Estate planning for digital assets

As our lives, or at least our personal information, become more electronic and computer-based, many people begin to wonder about the digital information they have stored on computers, websites, or "in the cloud." Recently, a client asked about who owns those assets after his death, how intellectual property rights were determined, and who had authority to access his information after he was gone.

All good questions and topics for consideration. Up until now, many of us attorneys advising clients simply shrugged and thought "don't we have more important things to deal with." However, a person's digital information may be very valuable, either setimentally or even financially.

The December 2010 issue of Wisconsin Lawyer, contains this excellent article examining issues and ideas related to dealing with one's digital assets, especially after one's death. A couple basic options include leaving a list or instructions about your information for your family members to follow after your death. A second, legal option may be to leave a list, that is incorporated into your will, and will be honored in the same way as a list of tangible personal property.

Review of guide for gay and lesbian couples

My book review of Nolo publisher's "A Legal Guide for Lesbian and Gay Couples" appears in the December 2010 issue of Wisconsin Lawyer. In summary, the guide gives some basic information for couples or attorneys, but sometimes the information is a bit outdated or better available elsewhere, like specialized online sources. Because the guide is written for a lay reader, it is probably not very useful for attorneys (who are the reading audience of my review) unless it is used as a very basic starting point for understanding issues for lesbian and gay couples.

Who will draft your will?

There are many options for prepare one's will and other estate planning documents. And, of course, many do-it-yourself options are less expensive than paying an attorney a few hundred (or even a few thousand) dollars to do that for you. In that vein, consider this essay about will-preparation software from the New York Times. When the writer tried four different software programs to draft her own will, she got mixed results--some perfectly acceptable, but some not so much.

In the end, the documents themselves are only part of the picture, whether you prepare your own estate planning documents or have an attorney draft them for you. The BIGGEST benefit of having an attorney assist with estate planning is the ADVICE. Legal counsel is especially important in complex situations like remarriage, potentially disagreeable family members, or a likely beneficiary with disabilities. An attorney provides the options, answers, and information for planning how one's estate will be handled and how surviving family members will be provided for. Then, the document drafting follows the conversation, with documents to carry out the plan.

Any lessons for attorneys from the Brooke Astor case?

By now, the verdict against the Brooke Astor's son and the attorney who drafted her will is old news. However, attorney's around the country are evaluating the way they serve clients in preparing estate plans, and not just for clients with mega-sized estates that make the news.

The New York Times relates the scrutiny some attorneys are feeling, even if it is self-imposed:

[L]awyers and those in the academic world say [the conviction of Astor's son and attorney] is likely to force estate planners in New York and elsewhere to take extra precautions when balancing their clients’ wishes and competence.

The law generally requires a very low standard of mental capacity to execute a will, and there are few hard and fast rules that lawyers must follow when ascertaining a client’s competence.

Some experts said the Astor case could motivate lawyers to use additional safeguards to ensure that their clients are competent when there is any doubt.

Although attorneys should, as a matter of course, assure that their client have the mental capacity to properly execute their estate planning documents, cautious attorneys may implement even greater safeguards like mental evaluations or video recording of signings.

Recently, Money magazine ran a story, "Rethinking your Estate Plan." It offers basic information and considerations, especially in light of the current economic environment and tax code.

You don't have to be a millionaire to worry about leaving a smaller legacy than you'd hoped - if you can leave one at all. According to estimates by the Federal Reserve, average household net worth dropped nearly 23% from a survey period starting in May 2007 to October 2008. That happened just as many Americans began feeling more pressure to help their kids who are struggling in this rotten economy.

To counter the uncertainty of the economy and build some reassurance in the future, the article suggests looking at charitable giving, estate tax consequences, how your plan to distribute your estate, whether a trust is a suitable option, and the frequency of reviewing and updating your plan.

By way of self-serving note: the article suggests you work with an attorney and "contact your attorney every three years or so and ask whether your plan needs updating."

The uncertain definition of "competence"

The excellent entries continue on "The New Old Age." Here is the discussion on mental competence, the legal way of determining whether someone has the cognitive ability to make decisions for oneself, usually meaning signing documents. Often, that determination varies even by the type of decision to be made: for example, voting, making a will, or entering into marriage may all have different thresholds for "competence."

The entry in "The New Old Age" considers competence in the context of non-deceased wealthy philanthropist Brooke Astor's later years when she had Alzheimer's disease. Here's a bit of the entry:

. . . Alzheimer’s sufferers may experience days of comparative lucidity alternating with days of bewilderment. Cognitive ability “may even vary throughout the day,” said Dr. Ronald C. Petersen, a neurologist at the Mayo Clinic who chairs the medical and scientific advisory board of the Alzheimer’s Association. “A person might be
relatively sharp in the morning and by evening be quite confused.”

Caregivers are familiar with the late-day agitation called “sundowning.” Medications, disrupted sleep, social stimulation and even a minor cold can affect these diurnal cycles. Though a variety of doctors are expected to testify during the two-month trial, they may shed little light on whether Mrs. Astor had, in legalspeak, “testamentary capacity” on a particular January afternoon in 2004, when she altered her will.

. . .

The bar for establishing testamentary capacity is set fairly low. The person in question needs to have a general understanding of her assets, know to whom bequests are normally left, and be able to state what she wants to do and explain why.

Preparing your will--good ways and not so good ways

A recent Associated Press story described the various options for a person to write a will. First, the article stressed the importance of a will, "Even if you voiced your wishes to your family, the bottom line is that a proper will bestows a certain authority on your decisions."

The article continues by explaining that a person can hire an estate planning attorney, prepare a will online (or with computer software), or simply write one out for oneself. Here are the pros and cons for each method:

Estate planning attorney--

Hiring an attorney is probably the best approach if want to be sure you're making the most of tax and property laws.

Estate and trust attorneys should also be able to raise financial repercussions you didn't consider. Getting a lawyer's counsel is an especially good idea if you have a sizable estate or anticipate your wishes might trigger a family spat.

Even if your assets are very modest, you might simply get peace of mind knowing a professional is behind the wheel.

Online wills--
A basic will can easily be under $100 in cost. However, "the drawback of online will sites is that they don't offer personalized advice."

Do it yourself--
Although this version is easy and free, it may not be honored in some states if written by hand or if witnessed improperly. Furthermore, "it's easy to forget even basic details every will should include."

A Florida attorney did some research regardin online and software estate planning documents. See his blog entries on the topic here.

As a final aside, consider the backstory and the nearly 30-year saga of an estate in New York, as told by the New York Times. In a stunningly long-term family dispute concerning the dead man's will and his real estate holding, two sisters alleged their mother and brother conspired to divert the sisters' rightful share of their father's estate.

My "simple probate" article from the Wisconsin Law Review

In case you are suffering from insomnia, I offer this aid--my published student comment from the Wisconsin Law Review, "A 'Simple' Probate Should Not Be This Complicated: Principles and Proposals for Revising Wisconsin's Statutes for Probate Summary Procedures." Granted the topic has limited appeal (probate attorneys, possibly legislators with too much time on their hands, and the aforementioned insomniacs), but the article explains the quirks of the current system in Wisconsin for settling small estates and offers ideas for improvements.

The article considers "law-in-action" (which is a hallmark of the University of Wisconsin Law School approach) as evidenced by the variations from county to county and from attorney to attorney in how this system is used by practitioners.

New link--Wills, Trusts & Estates Prof Blog

If you are looking for daily news from the mass media and legal sources on all things related to estates and probate, check out the blog by Texas Tech University School of Law professor, Gerry W. Beyer, called Wills, Trusts & Estates Prof Blog.

Most days, Professor Beyer has multiple posts with news from around the country. Some of the news is interesting to any reader (like Anna Nicole Smith's estate--see, now you're interested!). Some posts are decidedly for estate and probate wonks like attorneys and law students, but read a few posts and even the most legally intricate items can hook you in.

For future reference, I've added a link to the professor's blog to my list at the right side of Live a Beautiful Story.

Gender, wealth, and inheritance

An essay on Slate.com considers various aspects of inheriting wealth. The female writer discusses the expectations and burdens of a family's presumed dynasty, especially how things like "philanthropy, longevity, and serial marriages begetting multiple heirs have eroded patriarchal estates."

In the end, the trouble and heartache may outweigh the financial benefit of the estate. This is especially true if the will or trust was not well planned. Consider the following excerpt:

Economists say there are four bequest motives: accidental, egoistic, strategic, or altruistic. People leave money to others because they are bighearted, manipulative, self-centered, or disorganized. Endowing a middle-aged offspring's undercapitalized retirement is not on the list. As my contemporaries take, well, stock, I hear frequent tales of affluent fathers lacing their legacies with dissension, hurt feelings, or misunderstanding by passing on assets in an ungenerous or disorderly manner. Unsettlingly, their daughters find themselves unraveling wills, insurance policies, and asset preservation plans rather than simply mourning their parents.

Based on her experience, the writer recommends personal financial independence as the key to a secure future, rather than relying on a family windfall. Good advice for everyone no matter our stage in life.

(Photo by Eleaf; used by permission.)

Glossary for wills

Sometimes it seems like lawyers speak a language all their own. Over the centuries of English and American law, traditional terms and "legalese" have formed around how people inherit property, whether by a will or in cases where there is no will.

Here is a glossary of a few terms.

Will: (1) A document by which a person directs his or her estate to be distributed upon death (Black's Law Dictionary). (2) Under the Wisconsin statutory definition, a will includes any addition or amendment (usually known as a "codicile") made after the original will. Even though making a will seems straight-forward to most people, formalities of how it is written, who witnesses it, and how it may be changed or revoked are all part of state law. For example, here is a link to the Wisconsin statutory section on wills.

Testator: A person who has made a will; esp., a person who dies leaving a will. (Black's Law Dictionary). Likewise, "testate" is the state of dying with a valid will, see "intestacy" below. This is a simple definition, but the term is not in our everyday vocabulary.

Heir: (1) A person who, under the laws of intestacy [see definition below], is entitled to receive an intestate decedent's property. (Black's Law Dictionary). Although many people consider any descendant who may receive a decedent's property, either by will or by law, to be an "heir," the term only applies to those who receive when there is no will. Under Wisconsin law (and probably most other states), a surviving spouse is an heir.

Beneficiary: (1) A person nominated in a will to receive an interest in property other than in a fiduciary capacity. (Wis. Stat. 851.03). (2) Black's Law Dictionary offers a broad definition that includes a person who receives a benefit under any type of legal arrangement, such as will, trust, insurance policy, or guardianship. (Of course, Wisconsin statutes define "beneficiary" differently in different contexts too, but for probate purposes, it is defined as in (1).)

Intestacy: The state or condition of a person's having died without a valid will. (Black's Law Dictionary). How an intestate person's estate is distributed is determined by state law. Here is a link to Wisconsin statutes for intestate succession.

Issue: Descendants of a person, i.e., children, grandchildren, etc., including those who were adopted or born outside of marriage. (See, e.g., Wis. Stat. 851.13). Again, the concept is not difficult, but the term is not in our everyday vocabulary.

Residue: The part of a decedent's estate remaining after payment of all debts, expenses, statutory claims, taxes, and testamentary gifts have been made. (Black's Law Dictionary). This is the part of a person's estate that is "left over" after specific distributions (like "I give my diamond brooch to my granddaughter Susie") are made. For most people, this is the bulk of their estate, which is given in proportions rather than in set amounts because the value or nature of the estate is not known until the testator's death.

Executor (also known as "personal representative"): A person named by a testator to carry out the provisions in the testator's will. (Black's Law Dictionary). In Wisconsin, an executor is called a "personal representative," and Wisconsin statute provides for a personal representative's powers and duties.

(Photo by myuibe; used by permission.)

We love our pets... part one

Animal companions enhance our lives in many ways. Consider the many pet photos people happily share in the L. A. Times, for example. By now, nearly everyone has heard of the multi-million dollar bequest Leona Helmsley left to her dog, with billions more designated for a trust for the care of dogs. In the end, a reviewing court allowed the trust, with the ultimate beneficiary of the trust being a pet shelter. A full story about the Helmsley estate appears in the New Yorker.

Where there's a will, there may be a dispute

Parents always want to help their children, and this impulse often extends beyond the death of the parents. However, a will can be more than a means of passing assets from one generation to the next. Therefore, planning and preparation, including communication with the intended recipients (and also expectant, but non-receiving, recipients) is essential for a will to be honored by all involved.

As a recent New York Times story explains,

"Putting off discussion and then springing an unwelcome surprise in a will can poison the reservoir of family joy that parents want to bequeath to the next generation, resurrecting or exacerbating sibling rivalries, especially in blended families created through divorce or remarriage after the death of a spouse.

"Succession is a natural progression, as old as the concept of private property, yet many parents never bother to tell their children about plans for their estate."

Although the story is a good starting point for effective estate planning and family communication, it fails to fully explore the more difficult, but still common, scenarios where family members have no reason to get along in the first place, such as a spouse and children from a second marriage, and children from the first marriage. Also, will disputes can get ugly fast if there are no direct descendants of the dearly departed, and then nephews, nieces, siblings, neighbors, and friends may all be in the mix of those who inherit and those who think they should.

In addition to the linked story, the New York Times offers this special section on wealth and personal finance.

In another post in the near future, I will look at "decoding" the language of wills and estates, by beginning a glossary of terms.

(Photo by twenty_questions, used by permission.)