Don’t Shut Me Down: Planning For Digital Assets
In a world gone increasingly remote, managing your digital assets has become an even more important part of estate planning. From email accounts to digital photos and cloud-based storage, almost everyone owns some kind of digital asset.
Terms-of-service agreements and privacy policies govern these accounts and generally expire when you die. That means surviving family members may not be able to access your email, photos, social media accounts, etc.
However, emerging laws are providing a legal path for your executors to manage these assets. These laws also provide a framework to allow tech company “custodians” (e.g. Facebook, Google, or Apple) to safely disclose your assets without violating privacy agreements.
Most states have adopted the Revised Uniform Fiduciary Access to Digital Access Act (RUFADAA) or something similar, but legislation continues to evolve.
Digital assets can include any part of your electronic record, including access to your financial accounts, bitcoin and cryptocurrency, music and photos, licensed domain names, seller accounts on eBay or Amazon, and information stored on your computer and other devices.
If your state has adopted the RUFADDA, your executors may be up against the following limitations:
- An executor does not have authority over the content of your electronic communications (email, messages, or chats) unless you’ve explicitly granted this disclosure.
- An executor may petition a court to gain access to your electronic communications, but only insofar as such access is necessary to settle the estate.
- An executor may get access to other types of digital assets such as photographs, eBay, or PayPal accounts.
- If an executor does not have your explicit permission to access your account, tech companies may rely on their terms of service to determine whether to grant access.
- Tech companies may not provide access to joint accounts or deleted assets.
All in all, this means you need to plan for your digital assets. Do you want social media accounts deleted after you’re gone? Do you want your family to have access to your digital photos? The best way to make sure your wishes are followed is to catalog your online presence and create a legal plan.
Moving? Remember to unpack that estate plan
There’s a lot to think about when you move. In all the hustle and work of a relocation, certain things can get forgotten. Once you have the utilities on and the boxes unpacked, it’s time to have your estate planning documents reviewed by an attorney in your new home state. Here’s a list of updates that might be needed:
Estate taxes: Currently, 12 states and the District of Columbia have state-specific inheritance or estate taxes. Your estate plans may have been drafted to address local taxes which no longer apply. You could wind up with an unexpected tax bill or miss out on the full benefits your new state provides.
Your executor: An executor’s role is determined by state law, and some states require your representatives to reside in the state in which your will is probated. If your executor lives out of state, they may have to post a bond to serve or appoint a local representative. Your move may make it impractical or costly for your current executor to serve.
Communal property: In some states, property acquired during marriage is considered community property owned by both spouses. In other states, spouses only own what is under their own name. These designations can have implications for how your will is carried out, including the step-up in basis for tax calculations. Review the titling of your assets to determine if additional planning is needed.
Health care directives: Advance medical directives, living wills and powers of attorney should always be updated when you move to ensure they are in adherence with your local laws. Every state has its own documents and forms, and differences could delay or complicate your representative’s ability to act on your behalf.
Irrevocable trusts: Review your named trustee and beneficiaries for an irrevocable trust anytime you or they relocate. Some states may consider the domicile of the trust creator, beneficiary or trustee in determining state income taxes. Work with your estate planning attorney to determine if any changes are necessary to maximize your tax savings and ensure your wishes can be carried out efficiently and effectively.
SEC expands accredited investor definition
In order to participate directly in private equity markets, individuals must meet the Security Exchange Commission’s definition of an “accredited investor.” Now, new rules have expanded that definition, opening a few more opportunities for investment in private equity and hedge funds.
Previously, requirements were based largely on financial status. An individual needed an annual income of at least $200,000 (or $300,000 combined with a spouse) and a net worth of at least $1 million, not including one’s primary residence, to qualify.
Effective late last year, the SEC ruled that investors who can demonstrate a certain level of professional knowledge or certification will also be able to participate in private market alternative assets.
A statement from the SEC indicated that wealth would no longer be the sole means of establishing accredited investor qualifications. Now, individuals who do not meet those wealth standards qualify if they hold certain certifications, including Series 7, Series 65 and Series 82 licenses. The rule also broadened the definition of accredited investor to include limited liability companies, family offices, Native American tribes, and governing bodies with at least $5 million in assets or assets under management.
Some critics suggest the requirements are still too restrictive and limit capital available to smaller companies. Conversely, others argue the standards are too loose because they have not changed with inflation, thus allowing more investors to participate in risky private investments.
Investors who do not meet the accredited investor definition can still participate in alternative assets through private equity exchange-traded funds. Talk to your advisor about diversification strategies and whether they make sense for you.