By Derek M. Johnson

    With all the recent technological advances in society, many people are now going “digital.”  That is, many people now: communicate through e-mail, have online financial accounts, receive electronic financial account statements (via e-mail), pay bills electronically, make online purchases, store files, photographs or videos electronically, have social media accounts (e.g. Facebook, Instagram, Pinterest and Snapchat), own electronic assets (e.g., website domain names, virtual currency such as bitcoins, and electronic designs that are subject to copyright, trademark, or patent laws), etc. (collectively, “digital assets”).  While digital assets certainly make life more convenient for users, questions have arisen as to whether and how someone else can access a user’s digital assets when the user is incapacitated or deceased.  These questions are important because the universe of digital assets is growing immensely, and some digital assets can be very valuable (e.g., a website domain name or electronic copyrighted or patented designs).

    To help address these issues, a Power of Attorney for Property, Will and Trust can provide your loved ones with access to all of your digital assets in the event you become incapacitated or after you pass away.  However, this does not guarantee access.  For example, even if you grant a loved one access to your e-mails in your Will and Trust, a loved one may still have to start probate court proceedings to gain access and, even then, there is no guarantee that your loved one will obtain full partial access.  

    To overcome these hurdles, we recommend using “online tools” - to the extent they are available.  An online tool is an electronic service provided by custodians of e-mails and digital assets that allows users to provide directions for the disclosure or nondisclosure of the user’s e-mails and digital assets to your loved ones if you are incapacitated or after you pass away.  Unfortunately, most custodians currently do not offer online tools.  However, there are two notable exceptions: Google and Facebook.  

    •    Google’s Inactive Account Manager.  The Inactive Account Manager allows users with Google accounts (including Gmail) to designate specified persons to have access to the user’s e-mails and other digital assets held by Google if the user’s Google-related accounts have been inactive for a specified period of time (e.g., 3, 6, 12 or 18 months).  For more information about Google’s Inactive Account Manager, please visit https://support.google.com/accounts/answer/3036546?hl=en.    

    •    Facebook’s Legacy Contact.  The Legacy Contact allows Facebook users to have their accounts “memorialized” (as opposed to deleted) after he or she passes away and to designate another person to manage the user’s memorialized account.  However, the Legacy Contact does not allow the designated person to log into your account, remove or change past posts, photos or other things shared by you, remove your friends, or read any of your messages.  For more information about Facebook’s Legacy Contact, please visit https://www.facebook.com/help/1568013990080948 and https://www.facebook.com/help/103897939701143?helpref=faq_content.

If providing access to your e-mail and other digital assets when you become incapacitated or after pass away is important to you, then we recommend that you use all available online tools.

Another New Year is underway, and it’s time once again to share with our clients some information about changes in the estate tax law, and some other ideas and recommendations that may be of interest to you. See below for information and our recommendations regarding:
 

•           Current Gift and Estate Tax Exclusions;
•           Avoiding potential Illinois estate tax if you’ve established residency in another state;
•           Updates to documents, including:
  •           Avoiding Illinois estate tax on first of married couples’ deaths;
  •           Simplifying estate plans for married clients with total estate value of $4,000,000 or less;
  •           For all clients, “digital asset” access by your POA agent, Executor and Trustee; and
•           Gifting opportunities prior to 2026 for clients with larger estates.

 
Current Gift, Estate and GST Tax Exclusions.  The annual gift tax exclusion remains at $15,000 for 2019; the index for inflation resulted in an increase in the lifetime gift and estate tax exclusion and the GST tax exclusion to $11,400,000 in 2019.
 
Primary Residence Established in Another State.  Some of our clients are reading this while sitting poolside, enjoying the sunshine, in a warm state, far from Illinois. More and more of our clients are establishing residency elsewhere, but still maintaining a residence or ownership of other real estate here in Illinois.  We are thinking of ways for our “non-resident” clients to alleviate the potential Illinois estate tax that may be due on death.  If your total estate is worth $4,000,000 or more, even if your Illinois real estate is worth less than the Illinois $4,000,000 estate tax exclusion, there may still be an Illinois estate tax due.  The Illinois estate tax calculation takes into account the value of your entire taxable estate wherever located; the Illinois estate tax is then calculated on that entire value; and the resulting tax amount is pro rated based on the ratio that the value of your Illinois real estate is to the value of your entire estate.  This can be remedied by changing the ownership of your Illinois real estate.  Please contact our office to discuss your particular situation, and we will recommend one of several options to move your Illinois real estate out of the reach of the Illinois estate tax.
 
Updates to Documents.  It’s always recommended to have your estate plan reviewed periodically.  If you haven’t reviewed your documents with us in five (5) years or more, it’s time.  Here are some of the updates that have been most commonly needed by clients in the past several years:
 

• Since 2009, it has become important to include in married clients’ documents language regarding the Illinois “QTIP” election, to ensure that there will not be a potentially large Illinois estate tax due upon the first of the spouses’ deaths, due to the inclusion of outdated formulas in documents prepared prior to 2005 or so.

 

• Since the federal estate tax exclusion increased at the end of 2010 to $5,000,000*, and increased again at the end of 2017 to $10,000,000*, we have been able to simplify many of our married clients’ estate plans by eliminating unnecessary splits of the assets into separate “Family” and “Marital” Trusts, making it easier and more flexible for the surviving spouse to manage and use the assets after the first death.

 

• In 2016, Illinois passed the Fiduciary Access to Digital Assets Act, which adopted law regarding the authority of an agent under a Power of Attorney, a Trustee, or an Executor to access your “digital assets” (your on-line accounts, e-mail accounts, social media accounts, etc.).  If your documents do not include that authorization, contact us to update them.

 
Gifting Extra Exemption Amount Through 2025.  The increased gift and estate tax exclusion amount of $10,000,000* is in effect through 2025.  It is scheduled to revert to $5,000,000* on January 1, 2026. The IRS issued Proposed Regulations providing that any gifts made in excess of the current exclusion amount will not be “clawed back” if the exclusion amount does in fact drop back down to the lower amount.  For clients with larger estates, you have an opportunity to make gifts  to reduce the potential estate tax on your estate, utilizing the extra $5,000,000 of gift tax exemption prior to the end of 2025.  Contact us to discuss your options.
 
*The federal estate and GST tax exclusion amounts are indexed for inflation annually.
 
Please contact our office any time, to discuss these or other questions or concerns.  We look forward to hearing from you!