The Digital Afterlife in Utah

Planning for control of your personal information after you die used to be as simple as telling someone about the desk drawer or the fireproof box or the safe deposit box at the local bank. But in the era of smartphones and cloud computing services, that same stuff may be stored in digital formats on servers scattered across the globe. 

What happens to your digital life after you have passed? Does it just automatically go away? Most people today have numerous online accounts. They have email accounts for work and personal use, accounts on sites like Facebook and Twitter, and some people also have blogs or even their own websites. If you check the privacy policies on the sites where you have accounts, you will notice that most sites will not give out any information about your accounts without your prior permission and some will not give out information without a court order. Your digital life may or may not go on without you, so you must plan ahead of time.

As a recent New York Times article, How to Digitally Avoid Taking It to the Grave,” points out, if you do not plan ahead regarding how someone else can access your accounts after you pass away, then you risk the loss of those accounts. In other cases, accounts you would want to carry on might disappear. It depends on the policies of the sites where you have accounts. Some states have passed laws granting executors access to digital accounts after the owners pass away, and there is an effort underway to pass a uniform law in every state.

However, until the law catches up with today’s current digital environment, you need to have a plan. At a minimum, you should make sure that a list exists of your digital accounts. You should make sure someone will be able to find the passwords for those accounts. You also need to store that information somewhere it can be found by someone you trust. This could be done by including that information in your will, but that could make updating the digital information cumbersome. You could also give that information to a trusted individual before you pass away. You do not need to tell them now what your passwords are. You just need to tell them where to find the information.

Reference: New York Times (July 2, 2014) How to Digitally Avoid Taking It to the Grave

Keeping Your Utah Estate Plan Up-To-Date

“Many have not taken adequate steps to review and update these plans since the moment they were signed. Meanwhile, major life events such as marriage, the birth of a child or the launch of a business may have occurred.”

Estate plans are not a one-shot deal. They are like a snapshot of your life at a particular point in time. An old estate plan shows how your property and life circumstances looked at the time it was made. But things change over time, and so should your estate plan.

If you never change your estate plan, it might stop doing what you want.  As Forbes points out, in an article titled Why You Should Update Your Estate Plan,” if you do not update your estate plan when your life circumstances change, then you might be risking costly legal battles for your heirs. Significant property acquisitions that are not accounted for in your estate plan can lead to problems. Having additional children or getting divorced can cause problems, if you do not change your estate plan. Tax law changes could make your old estate plan ineffectual.

You should plan to update your estate plan every time your life changes significantly. If you get married, change your plan. If you start a new business, change your plan. Any significant life event that has occurred since you first created your estate plan may trigger a needed change or two in your estate plan. You should also plan on meeting with your estate planning attorney every few years to make sure that your plan takes into account any changes to tax laws. If you do not, your plan might not do what you think it should do.

Reference:Forbes (July 3, 2014) Why You Should Update Your Estate Plan

The Power to Adjust Your Utah Trust

Today’s low interest rates create special problems for those focused on income, including retirees and the income beneficiaries of trusts.

Prolonged periods of low interest rates can result in low trust income, creating conflict among beneficiaries. Many trusts are set up in a way that creates two different groups of beneficiaries. The first group are income beneficiaries who have a right to the current income the trust property generates. Another group are remainder beneficiaries. They get what is left in the trust when the trust ends. Income beneficiaries naturally want the income maximized and remainder beneficiaries want the principal maximized.

As Forbespoints out, in an article titled With Interest Rates Low, Here’s How To Boost Income From A Trust,” low interest rates make it difficult for trustees to keep both groups happy. There simply are not enough good investment vehicles available to keep both groups of beneficiaries happy in low interest rate environments. The solution is known as the power to adjust. This allows trustees to reclassify trust assets. Forbes has an example of how it can work: “By utilizing the power to adjust, trustees are able to invest in the best total return portfolio without regard to the amount of income it generates; so, for example, in the current low-rate climate, this may result in a portfolio that is primarily equity.  The power to adjust allows the trustee to take a certain amount of principal, reclassify the assets as income, and distribute the assets to the income beneficiary.”

The power to adjust is legal in all but three states. Utah recognizes the power to adjust but doens have a limit as to what a trustee can do. Non-expert trustees should consult with attorneys and financial advisors about how they can use the power to adjust to keep competing groups of beneficiaries happy.

Reference: Forbes (July 2, 2014) “With Interest Rates Low, Here’s How To Boost Income From A Trust

Deathbed Wills in Utah Can Be Contested, So Don’t Wait To Change Your Plan!

Three years and two trials later, the will remains the subject of a fierce probate fight in Sacramento Superior Court. Lawyers for the stepson and O’Brien’s brother have challenged the will as a fraud. They contend O’Brien didn’t have the mental capacity to amend the original trust.

Waiting until you are on your deathbed to create or change your will can cause a lot of chaos after you pass, so don’t wait to make those changes! Take a lesson from the late Joseph Herb O’Brien. O’Brien was dying in a hospital room. For a long time he had an estate plan that left his entire estate in a trust, the sole beneficiary of which was his stepson. The stepson had a long history of legal problems. Shortly before O’Brien passed away, he dictated a new will to two friends. This new will left the vast majority of the estate to one of those friends instead of the stepson.

The Sacramento Bee has the full story of what is alleged to have happened in an article titled “Final wishes of a ‘good man’ or deathbed fraud? Judge to rule in probate case.” It is a good read that explains all of the minute details of the case. Basically, the judge has to decide whether O’Brien was competent to change his will at that time or whether his friends coerced him into changing it for their own gain.

One thing of particular interest is the fact that it appears O’Brien had considered changing his estate plan on several occasions. The trustee had even threatened to resign on at least three separate occasions if O’Brien left the stepson as the beneficiary of the trust. However, O’Brien never did make the changes.

It is not clear whether he wanted to or not. If he did, then the mistake he might have made was to wait too long. If you want to change your estate plan, do not make the same mistake. Get it done while there is still time. Do not rely on a deathbed will. A judge may rule against what you would have wanted.

Reference: Sacramento Bee (July 13, 2014) “Final wishes of a ‘good man’ or deathbed fraud? Judge to rule in probate case

Utah College Graduates Need Estate Plans Too

After graduating from college, and even law school, the thought of drafting your estate plan probably did not make the top twenty on your “to-do” list, and why should it? The only thing most young professionals have when they first start out is debt. However, after you land your first job, preparing your estate plan needs to move quickly to the top of that elusive “to do” list.

Regardless of your age, you might not think you have very much –  but you probably have enough to want to have a say in who gets what.Young people may not view estate planning as a necessity when just starting their careers, but the reality is they should plan how their assets will be distributed in case something were to happen to them.

Estate planning is more than just deciding how your assets will be distributed. That is a large part of it, but there are other documents every good estate plan should include. A recent article in the National Law Review, titled Five Estate Planning Documents Every Young Professional Should Have,” lists the documents that it suggests for every recent college graduates.  Some of the suggested documents do not apply for Utahns.  The following is a list of document that I believe is more applicable:

  • General Durable Power of Attorney – This is a simple document that lets you choose who will handle your finances in case you are in an accident or get ill and cannot do it yourself.
  • Utah Advanced Health Care Directive – This is a statutory document that replaces the “living will”, and which allows you to appoint an agent to make health care decisions when you are not capable of make those decisions for yourself.
  • Will – Your will does not have to be complicated. However, if you want your property or any piece of it to go to someone in particular, then you need a will to make that happen.
  • Beneficiary Designation – On many of your financial accounts, such as the retirement account (401k, 403b retirement plan) and life insurance your first employer gives you, designating a beneficiary allows you to decide who gets the assets of the account after you pass away.
  • Simple Revocable Living Trust.  The size of your estate should not be the determinative factor in having a Revocable Living Trust.  Not only does it avoid probate, it can provide a separate vehicle for the management of assets.  Statistics tell us that many of us will suffer some period of incapacity during our lifetime.  With a living trust, a trustee can simply be authorized to continue the management of your property in case of your disability.  This can all be accomplished without court involvement and without the costs associated with a guardianship or conservatorship.

Estate planning is for everyone, recent graduates included.

Reference: National Law Review (July 7, 2014) Five Estate Planning Documents Every Young Professional Should Have

Can Your Utah Heirs Legally Access Your Digital Assets?

No matter what steps you take or what laws are eventually passed, managing a digital estate for a loved one will always be a long, arduous, and painful process.

Digital estate planning is popping up in the news more and more as people are trying to figure out how to deal with digital assets of loved ones who have already passed. Gaining access to one’s email and social media accounts after they die can be very difficult. It can be even more difficult for heirs to gain access to online financial accounts. For this reason, attorneys always stress that you should plan ahead and make sure you have come up with a good way for someone you trust to access any accounts you have.

Recently on PBS News Hour, another potential problem with access to digital accounts was raised in a segment titled Dead and Online: What Happens to Your Digital Estate When You Die? One of the interviewees points out that a family member attempting to gain access to your accounts after you pass away could be in violation of federal privacy laws and computer fraud and abuse laws. It could also be a criminal violation to break the terms of service of the website your family member is trying to gain access to in some circumstances.

As unlikely as it is, a family member trying to gain access to a deceased’s accounts may be criminally charged. It is not a good idea to leave it up to chance. You would not want to actually encourage your family to break the law. This is just another reason that you need to plan ahead and come up with a way that someone can access your online accounts after you pass away.

Reference: PBS News Hour (July 12, 2014) Dead and Online: What Happens to Your Digital Estate When You Die?

The World Knows All About Lou Reed’s Estate – Do You Want the Same Exposure For Your Utah Estate?

If Lou Reed had used a revocable living trust, and transferred his assets into the trust during his life, then all of this information would have been kept private.  No one would know how much he had, whom he left it to, or how much his executors were charging.

When a celebrity passes away, reporters scramble to find out how much money the celebrity had and how it will be distributed. But how exactly are they getting the information? Is it in-depth investigative journalism … or a common estate planning mistake?

Recently, the New York Post has had story after story about the specific details of Lou Reed’s estate plan. We know how much he had when he passed away. We know how much money his intellectual property interests have earned for his estate since he passed away. We also know how much money each of Reed’s heirs will receive. How do we know so much?

As Forbespoints out, in an article titled Lou Reed Walked on the Wild Side With His Estate Planning,” we know what we know about Lou Reed’s estate because his entire estate plan consisted of a single will. That will had to be submitted to a public probate process, which allows reporters to gain access to the details. If Reed had used a different estate planning tool, such as a Revocable Living Trust, it would be much more difficult for reporters to find out the details.

You might not care whether your estate is made public after you pass away, since you will not be around to deal with any consequences. However, you should consider whether your heirs would want other people to know exactly how much they inherited. It might violate their privacy.

Reference: Forbes (July 10, 2014)  “Lou Reed Walked on the Wild Side With His Estate Planning

Utah Revocable Living Trusts – Who Needs Them?

Every so often, a client will come in and announce that he or she needs a revocable trust. Typically the request stems from something the client has read in a book or article, or perhaps advice from a neighbor or friend. Of course, not everyone needs a revocable trust … 

As revocable living trusts continue in popularity, many first-timers think that is the solution to their estate planning needs. Usually a friend or family member who has a trust will suggest it, or they may have read articles online suggesting everyone needs to have a revocable living trust. Being new to the estate planning world, they assume this is something they need too. The truth is that revocable living trusts are designed for particular estate planning situations. They are not necessary in every situation.

A recent article in Financial Planning titled “Does Your Client Need a Revocable Trust?considered common situations that might call for a revocable living trust. The list includes:

  • Probate Avoidance – If an estate might have issues in probate, a revocable living trust can be used to keep it out of probate. Not every estate will have issues with probate, however.
  • Privacy Concerns – Wills are often subject to public scrutiny through the probate process. Because a trust does not go through probate, the details of an estate plan can be kept private.
  • Second Marriages & Blended Families – Trusts can provide a way to ensure that assets go to a second wife first and that the remainder then goes to children of a first marriage, if that is the objective.
  • Incapacity Planning – Trusts can provide a way for someone to manage your assets in the event you become too sick to do so yourself.
  • Special Needs – If you have a relative with special needs, a trust can be used to provide for their care without jeopardizing their public assistance benefits.

Again, these are the primary reasons why you might want to have a revocable living trust as part of your estate plan. However, the important thing to remember is to go to an estate planning attorney’s office with an open mind. Let the attorney tell you what the best options for your estate plan are.

Reference: Financial Planning (July 14, 2014) Does Your Client Need a Revocable Trust?

Heirs vs. Credit Card Debt – Who Gets Paid First in Utah?

When people die, their assets (cash, real property, investments, savings, car and so on) become the property of their estates. And each estate is obliged to pay all debts, costs, taxes and other liabilities due before it distributes what’s left over, according to the deceased’s wishes, to the beneficiary or beneficiaries. 

Credit card debt is no stranger to the American family. In fact, it’s no longer surprising to find out that someone has more credit card debt than assets. But how does that impact one’s estate? Unfortunately, credit card debt does not automatically disappear when the debtor passes away. It still needs to be paid by the estate if possible.

The Deseret News discusses the different possibilities in a story titled What Happens to Credit Card Debt When Someone Dies? Basically, any credit card debt will have to be paid out of any assets the estate has. The debt must be paid before any heirs can inherit. The good news is that in most cases no one will inherit the debt. If there are not enough assets in the estate to pay the debt, then in essence the debt ceases to exist. However, there are some exceptions. In community property states, a surviving spouse will be responsible for any unpaid credit card debt. A joint owner of the credit card account would also still be responsible for paying off any remaining debt in the account.

It is important to understand how your debts will be paid off after you pass away. If you have credit card debt, or any other type of debt, speak to an estate planning attorney about what you might be able to do today to plan for paying off your debts while still leaving some assets for your heirs to inherit.

Reference: Deseret News (July 18, 2014) What Happens to Credit Card Debt When Someone Dies?

New Developments in Digital Estate Planning

Last week, the Uniform Law Commission drafted the Uniform Fiduciary Access to Digital Assets Act, a model law that would let relatives access the social media accounts of the deceased.

Digital estate planning has become a hot button issue in estate planning and technology law. What exactly happens to our digital accounts after we pass away? It depends. Currently, most states do not have laws that would grant executors or others access to digital accounts. This means that access is determined by the terms and conditions and privacy policies of the technology companies that operate the websites the accounts are on. This has caused headaches for many families attempting to wrap up a loved one’s digital affairs.

The Uniform Law Commission has come up with a plan called the Uniform Fiduciary Access to Digital Assets Act that, if adopted by the states, would end this problem. However as National Public Radiopoints out, in A Plan To Untangle Our Digital Lives After We’re Gone, the idea is not popular with all technology companies. The Commission states that its proposal would give an executor access to accounts in the same way that a family has access to real world items, such as photographs and letters. However, technology companies say the proposal could create privacy concerns for third parties as their communications with the deceased would be accessible.

It is clear that something needs to be done about the problem with a deceased’s digital accounts. Some technology companies, such as Yahoo Japan, have taken steps to allow account holders to choose who has access to what after they pass away. Other companies are waiting for legal solutions. Still others are satisfied with the current landscape. Regardless what happens in the future on the legal side, how your digital accounts will be handled is something that you need to plan for on the practical side in your estate plan.

Reference:  National Public Radio – NPR (July 23, 2014) A Plan To Untangle Our Digital Lives After We’re Gone