Update on Digital Estate Planning

It has been a few years since I last touched on digital estate planning. Previous articles can be read here and here. Much like everything in our hyper-driven world, the law in this area is changing rapidly. I thought I would update you on those changes.

First, a primer: a digital asset is digitally stored content or an online account owned by an individual. Digital content would include images, photos, videos, text files or other digital content. The digital content is stored either on a device owned by an individual, on their local hard drive, or accessed via the Internet (i.e. "in the cloud"), often as part of a service offered by a third party and governed by a contract with the individual. More commonly, digital assets are assets associated with internet services provides like Yahoo, Google, Facebook, Apple, etc. and all of their associated underlying services like Flickr, Photobucket, and the like. But, it would also include on-line only bank accounts like ING or Ally bank.

What can only be deemed as bad outcomes - Yahoo denying access to email account in 2004 of deceased U.S. Marine, Facebook initially denying the mother of a 22-year-old man killed in a motorcycle access to his profile in 2005, and Facebook also denying a Virginia couple access to the account of their 15-year-old son who had taken his own life when they wanted to search his profile for clues into his death in 2011 - state legislatures have started to move forward in providing personal representative's the ability to access the decedent's digital assets.

For example, in February of 2013, Virginia passed a law providing that the personal representative of a deceased minor has the power to assume the deceased minor's terms of service agreement for a digital account. The drawback to this law is that it only provides access to a minor's accounts and not to someone older than 18. While the law is a good step, the law is limited.

Delaware recently took a big step forward in providing access to decedent's digital accounts. Delaware passed the "Fiduciary Access to Digital Assets and Digital Accounts Act," granting that digital legacies will be treated the same as physical assets, namely documents and records that were left behind for heirs and executors. The Delaware law is more inclusive than the Virginia law and laws on the books in other states like Oklahoma. But, it is only good for Delaware decedents.

The Delaware legislature based its law on a recent proposal issued by the Uniform Law Commission's called the Uniform Fiduciary Access to Digital Assets Act (UFADAA). UFADAA tried to balance the rights of many stakeholders (internet service providers, beneficiaries, fiduciaries, financial institutions, etc.) by following the theory that if a fiduciary would have access to a tangible asset, that fiduciary will also have access to a similar type of digital asset. UFADAA addresses four common types of fiduciaries: personal representatives of a deceased person's estate; guardians or conservators of a protected person's estate; agents under a power of attorney; and trustees.

Most states don't like the outcome of issue not receiving an inheritance if the issue were stuck in the unlucky situation of having a parent (Ann in Example 3) predeceasing the grandparent/benefactor (Xavier). States using per capita have modified it to a "per capita with representation." Under this system, the estate is divided amongst the members of the 1st generation where there is at least 1 live taker.

UFADAA is only at the initial draft stage, and there will likely be changes. At least it is moving the conversation in the right direction.

Basics of Estate Planning: What Estate Planning Documents Should Every Person Complete?

One of the more basic questions I get is "what estate documents do I need for a complete estate plan?" If you have been reading my newsletter you know that my go-to answer is usually "it depends." Not in this case. In this instance, there are certain documents every person over the age of eighteen should have completed. The list of documents include legal documents and non-legal documents. This month, I will look at the legal documents every person should have.

The legal documents include:

  • Last Will and Testament - A will is a legal document in which a person, the testator, specifies the method to be applied in the management and distribution of estate property after death. A will can do more than simply distribute property to heirs. It can also establish testamentary trusts, name guardians for minor children, name an executor or provide funeral instructions (though I would not recommend that in a will). In other words, the testator is providing post-death instructions to be followed regarding his or her property through the will.
  • A will only controls probate assets. Probate assets (a) are those assets that are owned solely in the decedent name without any other owners or a payable on death or similar type of beneficiary designation; (b) all property titled in the decedent's individual name as a tenant in common with others; (c) or beneficiary assets with predeceased beneficiaries that have no designated beneficiary; (d) assets for which the estate is named beneficiary; or (e) joint ownership property that is no longer owned jointly. Non-probate assets are not controlled by the decedent's will. Non-probate assets are those assets that are (a) owned under joint tenancy with right of survivorship; (b) have some form of direct transfer to a specific beneficiary; or (c) are owned via a trust.

  • Power of Attorney - A power of attorney (POA) is a legal document that provides written authorization to another person to represent or act on another's behalf in private affairs, business, or some other legal matter. The person authorizing the other to act is the principal, grantor, or donor. The one authorized to act is the agent or the attorney-in-fact.

    The principal creates a legal document giving powers to the agent to act in the principal's place. Those powers can be extremely diverse, from only dealing with one issue to spanning all the normal financial and legal powers a person can have. The agent is in a fiduciary relationship with the principal, and the law requires the agent to act in the best interests of the principal. The agent must also be completely honest with and loyal to the principal in their dealings with each other.

  • Healthcare Power of Attorney or Advanced Medical Directive ("AMD") - an AMD allows you to state what level of medical care you want if you are unable to make decisions for yourself. Specifically, you can direct that a specific procedure or treatment be provided, such as artificially administered hydration (fluids) or nutrition (feeding); direct that a specific procedure or treatment be withheld; and appoint a person to act as your agent in making health care decisions for you. In short, it says what medical care you do or do not want and possibly appoints someone to make medical decisions, if you are unable to make them. Your life will be in the hands of another person of your choice because, by appointing that person your agent, that person has decision-making priority over any other individuals who could, by law, make health care decisions for you, if it is determined that you are unable to make health care decisions for yourself.
  • Living Will - Covers many of the same aspects of healthcare that an AMD provides. However, the main difference is that a living will does not appoint an agent to oversee and make medical decisions for you during your incapacity. A living will is like writing a letter sometime in the past that hopefully foresees any medical conditions that might arise, allowing you to provide instructions in how to be treated under those medical conditions. An AMD appoints another person to make those decisions at a time in concurrence with your illness. Your AMD and living will work together to direct your medical treatment.
  • Trusts - It is not critical to have a trust. However, a trust could be important and determining the need for a trust could be its own article, or maybe even a three part series? (Click for the start of said series) But, in short, a trust is a legal document that is used to control the management and transfer of specific assets. Trusts divide the legal ownership of an asset from the beneficial ownership of an asset. There are three main people/entities involved in trust: (a) the person that creates trust and transfers ownership of assets to trust (Grantor); (b) a person/entity that is the legal owner of the assets, who administers the trust pursuant to grantor's instructions in the trust document and manages the assets for the benefit of the beneficiaries (Trustee); (c) and the person that receives the income or proceeds under the terms of the trust document (Beneficiary). One person can play all three roles at the same time. There are a number of reasons to have a trust. The main reason is for probate avoidance and the costs, expenses and time involved in administering an estate through probate.

Estate of the Month: Updates on Old Estates of the Month

I am not sure if this is good news or bad news, but there haven't been any true celebrity estate blunders over the last couple months. To that end, I thought I would go back and update some of the more interesting estates to see if there have been any changes.

Sean Taylor - Sean Taylor's estate was the very first celebrity estate of the month. At the time, Taylor's estate had faced numerous issues including foreclosure, inappropriate designated beneficiaries and erroneous ownership of joint assets. Not much has changed on his estate, but a jury found one of the suspects that invaded his home guilty of Taylor's murder in June of 2014. Seven years after Taylor's death

Steve McNair - McNair's estate was the second estate of the month. His estate has confronted several estate issues in the subsequent 5 years since his passing. Prior to passing away, McNair bought his mother a house in Mississippi. The problem is that it was titled in his name only. McNair did not have a valid will, and, thus, ownership of the Mississippi property went into his estate and the court appointed McNair's wife as executor based on her priority as a spouse. She soon demanded $3,000 a month in rent from McNair's mother. She couldn't afford to pay the rent and soon left the house. After leaving the Mississippi house, McNair's wife has alleged that McNair's mother took a number of belongings with her when she departed and sued McNair's mother for $50,000 in damages. McNair's mother's defense is that the removed property is hers. I guess there is no daughter-in-law/mother-in-law love between the two.

There are also "rumors," posted by a local Nashville true crimes author that the police are contemplating re-opening the investigation over McNair's death. Though with all internet rumors this one should be taken with a big grain of salt.

Dennis Hopper - He passed away in 2010 but his estate is still mired in litigation. Not the litigation you would think. When I posted his estate of the month, his estate (and his children from a prior marriage) was fighting with Victoria Duffy over a separation agreement. Duffy has alleged to have separated from Hopper just prior to his death. However, in this case, his estate through the Trustees of the Hopper Art Trust, are in litigation with the Dish Network over whether Dish's ad-skipping DVR program known as "Hopper" constitutes a violation of trademark law.

Viola Drath - Drath was a local socialite that was allegedly murdered by her husband Albrecht Muth. After numerous stops and starts in her murder trial, the allegations are no longer allegations - Muth was convivted of first degree murder in January 2014.

Junior Seau - When I wrote about Seau's estate, the biggest issue his estate was facing was potential litigation by his estate against the NFL related to allegations the NFL covered up the impact of concussions on its players. The NFL recently settled a class action lawsuit with the former players. As part of the settlement, members of the class could opt out of the settlement and sue the NFL on its own. The Seau estate made such a decision. On September 2, 2013, the Seau estate withdrew from the settlement citing the likely $4 million provided to the Seau estate addressed medical benefits and compensation but didn't "include compensation to heirs or successors." As an FYI, Junior Seau, just on his salary as an NFL player and including endorsements, alleged earned in excess of $28 million over his career.

Michael Jackson - When I last reviewed the Michael Jackson estate, his estate was battling the IRS over the value of his estate at the time of his death. The IRS contended his estate was worth approximately 1.178 billion dollars. Not much has changed, but the IRS has raised its claim on Jackson's estate from $702 million to $729 million.

I guess the only thing you can say is that, if a celebrity's estate is still open 5 years after the celebrities passing, the mostly likely reason is that the celebrity's estate is in some form of litigation.

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