When you visit or call our office, we want you to feel comfortable discussing important issues concerning both you and your family. We also want to arm you with the information you need to make an informed decision about you and your family's future. For instance, many people have common misconceptions about their personal and business digital assets. The following addresses some of those concerns:
1. WHAT are Digital Assets?
The phrase “digital assets” has not yet become widely accepted nor a legally recognized term. However, the issue is clearly demanding attention. Generally,a digital asset is a binary element owned by an individual or business. This includes all files and information stored in any online accounts, such as e-mailaccounts, social mediaprofiles (such as YouTube or Flickr), social networking profiles (such asFacebook), blogs, photo- and video-sharing sites, online music,online video games, online storage accounts such as “cloud” storage, and onlinesales accounts. This definition also extends to domain names and any intellectual property rights (such as copyrights, patents, trademarks, trade secrets, and the like), which may be associated with digitally-owned property.
2. WHY is Estate Planning for Digital Assets Important?
Identifying and creating a succession plan for digital assets could be very necessary in several instances, for both individuals and businesses. Who will maintain registered domain names or websites if the ownerof a business becomes temporarily unable to do so? Who will pay that company’s bills that arrive in paperless form without proper directions on how to do so? What happens to the business and personal financial records that are saved in a“cloud” if someone dies unexpectedly? What happens to blog pages, photos, and“tweets” if a person dies? By identifying your digital property and creating a plan on how to manage those assets in the event of a death, temporary or permanent incapacitation and/or guardianship, saves your designated agent or personal representative not only time but unneeded expense to save those items from possibly being lost forever.
3. HOW Can I Preserve My Ownership Rights ?
Almost all account-based websites contain language stating that their offered services are solely for the individual account holder’s use and are not transferable under any condition. This means that once an account holder dies, a service provider can reclaim the username and all information that user established. Privacy laws and other factors in the U.S. prevent several Internet services fromallowing accounts to be assigned to other people, even if stipulated as such ina will. For instance, e-mail accounts, social media profiles, social networking profiles, blogs, photo- and video-sharingsites often require a user to agree to that Internet service provider’s Terms of Use Agreement. However, this type of agreement generally permits the user (or his heirs) the ability to retain a proprietaryinterest in the content of those assets, if not the account itself (the contact list can be downloaded but the email address itself is not transferable). Comparatively, book, music and video directory sites, such as iTunes or Amazon Kindle only permit a user a limited license to access books, music or video directories, in accordance withthe Provider’s Terms of Service, without any type of ownership over those files. This means the content “purchased” reverts back to the Provider and is not downloadable by a third-party whatsoever. Furthermore, most states remain far behind the times, providing little or no legislation or case law regarding accessing and transferring digital assets at death. Regardless, there ARE steps a user can take to prevent having accounts closed upon death or incapacity, which includes compiling a detailed description of all such assets, instructions on how to handle each asset and designating a technologically-savvy person to handle each digital assets if the user becomes suddenly incapacitated or the like.
4. WHEN Should I Start Planning for My Digital Assets?
NOW!! Currently, many estate planners do not address or advise clients on these types of assets. However, business plans and personal wills and trusts should provide clear instructions to designated individuals (ie the personal representative) on how to dispose of this type of property. For instance, a will should specifically direct not only who should receive copies of saved digital pictures, but who should be the responsible party to handle this issue on behalf of the deceased. Our court system is slow to address and define the legal significance of digital assets. Nonetheless, responsible individuals and business owners should keep a running inventory and organization of digital assets. This will not only save heirs time and reduce unnecessary frustration but will also help prevent unwanted consequences, such as losing these types of assets forever, information that could have been useful to contact friends and family, to settle estate debts, and the like.
5. WHICH Digital Assets Can I Protect?
The following is a partial list of account-based websites which should be considered in a succession plan:
1. Google: In April 2013, Google became one of the first major Internet companies to put control of data after death directly into the hands of its users. Google is permitting usersand/or their estates the ability of when to deletesome or all of the data after 3, 6, 9 or 12 months of inactivity or to pass datafrom the accounts along to one or more other users.
2. Gmail: Upon request, Gmail provides instructions for gaining access to the deceased user’s account and, in some instances, Gmail may be able to provide the account content to an authorized representative of the deceased user.
3. Hotmail: Upon request, Hotmail will send a copy of any email essages stored on a decedent’s account, along with any existing contact lists, and will then ultimately close that account.
4. Yahoo: Yahoo!’s policy is to permanently delete all content and terminate the account upon receipt of a copy of a death certificate.
5. Facebook: Upon request, Facebook will memorialize a decedent’s accountto allow friends and family to write on the decedent’s wall in remembrance. The account may be closed upon a formal request fromthe decedent’s next of kin or upon a legal request.
6. LinkedIn: LinkedIn will terminate a decedent’s account once receivinga verification of death form, along with the email address registered to the deceased member’s account.
7. Twitter: Family members may remove a decedent’s Twitter account orsave a backup of the decedent’s public “Tweets”.
8. YouTube: A personal representative will be granted access to adecedent’s YouTube account.
9. PayPal: PayPal allows only a court-appointed Personal Representative to close a decedent’s account. If there are funds in the PayPal account, a check will be issued in the account-holder's name.
10. iTunes/Kindle Books: Apple and Amazon do not permit any transfer or assignment of media licensed through their companies upon death of the account-holder.
Today, you can read an article by Johnny Diaz, discussing a topic that is important to everyone in the Digital Age. I was excited to be interviewed for the article and thrilled to see that I was even quoted in it. To read the full article, click on this link or copy and paste it into your browser: http://articles.sun-sentinel.com/2013-05-31/news/fl-facebook-profiles-dead-20130531_1_digital-assets-facebook-page-south-floridians
Virtually all of my clients want to know how to pass their assets to their children without the expense (legal fees) or delays that they think will be involved in probate. This article is not intended to discuss the probate process, but rather, to give a general understanding of the benefits of a life estate deed executed in the State of Florida. However, to do so, you must understand basic principles of deed transfers, such as I have briefly listed below:
First off, please know that if you own property in your own name when you die, your beneficiaries will have to hire a lawyer to probate your estate. This is not true of certain assets that will pass under the terms of the contract existing between you and, for example, your bank, where you (hopefully) have named a beneficiary on your account to be paid upon your death. Probate also should not be needed for other financial tools, such as insurance policies, annuities, and IRA accounts.
However, probate is often needed for real estate, such as if you own your condominium in your own name when you die, your family will have to go to court to clear the title so that they can sell the property. Nonetheless, there are exceptions to this:
1. Husband and Wife. When a husband and wife own the apartment jointly (known as an estate by the entireties), most people believe that the survivor will automatically own the property upon the death of the other.
However, a Florida statute provides that if a decedent is survived by a spouse and lineal descendants, the surviving spouse takes a life estate in the homestead,NOT FEE SIMPLE, and there will be a vested remainder to any and all lineal descendants. Which means that potentially if one spouse dies and the couple owned the property prior to that death as "estate by the entireties", that the surviving spouse could not then sell/mortgage/encumber, etc. that propertywithout the consent of each and every one of those children!
2. Transfer to Revocable Living Trust.Your personal residence, if declared properly as a homestead protected property, is secure in Florida and cannot be taken from you even if you have judgments against you. However, in 2001, a Bankruptcy Court case concluded that if you transfer your homestead into a revocable trust, it no longer is exempt from creditors’ claims. Since then, prudent estate planning attorneys resist transferring homesteads into revocable living trusts. This homestead protection has nothing to do with the Florida Homestead Tax Exemption. The tax exemptionis still available to personal residences in trust, provided that the trust specifically states that you can live in the property.
3. Jointly with Child (or Children). If you transfer title to a childand hold title as joint tenants with right of survivorship with the child,there will be no probate when you die (or the survivor of a husband and wife dies). Here also the (adult) child should see an attorney, but the legal services are minor in expense and time, as compared to going through probate.On the other hand, there are potential problems that should make you thinktwice before putting the title in joint names with your child. Some of those issues that may make you reconsider whether to do this are:
a. This may be prohibited or restricted under the condominium documents, or may require association approval.
b. If you have a mortgage, you will need lender approval. If they permit it, they will charge a fee.
c. The transfer may result in the partial loss of your homestead tax exemption.
d. The child will have to pay capital gains tax when the property is later sold based on his gain in the half interest. For example, if the apartment cost you $50,000 in 1996 and you later transferred half to your child, he would have a tax basis of $25,000 in one-half of the apartment and would have to pay tax on the difference between one-half of the sales price and $25,000.
e. If your child has any income tax liens or judgment liens against the child’s share, they must be cleared before the property could be sold.
f. You could no longer sell or mortgage your property without your adult child’s consent.
g. You may be required to file a gift tax return.
h. The value of the interest transferred will be considered a gift for Medicaid purposes and will be the basis for a five (5) year “waiting period” that could delay your access to Medicaid benefits to pay for skilled nursing home care.
4. Traditional Life Estate Deed. Alternatively, you could do a traditional Life Estate Deed under which you retain the right to possession and enjoyment for your lifetime, and upon your death (or the death of the surviving spouse),the remainder (what is left after your life estate terminates) will pass to thechild (here known as the “remainderman”) when you die. Although you may not have all of the problems mentioned under item 3, you will at least be faced with the some or all of the issues, as discusssed in items e, f, g and h, listed above.
5. Enhanced Life Estate Deed. With an Enhance Life Estate Deed, you could transfer the remainder to your child or to a revocable living trust thatwould permit greater control of the property after your death. The Enhanced Life Estate Deed is a specially designed instrument that is only available in afew states, including Florida. It is similar to a traditional Life Estate Deed,and there is no capital gains tax if the property is sold shortly after your death. However, you retain the right to change your mind. That’s right. Without your child’s consent, you can take the property back and give it to someone else. In addition, you have the right to sell or mortgage the property and keepall of the proceeds without your child’s consent. To underscore the difference between the Traditional and Enhanced Life Estate Deed, with an Enhanced LifeEstate Deed,
a. The condominium association approval should NOT be required.
b. You should NOT need mortgage company approval.
c. The transfer should NOT affect your homestead tax exemption.
d. You should be able to sell or mortgage your property without your child’s consent (although some title companies may ask for your child to sign).
e. You will NOT be required to file a gift tax return since IRS considers the transfer and incomplete gift.
f. The value of the interest transferred will NOT be considered as a completed gift for Medicaid purposes and will NOT be the basis for the five (5) year “waiting period”, which could delay your access to Medicaid benefits to pay for skilled nursing home care.
g. However, if your child has any income tax liens or judgment liens, they may have to be paid off before the property can be sold. There are differences of opinion on this point. Until there are more definitive court decisions resolving these issues, we assume that the liens will have to be cleared. Many attorneys hold the position that if you can sell your property without the signature of your child (the remainderman), then why should you have to pay off the remainderman’s lien in order to sell your property?
In conclusion, the Enhanced Life Estate Deed, generally speaking, is an incredible tool for avoiding probate with minimal downside when compared to the possible alternatives.