Cover Your Digital Assets

A digital asset consent for release is now a standard part of an estate planning package with Clayton and Clayton, PLLC, but what is it?

Recently, North Carolina adopted the revised Uniform Fiduciary Access to Digital Assets Act, or UFADAA. While still new, adopting this statute has important implications with regard to estate planning.

Have you stopped to consider what happens to your digital assets when you die? Do you have photos stored on the cloud? What about digital music, videos, or books? What about access to email accounts, bank accounts, online medical records, web hosting accounts, social networking, and social media accounts?

The Internet is changing on a daily basis, and with those changes, it becomes a more and more ever-present factor in our lives. We took a vacation recently to a remote area with no Internet access, and we quickly realized how much we depend on our digital assets such as photos, videos, email, and file sharing services once we couldn’t access them constantly – and let’s not even get started on the difficult process of explaining to our son why we couldn’t stream his favorite Daniel Tiger videos!

Typically, “custodians” control our digital assets. These custodians are typically the servers, hosts, and/or companies that manage the cloud – which means that access is usually terminated at the death of the user. Prior to the enactment of UFADAA, attorneys often suggested leaving a list of passwords for loved ones to access digital accounts at death or incompetency, but there is a possibility that this is in violation of the user agreements that we agree to when we create such accounts. Best practice now suggests that the best way to do this is to create a Digital Assets Consent for Release in conjunction with a list of all electronic assets and accounts so that your appointed fiduciary knows where to look, what accounts you have, and how to access them.

This is why we are excited that NC has adopted the uniform rules.  While our digital assets will still be subject to copyright laws and federal privacy laws, we can now appoint legal access to our accounts through a Digital Assets Consent for Release. What this does is allow the fiduciary, typically the executor of the estate, to legally step into the shoes of the decedent to access these documents. Not only does this make the probate process run smoothly, but it also – and more importantly to loved ones – allows access to these assets.

It’s also important to check with the individual custodians of your accounts to see whether they offer their own estate planning options that you can manage and evaluate now. One example is Facebook’s creation of a Legacy Contact – see more here: https://newsroom.fb.com/news/2015/02/adding-a-legacy-contact/. In circumstances such as those, the UFADAA will defer to the account holder’s choices – although it typically will override “click-through terms-of-service agreements” that conflict with otherwise express instructions made by the account holder.

While a Digital Assets Consent for Release is an important step, it’s best to use it in conjunction with appropriate language in your Last Will and Testament. This way, your appointed fiduciaries should be able to have access to such assets not only during a period of incompetency when you cannot access such records on your own, but also after death.

Curious how your digital assets will be maintained after your death? Don’t hesitate to reach out to us to talk about this some more.

And don’t forget, if you created estate planning documents with Clayton and Clayton recently, but wish to add a Digital Assets Consent for Release to your estate planning documents, we will make one for you free of charge.

Can A Revocable Living Trust Help My Business Run Smoothly?

If you own a closely-held business, a Revocable Living Trust might be a great tool to consider – as it gives you the ability to transfer your business interests into a trust.

Typically there will be a gap between the date of death and the appointment of an executor to handle your estate during the probate process. This time gap can cause problems with a business running smoothly and in extreme cases can lead to your business dying with you.

As a way around this, business owners can transfer their interest in the business into a Revocable Living Trust. When the owner dies, the successor trustee can continue to run the business in a seamless manner and without delay.

Since the owner will only be transferring the business interest (as opposed to the actual business) into the trust – there won't be any major functional differences when running the business. At the same time, in the event that something happens to the owner, business employees or others who rely on everything running smoothly won’t suffer the consequences of a time delay in the event of the owner's death.

Whether or not to create a Revocable Living Trust will vary from person to person based on their needs and estate planning goals. If this is something you would like to learn more about, feel free to reach out to us so we can discuss it further.

How does a Revocable Living Trust help me avoid probate?

One of the biggest misconceptions about Revocable Living Trusts is that they are only for the wealthy. However, even if you have only accumulated a moderate amount of wealth or assets, having a trust might be a useful tool to consider for your estate plan.

Probate is the court-supervised process of settling an estate after someone dies. It is a time-consuming process and can sometimes end up being costly. Additionally, it is completely public – anyone can see the distributions made and who they are made to.

A Revocable Living Trust, however, allows for greater privacy since any assets that were titled in the name of your trust during your lifetime will generally avoid the probate process and will not become part of the public record. At the same time, a Revocable Living Trust can be altered, revoked, or amended any time during the lifetime of the person who created it – without the consent of the trustee or others – allowing privacy at death and flexibility during life.

While it is important to fund the trust by adding your assets to it, it is also important to have a will that will work in conjunction with the trust. A carefully drafted will can allow for assets that were not in the trust at the time of your death to “pour over” into the trust during the probate process.

Revocable Living Trusts are useful tools, but it’s important to keep in mind that they are not a magic solution to all of your problems. Without further planning, most Revocable Living Trusts cannot help you avoid income taxes, avoid estate taxes, shield assets from your creditors, or help you qualify for Medicaid.  While options may be available such as a credit shelter trust to reduce the amount of estate taxes due for some people or a spendthrift trust to prevent a creditor from accessing some assets, these are issues that would need to be carefully addressed on a case-by-case basis.

Whether or not to create a Revocable Living Trust will vary from person to person based on their needs and estate planning goals. If you would like to talk about whether one will be beneficial to you, we recommend talking with an attorney or tax advisor. As always, don't hesitate to contact us if this is something you would like to discuss.

Planning For Incapacity

While it is never something we want to consider, planning for incapacity is an important part of making an estate plan. There are many methods and tools available to make sure that your wishes are respected and that the people you trust the most will be the ones making important decisions on your behalf.

Some useful tools to consider include:

• Health Care Power of Attorney: A health care power of attorney becomes effective after a physician determines that you are unable to make or communicate health care decisions yourself. It is a legal document giving authority to the person (or people) of your choosing who you trust to make medical decisions on your behalf.
• Advance Directive / Living Will: A living will is the legal document that you can use to direct whether you want your life prolonged in specific circumstances. It is a great way to be able to direct your health care power of attorney so that they can best champion your wishes in the event that you cannot make them clear at the time.
• Advance Instruction for Mental Health Treatment: An advance instruction for mental health treatment works much like an advance directive or living will, but instead applies when one lacks the capacity to make or communicate mental health treatment decisions. This document gives your appointed agent the power to make decisions regarding mental health treatment – and includes specific directions for your agent to follow regarding the use of medication, shock treatment, and/or admission to a mental health facility.
• Power of Attorney: A durable POA is a great choice for many people as it allows for you to appoint an attorney-in-fact who can basically step in to your shoes and act on your behalf with regard to your financial affairs.
• Revocable Living Trust: While you can be your own trustee of your RLT during your lifetime, you can also appoint a secondary, or successor, trustee to take over in the event of incapacity. Since a trustee only has power over the property held in trust and subject to the trust document itself, the grant of power is generally less broad than a POA, creating an RLT may be an option to consider if you want to put greater restrictions on the actions of your attorney-in-fact.
• Standby Guardianships for Minors: if you have minor children but become incapacitated, having a standby guardian for any minor in place can ensure that the people you trust the most will be able to fill in for you to make decisions on behalf of the child.

We highly recommend that you put a plan in place so your wishes are followed in the event of incapacity, and perform periodic reviews of your documents to make sure nothing needs to be changed or updated.