The Digital Death Conundrum

What happens to your client's Facebook page after he or she dies? Does a decedent's executor have access to the decedent's Gmail account? These are some of the questions facing attorney's dealing with estate planning in the digital age. The current issue of the University of Miami Law Review features an article that tackles the issue of digital assets and attempts to provide answers to these questions.

"The Digital Death Conundrum: How Federal and State Laws Prevent Fiduciaries from Managing Digital Property," by James D Lamm, Christina L. Kunz, Damien A Riehl, and Peter John Rademacher, considers the problems that digital assets create for four types of fiduciaries: powers of attorney, conservatorships, probate administration, and trusts. From the article:

[T]he digital world is like the “Wild West,” in that its growth has outpaced legal and regulatory efforts. Although federal and state governments have enacted laws to control aspects of the digital world, some of these laws predate the World Wide Web and stand as inadvertent barriers to the execution of fiduciary duties in the digital world. State legislatures, private entities, and courts have made some efforts to correct these problems, but no current solutions provide the level of certainty that account holders and courts typically seek in fiduciary property management. Consequently, account holders are uncertain about the future of their digital property; fiduciaries must choose between refusing to manage digital property at the risk of civil liability, and executing their duties at the risk of criminal liability. . . . After illustrating the problems that digital property creates for each fiduciary, the article shifts to resolving these problems. It begins by debunking purported solutions by both private and governmental entities. It concludes by offering a holistic approach to resolving the conflicts facing account holders, fiduciaries, and service providers and providing the level of security sought in fiduciary property management, as well as a best-practices approach in the interim to a complete solution.

Public Housing and Medicaid Refreshers from the Congressional Research Service

Congress has released two new Congressional Research Service reports to the public. The reports, given to Congress in January, provide an introduction to two valuable government services.  

Introduction to Public Housing by housing policy specialist Maggie McCarty "serve[s] as an introduction to the federal public housing program. It provides information on the history of the program, how it is administered and funded, and the characteristics of public housing properties and the households they serve." The report reviews the trends in the public housing program and introduces the current debate surrounding the issue of private funding for public housing.

The second report, Medicaid: An Overview by Alison Mitchell, Evelyne P. Baumrucker, and Elicia J. Herz, looks at the basic elements of medicaid such as eligibility, services, and financing. The report then deals with selected issues relating to the Patient Protection and Affordable Care Act: "the ACA Medicaid expansion, the impact of the ACA health insurance annual fee on Medicaid, and the ACA maintenance of effort (MOE) with respect to Medicaid eligibility."

These CRS reports cover the issues at a basic level, but they are an excellent resource for a quick refresher on Medicaid and the federal public housing program. Whether you want to be sure your aware of the issues that are of interest to Congress or need a perspective on how to introduce a client to aspects of these programs, you'll find something useful in the CRS reports. At under 50 pages each, they're worth the read.

Estates Plans Are Not Just For The Old

In his article in the most February 2014 issue of Estate Planning, Attorney Sean R. Weissbart talks about an often overlooked estate planning client population--the young and wealthy. The article, "Estate Planning Strategies for the Young and Wealthy," discusses estate-planning strategies attorney's should consider for their young and wealthy clients. From the article:

Young and wealthy individuals do not fit the mold of the traditional estate-planning client, and advice for them should be tailored accordingly. To prepare for possible changes in life circumstances and unpredictable future tax laws over the course of these individuals' life spans, practitioners should use flexible strategies when advising the young and wealthy. This article addresses several of the most effective estate-planning strategies for clients in this enviable segment of the population. The strategies discussed in this article address how to provide the young and wealthy with the benefits that matter most to them: minimizing estate and gift tax, maintaining use and control over their wealth, and asset protection.

The strategies Weissbart explains include making completed gifts to trusts, with forced estate tax inclusion; transferring assets to self-settled domestic asset protection trusts; creating life insurance trusts; and maximizing exclusion gifting.

States Look to Reducing Estate Taxes to Keep Retirees

The New York Times reports that several states are taking steps to reduce their estate taxes, either eliminating the tax or increasing the exemption. According to the article by Paul Sullivan, five states and the District of Columbia have recently re-evaluated their estate taxes. Indiana and Ohio have eliminated their estate taxes entirely. Tennessee is phasing out its estate tax, and New York, Maryland, and D.C. have begun serious discussions about raising their estate tax exemptions to the federal level.

If New York, Maryland, and D.C. do increase their estate tax exemptions, more states will likely follow suit. From Sullivan's article:

“There is a strong possibility that the gap [between state and federal exemptions] is going to be closed over a few years,” said Jamie C. Yesnowitz, a principal at Grant Thornton and chairman of the American Institute of Certified Public Accountant’s state and local tax technical resource panel. “Once some of these other states see New York and D.C. are doing this, I would find it unsurprising if some of these other states join the bandwagon.”

The reason for the move to reduce estate taxes, says Sullivan, is competition from other states for residents and their tax dollars.

[G]overnors of cold-weather states (along with the District of Columbia) . . . have realized affluent residents are moving to states without estate taxes (and in some cases, income taxes) and in doing so, depriving their old state of the other taxes they paid, like property, sales and income tax.

Purchasing Life Estates to Protect Assets

Jeff Marshall recently posted an article on how to use life estates in estate planning on the Marshall Elder and Estate Planning Blog.  Marshall describes how older clients can use life estates to manage health care costs and protect their children's inheritance. From the article:

In the right circumstances, the purchase of a life estate can be an effective means to protect a parent’s assets and a child’s inheritance. For example, a parent may sell his or her home and move in with a child. As part of the arrangement, the parent can purchase a life estate in the child’s home. This transfers cash to the child while giving the parent the legal right to reside in the home for the rest of the parent’s life. The care provided by the child may help the parent remain in a supportive home setting. If a few requirements are met, the cash paid to the child will be protected from the cost of long term care that may be needed by the parent in the future.

As Marshall goes on to explain, a correctly structured life estate can shelter the money paid for the estate from medicaid cost recovery. The medicaid laws specifically allow for this kind of financial protection, laying out the requirements a life estate must meet to qualify. A qualifying life estate will not affect the owner's eligibility for medicaid, and the purchase price will be protected from future long term care costs.

But Marshall cautions against people running out and purchasing life estates in anticipation of long term care bills. Medicaid and health care costs are only one aspect to consider when developing an estate plan. One must also keep in mind tax consequences and other non-Medicaid issues. A life estate will not be an effective estate planning tool in every situation.

Digital Estates and Other Interesting Topics in 2013

The December issue of Estate Planning featured a bibliography of "Articles of Interest" in 2013 legal journals.  Here are a few articles from the list that caught my eye.

• Jamie P. Hopkins, Afterlife In the Cloud: Managing a Digital Estate, 5 Hastings Sci. & Tech L.J. 209 (2013).  From the abstract on SSRN:
  
  
  The rapid development of electronic devices and widespread access the internet has ushered in a new age: the digital age. The digital age has changed the manner in which assets are created and transferred. This digitalization of wealth challenges the effectiveness and efficiencies of traditional estate planning mechanisms. Additionally, modified estate planning techniques and the development of digital estate planning services have created serious privacy, security, and efficiency concerns for the transfer and management of digital estates. As such, creative and innovative digital estate planning solutions are required to ensure the privacy, security, and proper disposition of digital estates. However, because the problems facing digital estate planning are complex, a combination of legislative action and improved online service agreements are essential to solving the digital estate dilemma. Until digital asset ownership and transferability questions are resolved, digital estate planning will remain in flux as traditional estate planning appears ill suited for the management and disbursement of digital assets.
  
  
• Jeffrey W. Sheehan, Late Fathers' Later Children: Reconceiving the Limits of Survivor's Benefits In Response to Death-Defying Reproductive Technology, 15 V. J. Ent. & Tech. L. 983 (2013). From the abstract in the Vanderbilt Journal of Entertainment and Technology Law:
  
  
  When Congress instructed the Social Security Administration to begin paying a social insurance benefit to “widows and orphans” in the 1930s, it simplified the process of determining an applicant’s relationship to an insured decedent in two significant ways: First, Congress ordered the agency to honor the intestate laws of each state when determining whether an applicant was actually the child of a decedent, and second, it ordered the agency to treat any child who could qualify as an intestate heir as if that child actually depended on the parent financially at the time of the parent’s death. Three-quarters of a century later, advances in reproductive technology make it possible for a child to be born decades after the death of one or both of her genetic parents. As the law begins to explore the rights and responsibilities of the parents who choose postmortem reproduction and the children whose lives come into being through those procedures, the heuristics that facilitated efficiency in the 1930s may yield unintended consequences. This Note explores some of those consequences and suggests minor alterations to the rules governing survivor’s-benefits eligibility intended to preserve the program’s social insurance function as reproductive technology transforms life after death from a hope or a fear into a choice.
  
  
• Hannah Alsgaard, Rural Inheritance: Gender Disparities In Farm Transmission, 88 N.D. L. Rev. 347 (2013). From the abstract on SSRN:
  
  
  Farmers are farmers’ sons. Notable in our modern day, heralded by many as a gender-neutral society, it is farmers’ sons, not farmers’ daughters, who become farmers and take over ownership and management of the family farm. It has long been true that agricultural knowledge and land have passed through generations of men. In contrast, daughters, even today, are neither considered to be farmers nor likely to inherit family farmland. This Article begins by chronicling how farmland is inherited (by sons) then discusses why the pattern of excluding women continues. There have been substantial legal changes in the United States impacting land inheritance and ownership, culminating with the Equal Protection Clause’s extension to gender discrimination and the gender-neutral Uniform Probate Code. Social changes have also been tremendous, but even legal and social developments have been unable to correct gender disparity in farm inheritance. After exploring many legal and social factors, I conclude it is grooming – at the familial, governmental, and social levels – that plays the most vital role in training future farmers and mainly accounts for the gender difference in farm inheritance and the farming profession. This Article ultimately proposes girls must be groomed to farm in order to rectify the vast gender disparity in the ownership and management of family farms. A three pronged approach will be needed to remedy the situation, specifically: changing the role of lawyers, educating girls and women, and educating testators. What remains most important is that daughters are given the same opportunity as sons to farm based on merit, rather than being excluded from farm inheritance merely because of their gender.
  
  
• Lynne M. Kohm, Why Marriage is Still the Best Default In Estate Planning Conflicts, 117 Penn St. L. Rev. 1219 (2013). From the abstract on SSRN:
  
  
  By analyzing a Tennessee bigamy case, a New York same-sex marriage case, and the growing cultural trend toward cohabitation over marriage, this article discusses how and why marriage is the best estate plan to protect vulnerable parties as they age. The article examines how marriage assists vulnerable parties in avoiding potential conflicts in estate planning and distribution, particularly when those parties have entered into alternative relationships. By focusing on the cases of Witherspoon, in which John Witherspoon entered into a bigamous second marriage, and Windsor, in which Edie Windsor is suing the U.S. government over the lack of federal tax recognition afforded her Canadian same-sex marriage, this article reveals how marriage expansion does not necessarily incentivize marriage, nor does it provide the benefits and protections often sought by those who enter into those marriage-like relationships. By contrasting the protection marriage affords to a vulnerable party in estate distribution and the dilemmas presented by marriage expansion (as illustrated in Witherspoon and Windsor) with the cultural disquiet over the importance of the nature and meaning of marriage, this article illuminates estate distribution conflicts in the context of the paradox of contemporary American socio-legal marriage culture. Despite the pop culture confusion over marriage, this article demonstrates why it is still the best default for estate planning conflicts.
  
  
• Mary H. McNeal, Slow Lawyering: Representing Seniors In Light of Cognitive Changes Accompanying Aging, 117 Penn St. L. Rev. 1081 (2013). From the abstract on SSRN:
  
  
  As an increasing number of lawyers represent clients who are elderly, it is imperative that lawyers become more knowledgeable about the aging process and how it impacts our clients. Although it is difficult to generalize, many seniors experience numerous and diverse cognitive changes that accompany the aging process. Existing literature offers various frameworks for addressing capacity issues and techniques for assessing diminished capacity. However, current legal scholarship provides little guidance for lawyers on how to accommodate these changes when they do not rise to the level of diminished capacity or dementia, and when the changes may, in fact, result in increased wisdom and “developmental intelligence.” This article seeks to fill that void. It summarizes selected cognitive developments that impact memory, outlining various types of memory and how they evolve during the aging process. This article also discusses current literature on decision-making capacity and different decision-making models and strategies that seniors may rely upon. The article concludes with recommendations on methods for enhancing communications with aging clients, while simultaneously acknowledging and accommodating cognitive changes and enabling seniors to play a prominent role in the representational process.

Medicare and Medicaid in 2014

Medicare and Medicaid are rapidly changing as state and federal agencies scramble to implement the Affordable Care Act. The Kaiser Family Foundation is a great source of information on the changes and how they will affect consumers.

The Kaiser Family Foundation releases many useful reports and issue briefs. I am going to highlight two reports released in the last few weeks.

The first report is Getting into Gear for 2014: Shifting New Medicaid Eligibility and Enrollment Policies into Drive. This report outlines the key policy changes coming to Medicaid programs in January, 2013, in states that are expanding Medicaid coverage under the Affordable Care Act. It focuses on the eligibility and enrollment changes resulting from the Medicaid expansion. Twenty-five states and the District of Columbia are expanding Medicaid; everyone in those jurisdictions should be aware of the changes and their possible effects.

The second report, Medicare Advantage 2014 Spotlight: Plan Availability and Premiums, analyzes planned changes to the Medicare Advantage program for 2014. The report tracks the number of plans available through the Advantage program in 2014, the expected cost of the plans, and the changes to the plan benefits. According to the report, 15 million Medicare beneficiaries enrolled in insurance plans through the Medicare Advantage program in 2013, so the 2014 changes will have far reaching effects.