Death & Digital Life – Do Internet Accounts Live Forever?

Do you have a plan for your digital life after your life is complete?  Want your children rooting around in your social media accounts?  Your spouse?  How about your bank accounts? E-mails?  If you can’t log into your bank account after a health emergency should someone access your account to pay bills?  Who would you trust with your internet passwords?

Current law on the fate of a person’s digital assets when they are incapacitated or deceased is not uniform.  Forty-two states have passed laws related to digital assets.  State Senator Tom Killion (R), is the prime sponsor of Pennsylvania Senate Bill 827, (bill text here) the “Revised Uniform Fiduciary Access to Digital Assets Act” (the Act).  Killian’s office reports there is no known opposition to the bill; it has gotten unanimous approval from the Senate Judiciary Committee and is currently on the Senate Calendar for second consideration, possibly within the next two weeks.

Drafted by the National Conference of Commissioners on Uniform State Laws, the Act was approved and recommended for enactment in all states in 2015.  The widespread adoption of the legislation would provide consistency and clarity for individuals and internet service providers. Otherwise, the fate of your internet content may depend on the account provider’s policy.  Each provider has their own policy.  Some accounts and their contents could be lost forever. CBS provides one family’s harrowing story in this video.

Following traditions of trusts and estates law, the Act strikes a balance between the privacy rights of an account holder and a fiduciary’s ability to administer an estate.  It outlines procedures for an account owner to name a fiduciary for managing digital assets and provides legal authority to the custodian (i.e. Google, Twitter, Facebook, financial institutions) to provide account owner information to the fiduciary.

The right of an internet account holder to determine who may access their digital information and under what conditions is respected within the Act.  An account holder may designate the limits of a fiduciary’s access to online data, whether it is comprehensive or limited.  It requires a separate, explicit grant of authority within a power of attorney document for a fiduciary named in a power of attorney to access digital assets.

The Act uses a three-tiered approach to decide priority among conflicting fiduciary designations.  If an account holder designates a fiduciary through a provider supplied procedure within the account, that designation over rides any contradictory directive contained in a will or power of attorney.  If an account holder has not designated a fiduciary with the account provider, or the account provider doesn’t have a procedure, fiduciaries named in a will or power of attorney have authority to access account information.  An account holder designation by a will or an online tool would prevail over anything embedded in a generic terms-of-service agreement that doesn’t require separate action by the account holder.

The provisions contained within the Act are complex.  Consultation with an attorney familiar with the current law in your state is advisable.

Considering the fate of your on-line data may seem overwhelming.  The volume of accounts, passwords, and personal information electronically gathered and stored during the span of a modern life is growing.  The thought of identifying accounts, listing passwords and determining who, if anyone you would welcome into your digital life will almost certainly give you pause.  The alternative could be worse.

Estate Planning for Business Owners

Estate Planning for Business Owners
You’ve spent a lifetime fulfilling your dream.  Don’t let it end in a nightmare.

Every adult needs an estate plan.  A business owner’s unique circumstances require more detailed planning and precision in drafting documents.  With a combination of strategic business entity configurations, insurance policies, trusts and succession plans, a business owner can provide financial security for heirs, minimize estate taxes and avoid excessive legal fees.  Failure to plan for the impact of a business on the personal estate of its owner can cause unfortunate, unintended and avoidable results.  Each owner’s unique combination of business and family finances requires a unique estate plan.

 

Without a carefully crafted and documented estate plan, heirs can experience financial hardship and uncertainty about the future at a time of grief and loss.  In many instances, a small business owner provides the primary income for a family.  The business may comprise the bulk of the estate’s assets.  There is a risk of survivors losing income throughout the estate administration process, an inflation in the valuation of the estate, and an increased estate tax burden.  A well-considered estate plan can provide heirs with a clear path forward and the freedom to grieve the loss of their loved one without the burden of financial insecurity, uncertainty about the future, and confusion about how to accomplish what their loved one would have wished.

 

Business structure is a primary consideration.  One central figure executing a personal vision in a sole proprietorship has different needs than a partnership, a multi-party family run business, or a business led by several key players with an ownership interest.  Each of these business models present different challenges and opportunities for strategic plans.  All will benefit from thoughtful planning.

 

A sole proprietor needs to plan for the disposition of the business after death or incapacity.  The tangible assets and the business value of a sole proprietorship are included in the deceased owner’s personal estate.  Personal assets are considered available for paying business debts also. This can inflate the value of the personal estate and increase the estate tax burden.  Especially if the business has increased in value over time.  This tax burden can be doubly punishing.  Often the value of the business is dependent on the efforts of the deceased owner.  Profits are typically dispersed as income leaving little or no capital reserves.  The death of the owner may trigger a substantial decrease in the potential sale price of the business.  The valuation of the business for estate tax purposes won’t reflect this diminished value.  The estate tax collector comes quickly; an estate can find itself with no option but to sell the business at a fire sale discount to satisfy tax obligations.  Heirs can also experience a sudden loss of income with no access to cash until the estate administration process is complete.  With planning, strategic use of appropriate business entity formations, trusts, life insurance policies, and solid succession planning, these difficulties can be avoided.

 

The untimely death of a leadership figure in a family business that has failed to plan can create long lasting family discord and resentments.  Without advance discussion and agreement, there may be conflict about the future of the business, management and personnel, ownership interests, if and how the deceased family member’s contribution to the business is to be valued and distributed.  There are countless potential family rifts.  Will another family member step into the deceased parties place in the business? Are heirs to receive a cash buyout?  When and how is the business to provide a payout?  If family members craft a plan that details the procedures to be followed upon the death of each family member, the rifts created by different views as to how to move forward can be averted.  Careful planning enables the business to take the measures necessary to execute the plan.  Insurance policies can be purchased to finance a buyout of the deceased member’s share of the business.  Valuation of the business, division of ownership interests and an agreed formula for future valuation can be developed.  Plans for minimizing inheritance taxes can be utilized.  Replacement leadership personnel identified and trained.

 

Multi-party owned businesses also require preparation for a smooth transition when an owner dies or becomes incapacitated.  Buy-sell agreements can provide instructions regarding business values, future management personnel, whether deceased owners shares are to be bought out or if replacement management will step in.  Life insurance policies can be purchased if necessary to prevent cash shortfalls, facilitate buyouts and stave off taxation nightmares.

 

There are many different vehicles to consider for the successful transition of a business when a business owner dies.  An estate plan can include a variety of business entity formations (partnerships, limited liability companies, corporations), various trust documents, life insurance policies, buy-sell agreements, management and ownership succession plans, powers of attorney and wills.  Each business will benefit from a unique combination of vehicles depending on the business and family situation.  Precision document drafting and attention to detail is necessary to ensure the achievement of intended goal.  The stakes are high with enormous down side risk for your heirs.