over the assets to the level necessary to pass out of their estate for either estate tax or income tax purposes, or creditor protection. It is merely a tool to quickly move assets from testator to beneficiaries without having to enter the courthouse and probate a person’s estate.

There is one other piece of interesting information on revocable trusts. If a grantor creates a revocable living trust for the purposes of being, both the trustee and beneficiary (there are a variety of reasons why someone would do this and will be the subject of a future newsletter), at the grantor or trustmaker’s death the revocable living trust will become irrevocable and subject to the terms of the trust related to death of the grantor.

An irrevocable trust is a trust in which the grantor gives up any right to amendments or termination. In simplest terms, the grantor has given control of those assets in the trust to the trustee and will never regain control. Income from an irrevocable trust is taxable to the beneficiary, if disbursed, or taxable to the trust if not disbursed. Irrevocable trusts come in two forms. The first is called a Living Irrevocable Trust, also called an Inter Vivos Irrevocable Trust, and is created and funded by a living grantor. The second is called a Testamentary Irrevocable Trusts and created by the death of the grantor via their will.

A person would typically use an irrevocable trust for the tax benefits it can provide by removing assets permanently from your estate. Another benefit of an irrevocable trust is that it is an excellent asset protection tool. Because the grantor has relinquished control, the trust assets cannot be reached by a creditor of the trustmaker. The one big drawback is that a grantor generally, though there are some exceptions, cannot be a beneficiary to the income from an irrevocable trust.

Trusts, irrevocable and revocable, are powerful estate planning tools for caring for loved ones and protecting your assets. However, they take time to create creating and draft so talking with an estate planning attorney is advisable.

Estate of the Month: Walter Cronkite

My last two “Estate of the Month” articles have dealt with younger men who did not take the necessary steps to protect their family and faced tragic early deaths. This month, I will look at a much older famous person’s estate and demonstrate that older adults can make estate planning errors, too.

On July 19, 2009, Walter Cronkite passed away. Given his rather large estate (rumored to be in the millions and not surprising given his home on Martha’s Vineyard) it is interesting that he never created any type of trust. A will must be probated and the documents are publicly accessible to anyone that wishes to drop in to the county courthouse. Even establishing a testamentary pour-over trust in a person’s will would reduce the amount of public availability of legal documents processed during probate.

The first item of interest was that he did not leave his long time girlfriend, Joanna Simon, anything from his estate. Cronkite had stated, prior to his passing, that he did not want to disrespect his wife of sixty-five years who passed away in 2005. Knowing this, he was apparently very generous to Ms. Simon during his lifetime, but she received nothing from his estate on his passing.

The second item of interest was that because he never married Simon, she is limited in her ability to challenge the estate. In fact, most states have taken steps specifically limiting a testator’s ability to cut off a spouse. Known as election, most states generally provide the surviving spouse the opportunity to take a percent of the testator’s estate, regardless of what the will states. Since Ms. Simon was not Cronkite’s wife and Massachusetts does not recognize common law marriage, she can not take an election from the estate. Thus, most of the estate will pass to his children.

Lastly, by not creating a trust, Cronkite’s estate will pass through probate that could potentially be very expensive and result in contentious proceedings. While Simon’s rights are limited, his children certainly could contest what they received. Generally, it is much harder to contest a trust. A trust would have also limited, but not eliminated, questions in the will. The probate court will examine Mr. Cronkite's will, sort through claims of creditors, and eventually order distribution of his assets all under the public eye.

I will post updates in future newsletters on Mr. Cronkite’s estate in probate, which may reach the level of Brook Astor’s estate litigation that has dragged on for several years and recently finished up a five month trial in New York.