Don’t Have Your Head in the Cloud When It Comes to Digital Estate Planning

Most peoples’ lives are connected to a computer, or cell phone, or another electronic device. Today, a large percentage of the population has a social media account. Many individuals have downloaded apps for various purposes such as purchasing music or movies or doing online banking. Cloud based storage systems, cryptocurrency, virtual property, intellectual property rights to blogs and websites, ecommerce accounts like PayPal and Venmo and the abundance of social media apps have exponentially increased the types of digital assets that need to be considered when creating or updating an estate plan.

Federal privacy laws prohibit close friends and relatives from accessing one’s digital assets without proper written authorization.  It is essential for individuals to update their estate planning documents to include their digital assets. Facebook, for example, allows you to name a “legacy contact” who can change your profile and make decisions about your account; however, most digital assets lack this feature. Your digital personal representative does not have to be the personal representative of your estate. In addition to designating your digital personal representative, you should also inform the digital personal representative of your digital asset inventory location.

In 2017, Nebraska enacted a version of the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA). The burden is placed on the decedent to provide directions for disclosure to digital assets and to designate a person to access all digital assets. The Nebraska statute identifies a hierarchy of instructions for treatment of digital assets.

Online service providers can create an “online tool” that acts as a digital power of attorney to specify who has access to the decedent’s site (e.g. Facebook’s legacy contact). If the digital asset does not have an “online tool” then the person can use a will, trust, or another writing to determine what should happen to the digital assets. Because Wills become public documents, the Act allows for individuals to make an ancillary document to the Will that lists passwords and other sensitive information that will not become part of the public record. If none of these steps have been taken with a decedent’s digital assets, then the service provider’s Terms of Service Agreement (TOSA) will govern fiduciary’s access to information.

Inserting a digital asset clause in estate planning documents is necessary; however, it is insufficient to ensure an individual’s digital assets will be protected and passed to their intended beneficiaries. Further complexity in digital asset planning is created because of the myriad of digital assets that don’t fit into a single asset category like “personal property.” An example of an asset that is more difficult to define as an asset class is cryptocurrency.   Digital currency functions as a quasi-digital and financial asset.  For example, due to Bitcoin’s anonymity, there are no beneficiary designations on Bitcoin accounts. Special attention must be given in testamentary documents to specifically address access of these accounts and how they will be distributed through those documents.

Once a person who holds digital assets has designated and given access to the personal representative or trustee, they must also contemplate the tax consequences of those asset.  For example, consideration must be given to the potential capital gains tax on the asset as well as determining the fair market value of the asset to determine if there is an adjusted date of death cost basis.

Due to the variety of digital assets an individual possesses, the owner of digital assets should leave specific instructions on how to delete, memorialize, or designate heirs or legatees of their digital assets. Nebraska law provides the authority to designate a fiduciary to have control over a decedent’s digital assets. Careful planning will ensure the fiduciary is aware of all necessary digital assets and will further ensure proper distribution of those assets consistent with the digital owner’s intentions.

© 2019 Vandenack Weaver LLC

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New Nebraska Law for Accessing Digital Assets of Deceased

On April 13, Nebraska passed legislation for handling digital assets for those that die or become unable to manage their own assets. LB 829 authorizes four types of individuals to manage the digital assets, similar to how they would manage tangible property, for the deceased or incapacitated. This law follows the Revised Uniform Fiduciary Access to Digital Assets Act, as finalized by the Uniform Law Commission in 2015.

Prior to this law, managing the digital accounts of the deceased was difficult and time consuming, especially in situations where the fiduciary does not have the passwords for the deceased. This new law works in conjunction with Nebraska probate, guardianship, trust, and powers of attorney laws. For executors or administrators of deceased individual estates, court-appointed guardians or conservators, agents appointed by a power of attorney, or a trustee, they will now have a legal basis for accessing digital assets.

When a fiduciary is in a situation needing to access the deceased digital assets, the law creates a tiered system for access. Generally, if the digital asset has an online portal maintained by a third party that allows the user to grant access to another, those rules take priority. However, failure to use such an option or if no tool exists, the new statutory power granted to the fiduciary will apply.

© 2016 Vandenack Williams LLC
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Why to Have Your Powers of Attorney Drafted by a Qualified Attorney

Powers of attorney are very important. Legal powers of attorney identify who will act for you legally. Health care powers of attorney identify who will make health care decisions for you when you can’t make them for yourself. These are difficult and IMPORTANT life moments.

Because such powers of attorney matter most when you can’t act for yourself, it is important that your documents are legally accurate. Many well meaning agencies hand out forms and information about powers of attorney and forms abound on the internet. The sad fact is that forms are often incomplete, inaccurate and lack the counsel that comes when you consult with a qualified attorney who has prepared the documents for many clients and worked with many clients in times of incapacity.

Properly considered and drafted powers of attorney are not that expensive relative to the issues that arise when your agent does not have the powers needed or in some cases has too much power. Why would you spend significant sums on long term care and medical care but not be certain that your powers of attorney properly protect you when you can’t protect yourself?

This blog is being written as a reaction to one too many situations in the past six month where an elder client was left without the care they needed due to a form power of attorney or where an elder client was taken advantage of by an agent with too much power because “forms” were used instead of legal support.

© 2014 Parsonage Vandenack Williams LLC

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IRS Indicates Agent Under Power of Attorney Is Subject to FBAR Reporting Requirements

In its most recent version of its “FBAR Reference Guide”, the IRS indicates that an individual will be deemed to have “signature authority” over a foreign financial account if the individual is named as agent under a power of attorney which includes the power to exercise signature authority of a foreign account owned by the principal. The IRS indicates this is true regardless of whether the power has actually been exercised.

Following the updated guidance, it is imperative for agents under powers of attorney to inquire as to whether the principal has signature authority over a foreign financial account subject to FBAR reporting. Failure by the agent to report the agent’s signature authority over the principal’s account can result in imposition of the extreme civil and criminal penalties that may be imposed due to the failure to comply with the FBAR requirements.

 The FBAR reference guide is available at: http://www.irs.gov/pub/irs-utl/IRS_FBAR_Reference_Guide.pdf. The power of attorney example is found at page 5.

© 2014 Parsonage Vandenack Williams LLC

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Should I Have a Power of Attorney for Health Care?

A Video FAQ with Mary E. Vandenack.

In general, what a power of attorney for healthcare does is to create an agent that will be between you and the health care system at such a time that you become incapable of making your health care decisions. There are certain things you can specify in a document that don’t require an agent, but in most cases you will be well-served to have someone between you and the health care system if you are unable to make decisions for yourself.

In executing a durable power of attorney for healthcare and naming an agent, you should give careful consideration to what you would want to happen in an emergency, in the event that happens, and make sure you inform your agent of those desires.

© 2014 Parsonage Vandenack Williams LLC

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Who Should Be My Power of Attorney?

A Video FAQ with Mary E. Vandenack.

There are 2 different types of power of attorneys to consider when making that decision. The first type is a legal power of attorney. When you execute a legal power of attorney you are giving someone the ability to act for you on financial matters, to sign checks for you, or to enter into contracts for you. That power of attorney or agent needs to be somebody you have a lot of trust in in that regard.

The other type of power of attorney is a power of attorney for health care. That is a death-bed type of decision or one in which you are very ill or incapable of acting for yourself. You’re going to want to choose someone who is knowledgeable about what you want in those types of circumstances and that you feel will be an active advocate for you with the health care system.

© 2014 Parsonage Vandenack Williams LLC

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What Is the Difference Between General and Limited Power of Attorney?

A Video FAQ with Joshua A. Diveley.

The purpose of a power of attorney in general is to provide an agent authority to act on your behalf, so the difference between the general and the limited is that the general provides all the statutory authority allowed by law. For example, in Nebraska the general power of attorney will provide all kinds of authority for matters related to real estate, financial accounts and tangible personal property.

A limited power of attorney will be just that. It will be limited on what authority you do have to act as agent. For example, if you are out of town for a weekend and you are selling your house and you need to have somebody to represent you at closing, you can set up a limited power of attorney to just represent you on that one transaction rather than having general authority over all your bank accounts and that sort of thing.

© 2014 Parsonage Vandenack Williams LLC

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