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Death & Dying. Law & Technology.

Estate Planning - Questions Answered

Megan Yip

Welcome Jennifer Cowan to my blog. Enjoy her review of basic estate planning questions, and learn more about her work at the bottom of the article. 

Estate Planning Part I: Why Do You Need It?

When people find out that I am an Estate Planning attorney I sometimes hear why they don’t need one: “I’m going to spend it all before I die”; “I don’t have an estate”; “My kids will sort it out when I’m gone.” I’m here to tell you that you DO need an estate plan. And if you already have an estate plan in place, congratulations! Just skip to “Part II: What Happens Next?”

First, all of us have an estate, even if we don’t live in a gated mansion. We probably have some amount of assets, and we are likely to have items of sentimental value. Many people opt to keep that special item in the family or pass it to a close friend for whom it also has meaning. In the past I’ve done volunteer work for low income elderly clients. These clients are concerned about a beloved pet and making sure that the pet is provided for at their death. They also may have a treasured family item to pass to a relative. Both of these concerns can be addressed in a simple will.

An estate plan does more than just lay out who your assets go to. It provides for you if you become incapacitated. While no one likes to think about that happening, it is increasingly likely as life spans increase that a significant percentage of us will spend some time [legally] incapacitated: mentally unable to make medical or financial decisions for ourselves. An example of this is the loss of the ability to reason and manage financial affairs due to Alzheimer’s or vascular dementia. Any criteria for determining incapacity will be spelled out in your documents, most typically a letter from your doctor.

Before our initial meeting I ask new clients to fill out, or at least review, my Estate Planning Questionnaire. We discuss your assets and chosen beneficiaries, plus who you would want to make decisions for you if you are not able to make decisions for yourself. We discuss various distribution scenarios, such as whether you want your beneficiaries to receive the assets immediately at your death, or if you want distributions spread out over time (as is common with minor children). We discuss potential tax issues. Due to space constraints I’ll cover just two of the estate planning documents in use in California: the revocable trust and an Advance Health Care Directive.

In California revocable trusts are used primarily to avoid high probate fees and for incapacity planning. They can also be used to distribute assets over time. With a will, whatever assets you own at your death are distributed shortly thereafter. (It is often said that a will “speaks” at death.) A trust is much more flexible. For example, at death certain trust assets may be set aside in a subtrust to pay for college expenses over time, or support a spouse until his or her death and then allow the assets to go to children of a prior marriage. Trusts allow for incapacity planning, as the named successor trustee can take over if need be, even temporarily.

An Advance Health Care Directive is another important document. It allows you to state what medical treatments and life-sustaining measures you would like to receive and who would make your health care decisions if you are unable to make them yourself. In the absence of an AHCD well-meaning family members could argue over treatment options. There are other documents most California planners recommend, such as the Durable Power of Attorney and Will or Pour-over Will. These are explained on my website.

Can you now answer the questions/statements I opened with?

The person who plans to “spend it all” before his death: obviously we have no idea when we’ll die or what our assets will be at our death. [This is just common sense, not a legal answer.]

The person with “no estate” may have personal items of value or a pet that must be provided for. Also, estate or no, we need documents in place to provide for our own possible incapacity.

The client whose children will “sort out” options at the client’s death or temporary incapacity: do you really think that is a good idea? Unfortunately a death tends to exacerbate family issues, rather than exert a calming effect. Do your loved ones a favor: work this out in advance.

Remember, when, or if, something happens to us, most of us have specific ideas about how we would want affairs managed-who would make medical decisions for us, what our wishes are in that regard; who our assets pass to; who would be responsible for making those distributions, and so on. Additionally, if our wishes aren’t clearly documented, those left behind and responsible for implementing those decisions can be left wondering what our wishes would be-an added stress at an already difficult time. We also do our best thinking when we are not in a crisis or emergency situation; there is time and energy to consider options, what works best for you and your loved ones.

Part II: What Happens Next?

Congratulations! You’ve answered the questions, made your decisions and signed your estate planning documents. What happens next?

Have a discussion with your agent for healthcare about what your end-of-life decisions are and what matters are important to you regarding your care. The ACHD names an agent to act for you and make health care decisions on your behalf; it (and you) can’t possibly anticipate all medical decisions to be made and options available. Therefore, it is important to have a discussion with your agents about your values and wishes. A tool many clients have found helpful for this discussion is the “Go Wish” deck of cards available at www.gowish.org. The cards have simple statements such as “To have close friends near” and “To be treated the way I want.” You sort this various wishes/cards into piles depending on how important they are to you.

If you have a trust it is important to make sure that your assets are properly funded into the trust. Your attorney will help you with this or give you instructions for titling assets in the name of the trust. Whether you have a will or a trust, keep your document up to date. If you are no longer in contact with the person you wish to manage your affairs, name someone else. Let your attorney know if you get divorced or married, or there are other significant changes in your life.

Your agents should know where your original estate planning documents are kept and how to access them. After your death your successor trustee or executor contacts your estate planning attorney OR any other estate planning attorney to administer your estate. This involves collecting and valuing assets, paying bills (including filing your last tax return), collecting any money you were owed at your death and eventually distributing remaining assets to your beneficiaries.

Thanks for your time and attention. This information in no way constitutes legal advice or creates an attorney-client relationship with the reader. For more information contact Jennifer Cowan: 415.485.4437; cowanlaw@comcast.net; www.cowanlawoffices.com.

What Happens to Your Bitcoin When You Become Incapacitated or Die?

Megan Yip

Welcome Erica Bertorello to my blog. Enjoy her review of Bitcoin, and learn more about her work at the bottom of the article. 

Consider the following: Christian Troy is a single, successful computer executive in his forties. Christian’s two passions in life are his job and extreme mountain climbing. He has had the good fortune to work for a couple of extremely successful start-up tech companies and has become extremely wealthy. Christian decides to pour $2,500,000 USD into Bitcoin, a digital currency system. He also decides it would be a good idea to “get his affairs in order” and has an estate plan drawn up. Unfortunately, Christian’s estate planning attorney failed to instruct Christian to include the Bitcoin in his trust.

One month later, Christian goes on a mountain climbing expedition to Mount Everest. During the climb a huge avalanche whisks him off the side of mountain and he plunges to his death.

Bitcoin wallets are not bank accounts.

Traditionally when someone dies, surviving family members go through a deceased person’s belongings (e.g., the file cabinet filled with “important” papers) and watch the mail for a month or so to see what important financial documents (e.g., bank statements, bills) arrive. Using this information, it is easy to gain access to a dead loved one’s bank accounts after death and the procedure is streamlined because every jurisdiction has a clear set of rules governing this type of situation.

With a bank account, having the account name is usually sufficient. However, unlike the local bank branch down the street, families usually cannot visit a Bitcoin operator. Many Bitcoin exchanges and wallet companies are incorporated outside the U.S. without a true headquarters and are operated through virtual offices all around the world. Often times, there is nobody to contact at all and Bitcoin operators do not have access to login information.

Do you own any Bitcoin, and if so, did you include it in your estate plan?

Today, many people have gone paperless and often times financial documents, account details, records of debt and information about other assets are contained on a hard drive or in an e-mail account or cloud storage. If there is no will and no instructions, or if family members do not know if their loved one owned any Bitcoin, ascertaining whether or not the deceased had any Bitcoins or a Bitcoin wallet can be a significant challenge.

Family members may inspect smartphones or computers for valuable data, but very few people will look for Bitcoin wallets if they are not specifically told to do so. Additionally, Bitcoin wallets are tiny so they can be stored on all kinds of digital media from memory cards and USB sticks to network attached storage and cloud services, as well as in physical paper wallets.  Bottomline: Bitcoin wallets are easy to overlook.

Bottomline: Bitcoin wallets are easy to overlook

Does your estate plan include instructions regarding your Bitcoin?

Even if surviving family members realize some transactions were made to Bitcoin exchanges that might not be enough in the absence of clear instructions. Finding a Bitcoin wallet will not be of much help if it is properly encrypted and no instructions are left behind.

The easiest way for an executor, trust administrator or family member to search for a Bitcoin wallet is to see whether or not the Bitcoin application is installed on your computer.

However, accessing the Bitcoin wallet through the Bitcoin application will require your Bitcoin username and password. If the Bitcoin application cannot be located on the computer, other options include searching the computer’s hard drives for wallet software; searching browser history or bookmarks for links to online wallets and exchanges; or searching mobile devices for popular wallet applications.

However, finding a Bitcoin wallet is just the first step. The ability to control Bitcoin in a wallet is tied to a secure, cryptographic key or address and the executor, trust administrator or family member must also have this address to execute a Bitcoin transaction (e.g., exchanging Bitcoin for cash). Without the key, the Bitcoin is inaccessible and will remain lost in the Bitcoin protocol forever.

Finding a Bitcoin wallet is just the first step.

Can my executor, trust administrator or surviving family member use my username and password to log into my Bitcoin wallet?

Accessing your private computer, email or digital assets (e.g., a Bitcoin wallet) with your login name and password after you die creates another host of problems. The Computer Fraud and Abuse Act (CFAA) creates civil and criminal liability for accessing protected computers, systems or networks without authorization or in excess of authorization and obtaining information, including financial information.

Often times, authorized access does not extend beyond the account. Many service providers do not allow third parties to use someone else’s login information under the Terms of Service Agreement. If your executor, trust administrator or surviving family member uses your username and password to log into your account, he/she is violating the terms of the Terms of Service Agreement, creating potential CFAA liability.

The Department of Justice (DOJ) has taken and defended the position that violations of a service provider’s Terms of Service Agreement are actionable under the CFAA. Although DOJ does not routinely prosecute Terms of Service violations, the potential to do so is a serious threat to the people you have entrusted to administer your estate.

Currently, there are no companies that specialize in estate planning for Bitcoin, so it is up to you to plan for disposition of digital currency upon your death.

Have you made plans for your Bitcoin or other digital currency?

 

This post was written by Erica J. Bertorello. Erica is an experienced civil litigator with over sixteen years of practice in the areas of personal injury, medical malpractice, product liability and contract law. After witnessing a prolonged illness and decline of a close family member, followed by a lengthy, convoluted trust administration, Erica decided it was time to shift the focus of her law practice. She returned to Golden Gate University, School of Law in spring of 2014 to pursue her Master of Laws (LLM) in Estate Planning, Trust, and Probate Law. Erica anticipates opening her estate planning practice in fall of 2016. You can contact Erica at: ebertorello.esq@gmail.com

 

This website is intended for informational purposes only. While the information in this website is updated periodically, additional facts or future developments may affect the website's content, and thus no guarantee is given that the information provided on this website is accurate or complete.

What's a digital legacy?

Megan Yip

A legacy is what you leave behind when you leave a place. The dictionary definition suggests that a legacy is personal property and real property that you leave behind when you die, but I think that definition is pretty narrow. A legacy can also be anything including memories, traditions, relationships, things, art, and systems. 

So, what makes a legacy “digital”?

I think it could also be called a “cyber legacy” or an “online legacy”, but digital seems more inclusive because digital suggests what you leave online, but it also describes what you leave on your hard drive, thumb drive, playstation etc., whether that’s accessible through the internet or not. This could include accounts of all sorts, social media, relationships, photos, videos, emails, files in online storage, video games and more. In terms of 'tangibility' and also regulation, the digital legacy is somewhere between the ethical will and the formal legal will or trust.  Digital legacies are more tangible and are regulated more than memories and relationships, but they are less tangible than our real property and private property, which have hundreds of years of case law and much codified law to tell us what to do with them.

What is your digital legacy?

Like any legacy, digital legacies are very unique to the individual. There will be commonalities among your social group - the way ethical wills may have commonalities among families and social communities. There will be different commonalities among your professional group - the way estate plans, wills and trusts for people with certain kinds of monetary or real property assets have similarities.

Here are some questions to figure out what your digital legacy might be:  

How many hours do you spend in front of your computer or other ‘digital device’ each week?

What do you research, create, collect or enjoy while you are there? 

Have you created things and solved problems?  Have you networked and encouraged many people? Have you written music or poetry?

Who knows about it? Who should know about that?

What plans will you make to share your digital legacy with others?