“Estate Planning 2.0:” Who controls your digital assets after your death?

Donald L. Knapp, Jr.

The term “Web 2.0” has become a popular buzzword around the Internet and many digital innovations over the past decade. Web 2.0 has allowed the creation of more “digital assets” – including your Facebook and Twitter pages, blogs, and even your online brokerage account and credit card travel miles. These digital assets can be personal or business in nature.

However, the law has lagged behind the technology in this arena. There has been a rush to create social media accounts and set-up online banking and brokerage accounts – but who controls all those digital assets after you die? Do you have an “Estate Planning 2.0” strategy to fit the Web 2.0 world?

Your digital assets are becoming one of the more important – and are certainly one of the most overlooked – components of an estate plan. While it is obvious that everyone has physical assets (home, car, personal possessions, etc.), most people today have digital assets as well.  And until state and federal laws catch up with technology, your best bet to protect these possessions is through well-drafted provisions in an estate plan.

According to a recent survey conducted by McAfee, people place an average value on their digital assets of $35,000, around half of which is attributed to “sentimental” value, like your photos stored online. That amount likely does not include the value in your online brokerage accounts, if you have any. Whatever value you place on your digital assets, it is important to have a plan in place for them if you become incapacitated or pass away.

When drafting estate planning documents, such as a durable power of attorney, will, or trust, it is important to include provisions that authorize your designated representative to access these digital assets. Such provisions should also explicitly define the scope of the representative’s authority and clearly state your intentions for those digital assets once you pass away.

Because this area of the law is new and still evolving, there are limited cases interpreting such provisions. However, drafting clear provisions addressing your digital assets will provide you with additional peace of mind.

If you are in need of estate planning help, contact the experienced attorneys at Fausone Bohn, LLP in Northville, MI. You can reach us at 248-468-4536 or online at www.fb-firm.com. Our legal experts are knowledgeable about changing laws and stay up to date on this evolving area to ensure you receive the best protection for your assets.

The most recent legislation proposed on this issue was in Florida. You can read more about what lawmakers there are doing in an attempt to secure individuals digital assets after death: http://www.wtsp.com/story/news/politics/florida/2015/04/06/bill-lets-guardian-access-digital-assets-after-death/25361635/. 

Philip Seymour Hoffman’s Death Provides Estate Planning Lessons

Donald L. Knapp, Esq.

While Philip Seymour Hoffman’s death has focused attention upon the severe consequences of heroin addiction, his death can also provide lessons for families who do not have an estate plan.  In addition to three children born of his longtime companion, Marianne O’Donnell (“O’Donnell”), Philip Seymour Hoffman (“Hoffman”) also left a sizable estate worth approximately $35 million. Even though most of us will not amass that level of wealth, it is not impossible for a small business owner or professional who is a prudent investor to have a net worth that approaches $5 million.  More importantly, most married couples will have children that they will want to protect in the event of an untimely death.

A review of Hoffman’s Last Will and Testament (“Will”) reveals that his attorney did not due him any tax favors.   First, because Hoffman did not shelter any of his wealth, he will be paying approximately $11.46 million in Estate taxes.  The Estate Tax, which is also known as the death tax, taxes property that you own at the time of your death, such as cash, securities, real estate, annuities, and insurance.  In 2014, the first $5.34 million is exempt from the Estate Tax; however, the IRS will impose a 40% tax on all property that exceeds that amount.  Because you can give an unlimited amount of money to your spouse throughout life or as part of an estate plan, if Hoffman had married O’Donnell his estate could have passed directly to her without the requirement to pay any such taxes.  However, because O’Donnell was simply Hoffman’s “companion”, no such tax breaks are available.

Hoffman’s will is also problematic because it only makes reference to his oldest son, Cooper, not his daughters, Tallulah and Willa, who were born after the Will was executed.  In fact, it does not contemplate any children that he may have later.    Typically, wills contain language which provides equally for children specifically named in it as well as children born after the Will is drafted.  Hoffman’s Will contains no such language.  While O’Donnell will undoubtedly have full custody of the three children, it is possible that the children will have disparate amounts depending upon whether Hoffman made O’Connell or his children as beneficiaries of his bank accounts.

In short, marriage status and a properly drafted estate plan could have avoided much of the mess that Hoffman left for his companion to clean up.  Ultimately, whether you are fortunate to have substantial assets or whether you simply blessed with children and a comfortable lifestyle, it is important to plan for the unexpected so that your family is protected and they are the primary beneficiaries of your hard work, not the IRS.

If you have estate planning needs or questions please call Don Knapp at 248.380.0000 x 3213.