Why people still don’t understand digital assets

I read a recent article describing digital assets. The article described the need to create a plan for bequeathing one’s online presence to loved ones and talked about the need to wrap up old Facebook, Twitter and social media accounts by including these “digital assets” in one’s Last Will and Testament.

It’s not just social media accounts, it can be blogs or financial accounts or other things that you can access on your phone or computer,” said Elizabeth Volney, an estate attorney who recently gave a lecture on the subject. “We have tried to adapt our documents to provide access to these accounts both during incapacity and death.”

The recommendation that comes from the article is that you should “hand over the password to your loved one, and let them take care of things when you pass away.”

This is such a simplistic view of the minefield of digital assets, that I need to expand on the issues here.

I always struggle with the lumping together of “digital assets” because I think there are three main categories and each comes with their own considerations:

The first are the accounts that just need to be handled for housekeeping; email accounts, your Linkedin profile, Twitter, Instagram, Facebook, Tinder etc. These should all be closed down otherwise there are uncomfortable reminders; I have two LinkedIn connections who have passed away…it’s awkward and disturbing every time I review my contacts. Most social networks however, now have policies for these and they are well illustrated in this infographic. The situation most commonly cited to highlight this issue occurred in 2004 and 2005 when the family of Justin Ellsworth, a deceased U.S. Marine, successfully secured a court order to force Yahoo to give the contents of Justin’s email account to his family. Keeping account ID’s and passwords in a safe place to be discovered by your loved ones is one approach to handling this type of “digital asset”.

But then there are the accounts that have sentimental value that really should be passed down to a named beneficiary. I have all of my family photos in an online application called Lifecake and I don’t want these to just disappear. iTunes music libraries and eBook accounts should also be preserved if possible, after all, a generation ago people would leave their book and record collections to their children. You may have a genealogy account at ancestry.com, or used another online service that has been developed over a period of time with a great deal of effort. It is a shame to see these disappear and there may be somebody in the family who would like to take them over. It is even possible that different family members may argue over who should take control of these accounts, so although there is little financial value, there is still an argument for including these items in your Will so that it is clear who will take control of them after you have passed away.

However, the third category is the financially valuable digital assets and these can create really significant challenges. If your estate is to be divided equally between your children, but your estate includes some prestigious domain names registered at GoDaddy, a viral video on YouTube, a blog that generates Adsense revenue, some digital downloads at eJunkie, an affiliate account through Clickbank, a PartyPoker account with a significant balance etc how are these going to be divided? It is conceivable that your single most valuable asset in your entire estate is a domain name that could expire if nobody assumes control of it. There was an interesting article recently about a man who threw out an old computer with $7.5 million worth of Bitcoins on it. The inheritance and taxation laws are going to have to move faster to keep up with these innovations; most estate planning lawyers simply don’t understand what some of these things are.

There are of course digital assets that blur the lines between these categories; like email addresses or online identities that may have little financial worth but certainly have value to the family. It is only a matter of time before we see siblings fighting over the family twitter handle. @smith would be pretty cool to have, so it really needs to be in the Will along with the porcelain tea pot that nobody really cares about anyway.

There is much more to the handling of digital assets than keeping a list of User ID’s and passwords. At LegalWills.ca, LegalWills.co.uk and USLegalWills.com we partnered with MyLifeLocker to make sure that this piece of the puzzle is taken care of. We also have a proprietary keyholder® mechanism to ensure that no online accounts are left undiscovered by your Executor. But you have to give very careful attention to the distribution of these digital assets and make sure that the true value of each asset is properly understood. If certain digital assets have financial value, it may be appropriate to list them in your Will.

What is your most valuable digital asset and do you know who will own it after you have passed away? Do you have any digital assets that may result in a family squabble? I would love to hear about them as I am sure I have missed some potential issues in this blog post.

 

Don’t let other people’s mistakes put you off preparing your own Will.

Every once in a while there is an unfortunate case of somebody making a mistake when attempting to prepare their own Will. A recent case in Florida has been reported, quite literally, thousands of times through different law blogs as a “cautionary tale” of how things can go badly wrong when you try to prepare your own Will. You can look up the case of “Aldrich v. Basile” and you will see about 100,000 results with headings like

“Case Illustrates Dangers of Executing a Will Without Legal Assistance”
“Do-It-Yourself Wills: Cheap Now, Expensive Later?”
“Why Preprinted or Online Legal Forms Are Not Advisable”

I’ll explain my position on this very sad situation by firstly summarizing exactly where Ms Aldrich went wrong. In an E-Z Will kit form she listed some specific assets to go to her sister and if the sister were to predecease her, the list of assets would go to her brother. Then a few years later her sister died, so she updated that Will with a handwritten note that stated;

This is an addendum to my will dated April 5, 2004. Since my sister Mary jean Eaton has passed away, I reiterate that all my worldly possessions pass to my brother James Michael Aldrich, 2250 S. Palmetto, S. Daytona FL 32119.

There were two issues; firstly her original Will only covered the list of assets, not everything else. However, even though the handwritten update covered “all my worldly possessions” it was only signed in the presence of one witness not two and so was not accepted by the courts.blank paper

With respect to the first error, this is unfortunately a limitation of blank form kits, and this is why we steer people away from them – It is easy to forget things. It is important to not confuse a blank form kit with a fully interactive service that guides you through the process and checks for errors. When a person makes a mistake with an E-Z Will kit form it is a warning bell for using this type of form, not for trying to prepare one’s own Will using interactive software. If you use a service like ours this mistake is absolutely impossible to make.

But I personally feel that the second error reflects badly on the Florida Supreme Court. In their ruling the judge stated that

Unfortunately, I surmise that, although this is the correct result under Florida’s probate law, this result does not effectuate Ms. Aldrich’s true intent. While we are unable to legally consider Ms. Aldrich’s unenforceable handwritten note that was found attached to her previously drafted will, this note clearly demonstrates that Ms. Aldrich’s true intent was to pass all of her “worldly possessions” to her brother, James Michael Aldrich

Thankfully an increasing number of jurisdictions have introduced laws that try to respect the intent of the testator and they will not allow true intent to be over-ruled by a technicality. In this case, everybody knows what Ms Aldrich meant, everybody knows what she wanted, but the lawyers and the courts successfully managed to throw this out. The court declared that Ms Aldrich had died without a Will and gave a share of the estate to her nieces according to intestate law.

The judge actually stated that she was deciding the case contrary to the testator’s “true intent”, Ms Aldrich did not want any of her estate to pass to her nieces, they were never mentioned in any of her documents. One legal blogger was very critical of the decision claiming that;

Apparently, the court wished to inflict post-mortem punishment on the testator for engaging in DIY estate planning….The court blamed the “unfortunate result” on the fact that Ann did not seek legal assistance in creating her estate plan. 

So now to the reaction and estate planning lawyers are collectively rubbing their hands with glee and providing all kinds of examples of why trying to prepare your own Will is a mistake. Like this one

A lot of times clients come in saying they want something very simple,” says Rubin. “But then you find out their daughter had a baby by artificial reproductive technology. If the definition of ‘child’ in your will isn’t up-to-date, you could disinherit your grandchild.

The claim is nonsense. This clearly does not happen “a lot of times” and perhaps the conclusion should be that if this situation does not apply to you, you can safely go the “do-it-yourself” route.

They then go on to say

These are the conditions each state requires for a will to be considered valid. The standard in Florida is two witnesses.“Every state has its own quirky rules,” cautions Rubin

Actually…it’s not that quirky, every single state requires two witnesses. Across the internet, the scaremongering goes on with countless obscure examples of how attempting to prepare one’s own Will is going to lead to trouble. As an aside, the vast majority of challenges are to Wills prepared by estate planning lawyers but we rarely see “a cautionary tale for what can happen if you use a lawyer to prepare your Will”.

The fallout of this unfortunate case leads me to the following recommendations;

Do not be scared off from preparing your own Will. It isn’t as complicated as some people want you to believe. If you have a complicated family situation then you need legal advice, but most people do not. From time-to-time there will be an article in the media about somebody who made a mistake with a Will kit. This does not mean that preparing your own Will is a bad idea. Over 65% of people do not have an up-to-date Will in place, and many of these are under the mistaken impression that you must use a lawyer to prepare a Will. You should take things into your own hands and make sure that your Will is in place.

Do not use a blank do-it-yourself Will kit, there is a very significant likelihood that you will make a mistake or not cover all situations that need to be covered. Blank forms have way too many spaces that have to be completely correctly. When you see a Will completed through our service you can appreciate how complicated the document can be, with various trust clauses and powers to the Executor. If you do not have a legal education you would not be able to create a well drafted Will using these kits.

Do not use a handwritten note to express your wishes; it opens your estate up to challenges and it may not fulfil the requirements of a Last Will and Testament or Codicil.

Do not use a Codicil to make an update to a Will. Just create a new Will. If you use an online service like ours, you can just login, make the change and print off a new Will. It’s easy.

I just wish that common sense would have prevailed and that the courts would have respected the final wishes of Ann Aldrich. It’s a real shame that they wouldn’t.

Tim Hewson is the President and Founder of the LegalWills group of companies. Offering online interactive estate planning services through LegalWills.ca, USLegalWills.com and LegalWills.co.uk. Founded in 2001, these services have become market leaders helping hundreds of thousands of people prepare their important legal documents.

How to forge a Will

The title of course is tongue-in-cheek, but it seems that from all of the news lately, there has been a sudden spate of estate disputes and legal challenges. Either because a Will has been forged, signed under duress or written by somebody without the capacity to write the Will. These cases demonstrate that the prospect of an inheritance can bring out the worst in people, create rifts in families, and can result in very expensive legal battles that serve nobody other than the lawyers.

It starts with the bizarre trial of Peter/ Tony Chan who was convicted of forging the Will of Nina Wang – once Asia’s richest woman. Trying to forge a $4 Billion Will is a tricky crime to get away with, and it resulted in a 12 year jail sentence. But Mr Chan was not alone. Next was the Will of Harinder Singh Brar, Maharaja of Faridkot, with another $4 Billion estate. This time it was a team of staff members who connived to leave the entire estate to themselves in Trust, but the courts ruled that the Will was made under duress and therefore illegal.

However, it’s actually more likely that a Will would be manipulated or forged for a more modest estate, and this was the topic of a recent article in the Daily Telegraph discussing the rapid increase in legal battles over estates. There are three key reasons for this rise; firstly, the size of the average estate in the UK has risen from £150k to £265k in a decade. In addition, people are starting to depend on an inheritance as part of their own financial plan – consumer debt is rising and many are banking on an inheritance to get themselves out of debt. And finally, society in general has become more litigious over the years.

Contrary to popular opinion, writing a Will through an online service does not make the document any more likely to be challenged. In fact, just recently, a Will drawn up by a solicitor while in the presence of one daughter, was deemed invalid as the testator did not have mental capacity to write the Will. Turns out that the daughter (who happened to be a magistrate) put pressure on her mother to disinherit the other children. Oh, and she had to pay back the £18,000 in gifts she received in the last few months of her frail life. The real tragedy of this story though is that the estate was worth about £200k, and the whole lot disappeared in legal fees. The whole estate went to the lawyers.

There are some lessons to be taken from this troubling stories. Most importantly, write your Will when you are young enough and have the mental capacity to do it. People procrastinate with their Will writing, thinking that they will prepare it when they are older. We hear all the time people saying “fortunately, I don’t need a Will yet?”. Obviously you don’t, you don’t need a Will until you die, but it’s too late to write one then.

This is one of the reasons that online services like those offered by LegalWills.ca, USLegalWills.com and LegalWills.co.uk are becoming increasingly popular. They allow you to prepare your Will in your own time, on your own terms, but also allow you to update your Will throughout your life, as often as you wish. It makes sense to prepare a Will today, and then just update it as circumstances change.

Bleak House and your Last Will and Testament

I was recently reminded of the Charles Dickens novel Bleak House, which centres around the court case Jarndyce and Jarndyce. For those of you unfamiliar with the story; it tells of a legal battle over a large inheritance which is dragged on through the court system. In fact, it continues for generations until the case is finally closed.

as well as he could make out, it was over. Over for the day? we asked him. No, he said, over for good. Over for good! When we heard this unaccountable answer, we looked at one another quite lost in amazement. Could it be possible that the will had set things right at last and that Richard and Ada were going to be rich? It seemed too good to be true. Alas it was! ……”Mr. Kenge,” said Allan, appearing enlightened all in a moment. “Excuse me, our time presses. Do I understand that the whole estate is found to have been absorbed in costs?” “Hem! I believe so,”

The lawyers continued to fight the battle over the inheritance until the whole estate was absorbed in legal fees, at which time, the lawyers all stopped working on the case !! Jarndyce

The novel was written in 1853, in a very different World to the one we live in, but just yesterday I saw that, generations on, the legal profession still works in the same way. The bankruptcy of Nortel has so far racked up $755M in legal fees while the parties argue on how to divide $9B in assets, and after nearly a billion dollars in legal expenses, the proceedings are no closer to a resolution. The lawyers have no vested interest in drawing the case to a close as they can continue to bill $1000 an hour in fees.

So what does this mean for your estate? and how can you minimize your assets ending up in the hands of litigating lawyers?

  • Write your Will, make it clear and unambiguous.
  • Do not use a blank do-it-yourself form from a bookstore
  • Sign it according to the signing requirements in your jurisdiction (usually two witnesses must sign, who have no vested interest in the contents of the Will).
  • Write your Will while you are young enough to have the capacity to understand it.
  • Update your Will as soon as your personal or financial circumstances change.
  • Never make an update to a Will by writing on the document or putting lines through sections. Always prepare a new Will when you want to make a change.
  • If you have very complicated affairs, consider getting legal advice when preparing a Will.

It is a myth that preparing your own Will means that your estate is more likely to face a legal challenge. If you use an interactive online service like the ones offered at LegalWills.ca, USLegalWills.com and LegalWills.co.uk you can create a Will as complete and legal as a Will prepared by a lawyer or solicitor. In fact, if you look at the legal fights over Wills, they are frequently prepared by lawyers and we’ve discussed many in this blog, for example Huguette M. Clark, and Anna Nicole Smith. Often though, problems arise from Wills not being updated properly because circumstances change, and a return to a lawyer’s office is too expensive or inconvenient. This is why many people are turning to online services like those offered by LegalWills because it allows them to prepare the document conveniently, but more importantly, these services allow the users to update their document at any time, as often as they wish. In many ways, the services reduce the likelihood of a legal challenge, and the loss of the entire estate to legal fees.

The importance of a verbal legacy

It happens all the time; a person dies and the debates immediately start around who was promised what. When there is no Last Will and Testament, these discussions often get more fractious. How important is a verbal promise to leave a certain item to a particular individual? well, not very important at all as it turns out. It actually means almost nothing at all.

There are a number of issues with relying on verbal promises. The most obvious is that the same item can be promised to many different people over time and it is impossible to keep track of who was last promised each item. This is why a verbal commitment to leave something to an individual cannot form part of an estate plan. More importantly, if a person dies without a Will, it doesn’t really matter who was promised what; the courts decide how an estate will be distributed and this will be according to the intestate laws of that particular jurisdiction. If a neighbour was promised a prized antique, there is almost no chance of them receiving it unless the legal beneficiary feels particularly charitable after the estate has been distributed. 

If there is a Will, then the estate is distributed according to the instructions within the document. There is absolutely no discretion to overrule the contents of a Will based on a claim that a verbal promise was made.

Even if the remaining loved ones think they agree on how Aunt Milly’s items will be shared; if there is a Will, this document will determine the distribution, if there is no Will, then the courts will decide.

This article was actually prompted by a personal experience of regularly visiting a Great Uncle over a period of many years and during every visit being told that a certain family heirloom was to be passed down to me. Even if he really wanted this to happen and even if he told his main beneficiary that this should happen, it was not written into the Will and I never saw this family heirloom; it was sold off. This can come as a surprise to a person who has been told a hundred times that a certain heirloom will be coming their way.

So verbal legacies count for very little in the world of estate planning. The only thing that matters is a signed, witnessed, Last Will and Testament. Do not rely on promises made over the years and do not assume that an estate can be sorted out amicably without a Will. There is never an advantage to not preparing a Will, and verbal commitments mean nothing.

“Fortunately I don’t need a Will yet!”

This was a comment left on our Facebook page recently; “fortunately, I don’t need a Will yet”. Which is somewhat akin to saying I’m not putting my seat belt on because I don’t need one yet. Technically it is correct of course; you don’t need a Will until after you die. The problem is, that it’s just a fraction too late to think about putting one together at that point. Fortunately, there’s no restriction on how far in advance you can write your Will, in fact, today would be a really good time.

With 70% of adults not having a Will in place, it’s clear that many people are adopting the approach of planning to write a Will just before they die, and the associated assumption is that they will die when they are old….probably years from now. However there are a few very serious issues with taking this approach;

  • Most of us are not given due warning when we are about to die. Accidents happen, and it’s just wishful thinking to assume that we will all have the time to sit and write a Will a month or so before we pass away.
  • Moreover, at the time when we know that we are about to pass away, we may not have the capacity nor the facilities to write a Will. If you are planning to use a lawyer to prepare your Will you will either have to book an appointment or ask the lawyer to visit you. If you are planning to prepare your own, you may need a computer, printer, witnesses and the instruments that are at hand now, but may not be in your last few weeks.
  • Most importantly though, a Will written on one’s deathbed is more likely to be challenged because it was not prepared with a rational lucid mind. Knowing that you are close to death may have an impact on your ability to think straight, and that’s not even taking into account any medications that you may be on at that stage. You have to be capable of making sound judgements when preparing your Will. In fact, you must have the mental capacity that you have right now.

This is why it makes sense to prepare your Will now rather than waiting for this imaginary day in the future when you become more sensitive to your mortality.

The other mistake that people often make is to wait until they have stability in their life. We often hear things like “I’m not going to prepare my Will now because we’re planning to start a family next year”. There is no benefit to waiting until life has a perceived stasis. In fact, when you use a service like the one at LegalWills you can make unlimited updates to your documents at any time. When a change occurs in your life, you can just login, make the change to your document and create a brand new Will. If you wait until your circumstances will not change, then your Will is likely to never be written.

There is really no advantage to procrastinating, and many disadvantages. As the proverb says “the best time to plant a tree is 20 years ago, the second best time is now”.