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Digital Assets and Estate Planning

It used to be that when someone died, their executor would follow a standard roadmap to settle their estate: clean out the house, go through the file cabinets, and file a tax return at the end of the year. Now this wasn't exactly easy-handling the administration after a loved one's death can be emotionally and logistically brutal-but at least everything you were dealing with was tangible. Nowadays we live our lives at least partly online, and that can mean a big headache for our families when we die: How do you sort through the deceased digital accounts and possessions when you don't even know what they are?

Twenty years ago, all an executor needed to do was collect the mail for three months and they'd have everything they needed, but as we move into a paperless, digital society everyone keeps their critical information in their heads.

How to inventory your digital life-your online bank accounts, your social media, your email-has only recently become standard practice in estate planning. It has become important to get people started on simply identifying the components of your online life. After all, it's easy to note in your will that your niece gets the antique clock, but you might totally forget about your Flickr account or ancient LiveJournal.

It's a fact of life that we're all going to die at some point.

First Things First

If you haven't already, you must make a will and designate a fiduciary. You should also consider what happens if you are incapacitated or temporarily disabled, and appoint someone as agent under a power of attorney. The power of attorney should include digital-assets provisions designating someone to access your online accounts. The appointed fiduciary (either the executor when you die or a power of attorney when you're incapacitated) will handle your affairs; having a will and a power of attorney in place can save your family a huge headache.

To get started, it is recommended to break down digital estate-planning into bite-sized chunks, and it helps to sort the tasks into categories. There are four major components to your digital life:

  • your passwords
  • your online bank accounts and financial life
  • your email addresses and social media, and
  • your digital assets, like photos or music.

Each one requires a different strategy to ensure that nothing gets lost or forgotten.

Passwords

You must make sure that your executor can access your computer, your phone, and your accounts. Now, you could just leave a piece of paper on your desk with all your passwords on it, but that presents some obvious problems-passwords tend to change pretty quickly, so you'd have to be diligent about keeping the list updated, and post-its are not really that secure if someone untrustworthy should happen to have access to your desk (absolutely don't do this for an office computer). At least make sure someone knows, or has a way of finding out, the code to get into your primary computer and your phone.

One solution is a password manager, which stores your passwords for you; it allows you to designate an emergency contact who can access your "vault" if you die or are incapacitated. Note the fact that anything online is vulnerable to data breaches, so it's up to you whether you think a document, whether left in plain sight, stored in a file drawer, or stored in an encrypted file, is a better plan than the digital services. Many professionals recommend using a password manager and changing your master password every few months.

Note: The Apple ID is the absolute hardest to get access to after someone's died. Make sure that one, at least, is stored somewhere or otherwise accessible to your executor.

Your Financial Life

It's very green of you to do away with your paper bank statements, but your executor still needs a way to know what your accounts are and how to access them. At a minimum, hand-write down where you bank and what the account numbers are, so the fiduciary can get access. You should do this as well for life insurance policies, stocks, brokerage accounts, retirement accounts, and credit cards. While you're at it, go through your bank and credit-card statements and make a list of your recurring payments, like utilities, tuition, loans, even your Netflix account and newspaper subscriptions. All of this will make closing out those accounts easier for your executor.

Email Addresses and Social Media

The password to your email accounts should be in your password file. For Gmail, you can set up an "inactive account manager"-a dead man's switch-so that if you don't log in to your account for a certain period of time, your designee will be notified. It offers you the option of including a personal message, which I personally declined-if I'm contacting my wife from beyond the grave, it's going to be via good old-fashioned haunting.

Other email providers vary: Yahoo will not turn over your account no matter what you do; Microsoft will send a data DVD of all the contents to your executor; AOL will transfer ownership to another username listed on the account. You will have to wade through the terms of service for your particular provider.

For your social media, what you do might depend on how valuable your online platform is. If you have 7 million followers on Instagram-something that potentially could be monetized-you'll want to leave a letter of direction about how you want to handle that account.

Facebook and Instagram both allow accounts to be memorialized; Facebook also allows you to designate a legacy contact to manage your memorialized page. Twitter will let your executor or family member deactivate your account, but that's about it. Again, check out the terms of service for each provider.

Your Digital Assets

If you have significant intellectual property-e.g., you're a successful novelist and there's an unfinished manuscript on your hard drive-you should designate a personal representative to handle those parts of your legacy. (Samuel Beckett, for example, did not want women performing in Waiting for Godot, and his estate has tried to enforce that.)

If you have ordinary intellectual property, like photographs or original music stored on hard drives or online services, you should still provide instructions for who owns those in your letter of direction. Your digital collections, like the books and music you buy from iTunes, are trickier-when you click "buy," you're not really buying that song, you're licensing it-and it seems that Apple is not going to let you will your purchases in the same way you could if they were CDs or LPs. Also think about any other virtual assets you might have: digital currencies, games, or domain names, for example.

Many of us have a protective instinct when it comes to our data. After all, it's ours.

You would be doing your executor a favor if you cull, organize, and label these things now-I have a bunch of old hard drives in the closet, and I'm sure they all have a million precious photographs on them, so my goal is to sort through them and at least label them with what they contain. As a second line of defense, I might put them all on Dropbox, so I can share them with other family members who can access them in the event of my death.

Finally, consider your online portfolio, blog, or any other digital space that houses your work. Do your loved ones a favor and organize these important documents, in case something happens.

Get Help

Feeling overwhelmed? ST.CLAIR & ASSOCIATES, PLLC, trusts and estate attorneys can help you with your estate planning. Including: inventory of your general assets, your digital assets, and help you leave instructions on how to access them and how to distribute them.

Jeffrey A. St.Clair, St.Clair & Associates, PLLC, 16 Court Street, Suite 2901

Brooklyn, New York 11241 - (718) 596-4466

Last Will & Testament

Introduction:

Most people erroneously believe that Wills are only for the rich. Accordingly, many Americans die without a Will. Under New York laws a Will is a written instrument made to take affect upon death, whereby a person disposes of property or directs how it should be disposed of, and is revocable during their lifetime. The person making the Will is called the Testator. The amount of property an individual has is irrelevant to whether or not an individual needs a will. The Will serves many essential functions not contingent on the wealth of the Testator.

Function:

In addition to designating the transfer of property and assets a Will may be used to designate guardianship of minor children. Making a Will is the simplest way to ensure that your children are provided for and that your property is distributed according to your wishes. Conversely, without a Will to indicate your wishes, the Courts can distribute your property pursuant to the Laws of Intestacy. Intestacy or Intestate is the legal term for your status if you die without a Will. Moreover, if you have no apparent heirs and die without a Will, your estate may be absorbed by the state.

The Process:

In order to draft a Will best suited to your situation, your attorney needs to have all relevant information. The domicile of the Testator at the time of death is an important fact. A Will must meet specific State standards to be valid and enforceable. Domicile determines which state laws, including issues of estate tax, will control. It is also important to know the full extent of a Testator's real and personal property, the identity of their family members and the identity of any potential beneficiaries.

Surviving Spouse:

Under New York Law, a parent can disinherit their children; however, a surviving spouse can not be disinherited. Any attempt to disinherit a surviving spouse will fail if challenged by the surviving spouse. New York and many states provide a surviving spouse with a right of election. This is a right to elect not to accept the terms of the Will. In New York, upon the death of a spouse, the surviving spouse can choose the greater of $50,000 or one third of the decedent spouse's net estate. Whether a spouse dies and seeks to completely disinherit the surviving spouse or makes a Will prior to marriage not mentioning the surviving spouse; the surviving spouse has a right of election. In addition, a surviving spouse is entitled to an "exempt personal property set aside". These personal items include a car, furniture and cash up to $15,000; with a total value generally not exceeding $56,000. Moreover, these items come "off the top" over and above property passing to the spouse by Will, intestate share or elective share.

Executor:

An Executor is appointed by the Testator in the Will. The Executor's job is to carry out the Testator's wishes. Their duties include (i) collection of all estate assets, (ii) determining any claims against the estate, (iii) filing required tax forms and (iv) distributing the assets to beneficiaries listed in the Will.

Due to the importance of these functions, a qualified individual should be elected Executor. Additionally, an alternative Executor should be named in the event that the named Executor is unable or unwilling to act.

It is important to note that not all assets are subject to the provisions of a Will. A Will generally controls the property in your name. Property held jointly with a right of survivorship passes, by operation of law to the surviving joint owner (ex: joint bank accounts or joint tenancy). Similarly, retirement benefits, life insurance proceeds, trust accounts and defined beneficiary items generally name specific beneficiaries and are distributed by operation of law.

Guardian:

The appointment of a guardian becomes necessary if a Testator has minor children. A testamentary Guardian is specifically charged with the duty of taking care of the Testators minor children. Accordingly, a Guardian should be chosen with due diligence; they should posses the ethical and moral standards the Testator would want imparted to his or her children. The appointed Guardian will only play a role where Testator and spouse die in a common disaster or the spouse has predeceased the Testator.

Funeral Arrangements:

Notwithstanding the need to designate your wishes in a Will, there are certain instructions which may be inappropriate to place in a Will; namely, burial instructions. Generally, the surviving spouse or next to kin has the right to make funeral arrangements. Funeral arrangement are usually made immediately after the Testator's death and well before the Will is examined. It is therefore advisable to communicate burial wishes directly to the spouse and/or next of kin. Many people use a "Letter of Instruction" for this purpose and have their attorney draft it along with their Will.

Conclusion:

Under New York Law, there is no prescribed format for drafting a Will. However, New York does prescribe strict testamentary formalities for the execution and attestation of a Will. A properly drafted Will can (i) simplify the administration of the estate, (ii) facilitate the smooth transfer of property to designated individuals, (iii) provide for the care of minor children and (iv) give effect to the decedent's wishes. A Will is an important legal document. It is always advisable to use a qualified Attorney for the purpose of drafting your Will. Moreover, should the need arise, your Will can be updated or modified by your Attorney by way of an amendment called a Codicil or redrafting the entire document.

Feel free to contact me if you have any questions.

Supplemental Needs Trust

This is an important legal planning tool for disabled individuals called a Supplemental Needs Trust or Special Needs Trust ("SNT"). An SNT allows a disabled individual to maintain or obtain public benefits such as Medicaid or Supplemental Security Income ("SSI"), while the SNT funds are used to improve the beneficiary's life. An SNT provides for needs not satisfied through government by supplementing them. Generally, government entitlements cover such basic needs as food, clothing, shelter and health care. An SNT may provide items such as private caregivers, social workers, legal counsel, aides, housekeepers, accounting professionals, therapists, vacations, modes of transportation, educational programs and vocational training.

There are different types of SNTs. However, all SNTs state the creator's clear intent to improve the quality of life of disabled individuals by providing supplemental support. Any SNT created and funded by an individual other than the disabled beneficiary is called a third-party SNT. It can be inter vivosor testamentary. There is no "payback" to the state in a third-party SNT upon the beneficiary's death, nor is it subject to a Medicaid lien. The creator of a third-party trust can direct who inherits remaining funds upon the trust beneficiary's death. The individual's own assets must not be used to fund a third-party SNT to avoid recoupment by Medicaid at death.

The funds of a disabled individual under the age of 65 may be used to establish a self-settled SNT for his or her own benefit. For example, funds obtained from an inheritance, medical malpractice or personal injury award or settlement may be used to fund a self-settled SNT. Indeed, a disabled plaintiff with extraordinary medical expenses may reap nominal, if any, benefits from a settlement if the money is used for services already provided by public benefits. It is essential to note that, although funded with the beneficiary's assets, the self-settled trust must be created by a parent, grandparent, legal guardian or court order.

Self-settled SNTs contain "payback" provisions to protect the state's right to reimbursement for medical assistance paid for the individual.
Medicaid liens must first be satisfied before funds from a personal injury settlement can be transferred to an SNT. Therefore, the accuracy of liens must be verified and reductions negotiated prior to establishing an SNT.

Disabled individuals who are 65 or older may wish to transfer their funds to a pooled SNT, which is established and administered by a not-for-profit organization on behalf of disabled individuals. Individual accounts are created for each beneficiary. Penalties may apply for transferring assets if government benefits are sought. Further, upon a beneficiary's death, the pooled SNT generally keeps all or a portion of the remaining funds for the benefit of the other beneficiaries.

The lives of the disabled will be greatly improved by using SNTs to provide for special needs not already covered by government benefits. Creating SNTs for the disabled, while permitting them to access government aid, is an indispensable legal planning tool.