Blogs from 2017

What is a digital asset and why do I care? If you have an email account, social media access, or use your computer to access accounts – you have digital assets. As we go through our day-to-day lives, we do not often consider – what happens to these accounts when I die or become incapacitated?

WHAT IS A DIGITAL ASSET?

A digital asset is anything that exists in a computer format (sometimes referred to as binary code format) that also comes with the right to use. If data does not include the right of use, it is not considered a digital asset. Simply put, Digital assets include but are not exclusive to: digital documents, audible content, motion picture, and other digital data such as email accounts, online financial accounts, personal blogs, and social media and networking websites, as well as computer accounts and passwords.

WHY DO I CARE?

What happens when you can longer access your digital accounts? Is important information lost forever? Are your social media accounts left on forever? What if you wanted someone to be able to access, control, turn off, or otherwise manage your digital access once you were no longer able to do so yourself?

Planning for digital assets is important because:

• It makes things easier on loved ones
• Prevents losses to an estate
• Helps prevent the loss of personal information
•  Prevents information from being revealed to people that you would not want to have access
• Can help to prevent identity theft

HOW CAN I PLAN FOR MY DIGITAL ASSETS?

The law regarding access to another person’s digital assets are scattered and different across the states and many states do not have specific laws addressing the issue. One of the ways that you can plan for your digital assets is to include appropriate language in your will, trust, and financial power of attorney.

By expressing your wishes as to who can access and control your digital assets and in what way you would like them to handle your digital accounts, you have the ability to specify your wishes for the disposition of your digital assets. Although some states may not recognize your wishes concerning the disposition of digital assets, Texas DOES recognize the use of these provisions in your estate plan.

In Texas, if you have not used an online tool provided by your digital service provider to state your instructions regarding access and disclosure of your digital asset – then your instructions in your power of attorney, will, trust, or other plan document will control the access to and disclosure of your digital assets. If you give directions directly to a service provided (for example, your email provider), those instructions will supersede any contrary language in your power of attorney, will, trust or other documents. If you provide no instruction at all, the terms of service with each service provider will apply.

WHAT SHOULD I DO?

Despite the differences state-to-state regarding digital assets, the best action is to be proactive. You should state your wishes as part of your estate plan. Although not all states have the laws in place to officially recognize estate planning regarding your digital assets, a majority of states have laws in place to recognize these important assets and the remaining states have legislation under active consideration. Let’s talk through how to include your digital assets in your estate plan!

Yes, 529 accounts may be that good. In fact, they may be one of the best ways–and many people think they are the best way–to save for a child’s education. You have a number of options when it comes to saving for college. There are Uniform Transfers to Minors Accounts, education IRAs, and prepaid tuition plans, to name a few. All the options have their advantages, yet 529 accounts seem to combine the best features of all of them to make a fairly good investment vehicle.

The main advantage is that the earnings and most withdrawals are income tax free. Even though you must use after-tax money to create the accounts, all capital gains, dividends, and interest are generally tax free. Withdrawals are subject to income taxes only when they are not used for tuition, room, board, and other authorized expenses.
Another advantage is that gifts to a 529 account not only qualify for the $14,000 annual gift tax exclusion, but you can even make five years worth of gifts today and elect to treat them as being made equally over a five year period. In other words, if a married couple with four grandchildren can give as much as $140,000 to each grandchild right now, for a total of $560,000 to the four grandchildren. Each grandchild will be treated as receiving $28,000 per year for five years.

As far as estate taxes are concerned, all amounts you contribute to the account will be excluded from your estate even though you are the person controlling the account. However, you should note that if you elect to spread your contributions over five years for gift tax purposes, and you die within that five year period, a portion of the gift will be included in your gross estate. You can also designate a successor to yourself to control the account should you die before a grandchild goes to college.

There are a few downsides worth noting. Unlike some of the other alternatives available for saving for college, 529 accounts don’t let you choose the investments yourself. All you can pick is the type of investment portfolio the account will maintain. Also, if you use funds in the account for non-qualified purposes, a 10% penalty will apply to the portion of the withdrawal which constitutes investment gains. Importantly, as well, some of the tax laws which make 529 accounts so great may expire in 2011 if Congress fails to extend the new tax laws, and other key benefits can always be changed during a future session of Congress.

Overall, 529 accounts present you with an unbeatable combination of features. The accounts offer income tax free growth and withdrawals with no gift taxes, no estate taxes, retained control of the funds, and flexibility in the future should circumstances change.

Call your broker or financial planner for details on how to set up the 529 accounts.

GUARDIANSHIP QUESTIONS:

Q.        If my spouse and I die together, where would our children live for the first day or week or month until a judge can determine who will be their guardian? What if there are relatives we absolutely don’t want them to live with, even temporarily?

A.        There is no simple answer to your question because where your children would live depends on when you die and where your children are when you die.

For instance, you and your spouse may be with your children when you both die, thereby leaving them without immediate supervision. Or your children may be at day care, at school, or with a babysitter, and that means the supervision they are receiving would soon be coming to an end. In these types of situations, it is likely that the police will show up and take charge.

The police would allow your children to be placed in the care of a relative or friend as long as they are convinced that person is not unfit to care for the children. The police can use the computer in their car to obtain this type of information. For instance, a relative who has a criminal record would probably not be allowed to take the children.

If your children are old enough to tell the police who to call, the police would likely do so and attempt to leave the children with the proper party. But if your children are too young to know phone numbers, addresses, or even complete names, or if no temporary guardian is available, then the police would take your children to Child Protective Services (CPS).

CPS would care for your children until a suitable family member or friend is located. CPS may place your children in foster care, if necessary, until a judge determines who the permanent guardian will be.

It may be the case that your children are already in the care of a relative or close friend when you both die. In such a situation, the police and CPS may never get involved with the care of the children. Instead, the children would most likely remain with that family until a judge makes a determination as to permanent guardianship.

You mentioned that there may be relatives you don’t want your children to live with, even for a brief period. The problem is that if the police don’t know how you feel, and if the relative otherwise checks out, the children may be placed in that person’s temporary care. Unfortunately, it is too often the case that relatives want to control the children’s inheritance, and they know funds will be available if they are acting as guardians.

You could prepare a witnessed and notarized document stating your intention regarding who you do and do not want to serve as guardian. In fact, that information is often contained in a person’s will. But the problem is that this document will probably not be available when it’s needed. Most people don’t think to send their kids to school, daycare, or a friend’s house with a copy of their will or other legal documents, and even if they did, the police may not be inclined to rely on the document’s validity.

If the police show up and several relatives or friends demand to take care of the children, the police will most likely not make a choice between them, but will instead deliver the children to CPS. An investigation will then be conducted by CPS to determine who is most suitable to take care of the children until a guardian is formally named by the court.

You should be sure to state in your will who you want to serve as the guardian of your children in the event you and your spouse pass away before your children are legal adults–age 18 in Texas. You can name any person you want, and you can also provide a list of persons in order of preference. You can even name two persons to serve, but they must be married to each other.

Please note the answer to your question may be different if you don’t live in a large Texas city.

Secure peace of mind by talking with Jacob or Justin. Call today to book your appointment now. Remember, your first 1-hour meeting is FREE.