New Jersey Estate Planning & Elder Law Blog : New Jersey Estate Planning Lawyer & Attorney : Deirdre Wheatley-Liss : Fein Such Kahn & Shepard Law Firm : Elder Law, Tax Planning

What happens to your Facebook chats, Flickr photos,LinkedIn connections, and Twitter witticisms when you die. Will your friends and family have access to your "digital memory"?

The short answer: "No".  in fact, getting friends and family access to your passwords, and thereby your social media identity, is most likely strictly forbidden in the privacy policies of the social media venues you frequent. While you're Personal Representative (executor, trustee, administrator) it may be able to access this information, it may also require a court order to do so.

So what can be done to safeguard your online persona? KATU out of Seattle to reports today that "Digital death coverage is a growing business. There are websites that help you bequeath your accounts to others and inform your online friends that you’re dead."

One such website has the the warm and fuzzy name of deathswitch.com.  Apparently the site will continuously since you an e-mail, and if you don't respond within a certain period of time, carry out your "final instructions". I didn't put a link in, because when I went to the site, it crashed my browser.  This highlights the problems with any kind of "online vault". Who's running it? What are they doing with the information you're putting in there? Are you putting your online passwords in one place, that could then be accessed by other parties for malicious purposes?

A better solution?  Treat your online persona with the same amount of care that you treat your online financial records.  I previously posted You Die - Your Passwords And User Names Die With You (way back in 2007), but the advice holds true today.

The best way to address concerns raised by virtual assets in the electronic age from an estate planning and estate administration perspective is to employ some practical advice:

• Create a spreadsheet of login and password information
• Update the spreadsheet WHENEVER a change is made
• Save the spreadsheet to a removable media format (CD, DVD-R, USB Flash-Drive, etc).
• Store the removable media format in a safe location that your spouse, power of attorney, key adult child(ren) and attorney are aware of (safe deposit box, fireproof vault, drawer in the house where the important stuff is).
• If you password protect the file, make sure that your spouse, power of attorney, key adult child(ren) and attorney are aware of the password
• MOST IMPORTANT - Update the spreadsheet whenever a change is made

Photo Attribution: http://bit.ly/9hz6Kh

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Actor Gary Coleman's life and death were tragic in many ways.  Unfortunately, some of circus that engulfed his life followed after death due to confusing estate planning, as an article by Jun Li  at Celebrity Justice highlights (quoting yours truly).  

Coleman prepared a Will in 2007 using an attorney, leaving everything to ex-girlfriend Anna Grey..  In 2007 he  purportedly hand wrote out a new will (a "holographic will') that left his estate to his then wife, Shannon Price.  He and Price divorced in 2008 but Price claims that had a common-law marriage after that point.  And you thought his exploits during life were confusing.

In some states, such as Utah (where Coleman died) and New Jersey holographic wills are legal, so long as they adhere to certain requirements (all in the person's own handwriting, witnessed by 2 persons being common requirements).  

An issue that often arises with holographic wills, especially those made when someone is ill, is undue influence.  There are very limited grounds to overturn a person's Last Will and Testament.  One of those grounds in undue influence, which is to say that a person had undue authority over another when they were making out their will which may have lead a person to name them as a beneficiary our of fear instead of desire.  This issue can arise frequently when a senior has made a handwritten will disproportionately favoring a caregiver child during a period of illness.  

For those who do wish to make a disproportionate distribution to a caregiver child, be aware that a holographic will may not stand up under scrutiny.  This may be an instance where an attorney should be involved to make sure that your wishes are fully enforced after you are gone.

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USA Today has two stories running today - one Our view on death and taxes: Loopy estate tax policy highlights D.C. dysfunction, and the other Opposing view on death and taxes: End the 'death tax'.  Both totally miss the point that there is a tax as a result of death no matter which way you lean - an estate tax would be assessed immediately, or there will be capital gains taxes to pay for decades to come.

In the first article, they quote a US Senator: "Sen. Jim Bunning, R-Ky., bluntly put it, [George] Steinbrenner "was smart enough to die in 2010."  Really?   Smart enough to die this year?  I am sure Mr. Steinbrenner's family and friends appreciate your comments on their loss.  USA Today then describes why there is no estate tax in 2010, including the recent political battles, and supports an estate tax by saying:

It makes sense to tax inherited wealth, derived simply by having the right parents, at a higher rate than money acquired through hard work or investment. Advocates of repeal rarely say where else they'd get the money to make up the lost revenue, because the inevitable answer is it would come from taxpayers of lesser means.

Ahh, the famous "he who has more must share" argument.

On the flip side, in the second article Rep. Louie Gohmert, R-Texas, takes the position "[t]ime to end the death tax permanently.":

For anyone to reach his hand into a deceased person's pocket and steal is despicable. But, when someone dies and the government steals from the deceased, our laws legalize the theft.

He goes on to tell the story of the family farm that had to be sold to pay taxes.  

Ahh, the famous "how dare they" argument.

How how about a few actual facts to consider.

• The estate tax impacts around 2% or less of the entire US population (for in depth factual information about who pays the estate tax and how generated look at  the Tax Policy Center "Tax Policy Briefing Book" chapter on Wealth Transfer Taxes).  So for the other 98% of US taxpayers, consider the estate tax  a source of revenue to the federal government that you don't actually have to contribute to. 
• In 2009, an estimated less than 100 estates with family farms and small businesses were subject to tax - just 1.9% of all taxable estates.  There are current laws to defer taxation of farms and better ones have been proposed (see Family Farms to be Exempted from Estate Tax?)
• Estate taxes were estimate to generate $13.8 billion in 2009.  The federal government spends $x each year - if estate taxes don't generate part of the income, other taxes will.
• For more facts, look at Truths about the Estate Tax - Debunking the Popular Myths

And the most important, and most glaringly overlooked fact of all in BOTH USA Today articles - if there is no estate tax there is STILL a tax on inherited wealth.  That tax is the capital gains tax. Let's thing - if there is no estate tax all that appreciation on assets that has disappeared for 98% US taxpayers on a person's death will now potentially be subject to tax on the sale of assets.  An while an estate tax may seem harsh in light of the death of a loved one, consider the nightmare of finding proof of cost basis for assets purchased decades earlier.  For more information about the real realities of no federal estate tax, look at Federal Estate Tax "Death" in 2010 Creates Capital Gains Trap.

A thought - let's abandon rhetoric and look at creating good tax policy.

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The State recently announced that Michael H. Bryan will be the new Acting Director of the New Jersey Division of Taxation. Per the press release, Bryan is to lead the Division of Taxation in the direction of enhanced communication and support with taxpayers.

The Division of Taxation could use an internal audit on practices and procedures to act more effectively.  While I don't usually find a problem with written communications, it takes several weeks for them to get from the mail room to the person's desk.  My other issue is on phone coverage - when  I call I am often left to a phone that rings and rings with no answer.  

As Bryan is coming from the private sector (Comcast to be precise) hopefully he will bring some ideas oriented at efficient customer service with him.

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I am delighted to have been asked to serve on the Montclair State University Planned Giving Advisory Council. Through some of my sons activities I have had the opportunity to spend numerous hours on the beautiful campus of this hidden gem of New Jersey.  Although not an MSU Alum, by volunteering for this position I hope to support the Planned Giving Department in educating their alumni base about the value of donations to the university, as well as how to leverage that value by creating tax savings for the donors and their families.

You can find out more here.

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The Wall Street Journal recently ran "Reverse Mortgages Look Better" with the premise that the consumers position has changed from learning about reverse mortgages to shopping for the best product for them.  

Upfront fees on reverse mortgages have fallen substantially in recent months, giving homeowners interested in this product a new challenge: how to compare offers to find the best one.

"Quite a few of the lenders now have reduced the origination fees," says Barbara Stucki, vice president of home-equity initiatives for the National Council on Aging. "Some of them are getting rid of the origination fees. Some are willing to pay some of the mortgage-insurance premium fees upfront."

In my prior post "Reverse Mortgage Basics - A Tool to be Reconsidered" I pointed out the amount of the mortgage does not change from company to company - the amount you can get is fixed based on your age, interest rates, and the appraised value of the house.

What you can shop for is how much getting the mortgage is going to cost you.  This is where can you save huge dollars.  If you are considering a reverse mortgage, meet with brokers from at least 3 different companies.  Some of the questions to ask include "What are the fees, in detail".  For more information, AARP has a Reverse Mortgage Guide.

Thanks to Denis Ciklic at Bank of America for bringing the article to my attention.

 Image: jscreationzs / FreeDigitalPhotos.net

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Why is there an estate tax at all?  An interesting article in The Nation "The Plutocracy Prevention Act" explores the ideological underpinnings of the enactment of the federal estate tax in 1916.

A century ago this summer, Theodore Roosevelt gave his remarkable "New Nationalism" speech about the dangers of concentrated wealth and corporate power. After witnessing a decade of financial corruption and corporate malfeasance, Roosevelt called on the nation to "effectively control the mighty commercial forces which they have themselves called into being."

 Hmm, dangers of a "decade of financial corruption and corporate malfeasance" - sound familiar at all?  Madoff and BP come to my mind.

 The article goes on to provide why the estate tax was structured as it was:

Part of his vision was a "graduated inheritance tax on big fortunes, properly safeguarded against evasion and increasing rapidly in amount with the size of the estate." Congress instituted an estate tax in 1916 that was in place until last January. For most of the last century, the estate tax was a single tax rate. A person with $5 million was taxed at the same rate as someone with $5 billion.

While the author is using this history lesson to underscore their support for the newest estate tax legislation (see prior post "Estate Tax News From Washington") where there is a "billionaire surcharge" I find it interesting that the facts and circumstances that gave rise to the estate tax almost a century ago are so similar to those facing us today.

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A truly valuable article from the AP today "Americans are treated, and overtreated, to death".  The article stares down a hard question - When do we stop focusing on a cure and start caring about how we die?

The statistics are disturbing:

Americans increasingly are treated to death, spending more time in hospitals in their final days, trying last-ditch treatments that often buy only weeks of time, and racking up bills that have made medical care a leading cause of bankruptcies.

More than 80 percent of people who die in the United States have a long, progressive illness such as cancer, heart failure or Alzheimer's disease.

More than 80 percent of such patients say they want to avoid hospitalization and intensive care when they are dying, according to the Dartmouth Atlas Project, which tracks health care trends.

Yet the numbers show that's not what is happening:

_The average time spent in hospice and palliative care, which stresses comfort and quality of life once an illness is incurable, is falling because people are starting it too late. In 2008, one-third of people who received hospice care had it for a week or less, says the National Hospice and Palliative Care Organization.

_Hospitalizations during the last six months of life are rising: from 1,302 per 1,000 Medicare recipients in 1996 to 1,441 in 2005, Dartmouth reports. Treating chronic illness in the last two years of life gobbles up nearly one-third of all Medicare dollars.

Do we want to tell people they can't be treated for their disease because .... (fill in the reason - money, age, citizenship, whatever?).  I don't think so.  However, what is missing from the discussion about terminal disease is how do you care for it as opposed to how do you cure it, because there may not be a cure.  Death is part of life - harsh and unwanted and soul-destroying as it may be, it is and always will be the end.

The article suggest that an answer to all of these disturbing questions may start in a conversation - a real back and forth dialog with all parties being fully informed - of what it means to battle a disease or care for it.  

So where do you go to have that dialog? In a conversation I had with David J. Shulkin, MD, Chief Operating Officer and President-elect, Morristown Memorial Hospital a few weeks ago he suggest patient message boards.  He believes that patients need to be active participants in their own health care, and part of that is leveraging the experience of other dealing with the disease is addressing the "cure" v. "care" question.  

Image: renjith krishnan / FreeDigitalPhotos.net

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A new estate tax reform solution has been proposed by Sen. Bernard Sanders, Tom Harkin and Sheldon Whitehouse billed  the Responsible Estate Tax Act.  According to Steve Leimberg, this newest estate tax proposal is structured as follows:

· Exempt the first $3.5 million of an estate from federal taxation ($7 million for couples). (According to their estimates, this would exempt 99.75 percent of all estates from the federal estate tax in 2011).

· Include a progressive rate structure so that the super wealthy pay more.

     o The rate for the value of the estate above $3.5 million and below $10 million would be 45 percent, the same as the 2009 level.

     o The rate on the value of estates above $10 million and below $50 million would be 50 percent.

     o The rate on the value of estates above $50 million would be 55 percent.

· 10 Percent Billionaire's Surtax: The proposal would impose a 10 percent surtax on the value of an estate above $500 million ($1 billion for couples).

· Close Estate and Gift Tax “Loopholes” requested in President Obama's Fiscal Year 2011 budget.

· Require consistent valuation for transfer and income tax purposes;

· Modify rules on valuation discounts;

· Require a 10-year minimum term for Grantor Retained Annuity Trusts (GRATS).

· Protect family farmers by allowing them to lower the value of their farmland by up to $3 million for estate tax purposes.

     Their bill would increase the ability of an estate to use the Special Use Valuation rule reduce the value of farmland for estate tax valuation purposes from its current $1 million to $3 million and index it for inflation.

· Benefit farmers and other landowners by providing estate tax relief for conservation easements.

     Their bill would provide tax relief to farmers and other landowners by amending estate tax rules for conservation easements through an increase in the maximum exclusion amount to $2 million and increasing the base percentage to 60 percent.

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