Wealth Law Blog : Oregon Asset Protection Lawyers & Attorneys : Samuels Yoelin Kantor Seymour & Spinrad Law Firm : OR Estate Planning, Fiduciary Litigation

My law partner Merritt Yoelin recently pointed out an article in the Wall Street Journal entitled The 25 Documents You Need Before You Die. In discussing the article, Merritt explained “many of our clients have asked us for this type of information so that they may organize their affairs. This is the best I have seen in my many years of practice.”

In the article, Saabira Chaudhuri discusses a number of documents that each of us should compile. The article provides an excellent framework to think about the estate planning process. The articles main points can be summarized as follows:

     1.         Know what your assets are and how you own them. We often discuss with our clients the importance of understanding what your assets are, what they’re worth, and how they are titled. For example, for planning purposes, the home you own with your spouse, your interests in a retirement plan or IRA, or investments you own with an unrelated business partner, will all be treated in very different ways at your death. It’s essential to understand these intricacies and possibly take appropriate actions in the estate planning process. For example, many clients with whom I meet are surprised to learn that their will or trust will generally not control what happens to their retirement accounts or IRA when they die. Rather, it’s the beneficiary designations that are typically signed when a person first opens such accounts.

     2.         Plan carefully, and prepare legal documents that reflect that plan. While that might sound like a platitude, many individuals simply have not prepared an estate plan that meets the specific needs of their family. Rather, they see the process as just “completing the right forms.” However, every family has a unique set of assets and family dynamics. It’s entirely common for children in a family to have very different personalities, needs, and challenges. By candidly discussing these issues with an experienced estate planning attorney, these issues can be addressed, while at the same time navigating the ever-changing tax issues that impact the estate planning process.

     3.         Communicate! Another key point set forth in Ms. Chaudhuri’s article is the importance of communicating information about your planning to your family, your executor, and/or your trustee. If these key people don’t have the appropriate information relating to your assets and the planning steps that you’ve taken, their job in taking care of your estate will be much more difficult. I made a similar point in my WLB article last year entitled “Estate Planning and ‘Virtual Assets’”. In that article, I discussed the “VAIL” or “Virtual Asset Instruction Letter,” which is similar a tool to list your electronic or digital assets (which we call “virtual assets). The VAIL is an instruction letter about these kinds of assets that is directed to your executor or trustee to ease the burden of administering these assets after your death.

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In Part 1 of my last article, Estate Planning and “Virtual Assets,” I discussed the complex issues relating to estate planning and “Virtual Assets,” which include financial accounts, email accounts, social media sites, and other personal or family information. All of these assets are typically accessed over the internet with a username and password. Here are two additional recommendations with respect to Virtual Assets:

1.   Consider Who Should Receive Your Virtual Assets. If a virtual asset is a bank or investment account, your will or trust should (presumably) control who will receive these assets at your death. However, what about access to family photos or genealogical information? One might want to specifically instruct your executor or trustee to replicate and distribute these items so that they pass to multiple intended beneficiaries.  

2. Use Caution in Using Commercial Services to Hold Your Virtual Assets. A new cottage industry has sprung up to provide a type of “online safe deposit box” to store your virtual assets and provide a means by which designated individuals can gain access to your virtual assets. A few words of caution are in order. First, be careful and make sure you’re dealing with a reputable company. Giving someone the keys to your digital existence would be a goldmine for someone bent on stealing your identity. Second, remember that giving someone access to information about an asset is not the same as giving that asset to that individual. Your will or trust should ultimately control who should inherit your assets, not an online service provider. There may be complex legal and tax issues that need to be taken into account in designating beneficiaries of virtual assets. For example, one online service provider refers to an “electronic will.” In most states, a will requires certain formalities (typically a written instrument signed before two witnesses), and the absence of these formalities can render one’s good intentions legally invalid.

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For many, our primary means of communication is email, often through multiple email accounts. We “tweet” about the latest happenings through our Twitter accounts. We keep in touch with friends and colleagues through social networking sites such as Facebook and Linkedin. We store family photos and other important information on a growing array of online sites. We access our financial assets, such as bank accounts and brokerage accounts, over the internet. We pay our bills electronically. We own internet domain names. In the aggregate, these “virtual assets” have tremendous aesthetic and financial value. 

Yet, when we die or become incapacitated, what happens to these assets? Who can gain access to this “virtual existence” when we’re gone?

The answer is a very complex. Most of these virtual assets are controlled by a license agreement with the provider of the online access. Such license agreements vary from provider to provider. Without careful planning, chaos may rein. Here are some key recommendations to consider:

1.      Integrate Virtual Assets into Your Estate Plan. Wills, trusts, and powers of attorney have been around for centuries. In appointing an executor, trustee, or agent under a power of attorney, you are appointing a representative that you trust to take control of your assets and follow your legal instructions. Whether dealing with virtual assets or an office building, you should appoint individuals in these roles that are both trustworthy and competent to carry out these instructions.

2.      Create a Virtual Asset Instruction Letter. A “Virtual Asset Instruction Letter” or “VAIL” will list all of your online accounts and assets, and will provide web addresses, user names, and passwords to give your designated representative the ability to identify and access these accounts. Place the VAIL in a safe location, such as a safe deposit box, that can only be accessed by your legal representative. In addition to a written list, you might consider saving the VAIL to a flash memory drive or CD which can make your representative’s access to these accounts more efficient. For assets such as email accounts, your VAIL may instruct your representative to delete the account after a period of time. Most such accounts will simply terminate after a certain period of inactivity.

Check back with WealthLawBlog.com in a few days to see additional recommendations relating to virtual assets.

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