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Digital Asset Management: What Happens to My Online Accounts When I Die or If I Am Incapacitated?

In 2023, most people have shifted (whether you wanted to or not) to living mostly online. Between keeping up with social media and managing your finances, the average person has more than 90 online accounts.

When dealing with estate planning, the common agenda is to ensure that you and your family are taken care of if the worst were to happen. Thinking about your online accounts isn’t something that comes to mind when planning how to make the administration of your estate easier for your executor or your power of attorney. However, your online accounts can be very important. Your fiduciary or loved ones will not be able to manage anything unless you’ve planned for that. For instance, many times people have opted to move away from receiving paper statements and have elected to get everything delivered online to their main email address.

The main question you should ask yourself “Who will have access to my accounts?” and “What accounts do I have?”  Also, “Are there accounts that I do not want accessed even after death?”

Some examples are your financial accounts, utilities, taxes, photo managers, social media accounts and email accounts.

As an example, Facebook doesn’t want anyone to manage your Facebook account other than yourself. Facebook does provide an option for an account to be placed as a “legacy” account. This will allow your fiduciary to memorialize or terminate the account. This election must be done while you are alive. If you don’t choose to have your account permanently deleted, only your main profile will be memorialized if Facebook becomes aware of your passing.

Another example is Gmail. If you do not access your Gmail account for more than twenty-four months, Google will delete the account. Therefore, important information may be lost if the account isn’t accessed.

 A great solution to this would be to maintain a password manager. If you provide this login information to your fiduciary, they will be able to access the accounts that you do have with the latest passwords. There are many good password managers available.

When it comes to logging into a computer, phone or other device, you will need to know the encryption code. This could be as simple as a four digit pin or something more complicated that may even need dual authentication; such as using Duo.

With cryptocurrency, if you do not have the encryption key or the private key, you will lose access to that underlying data, meaning the actual currency. If that happens, the cold wallet (an external drive) or web based account will be locked and completely inaccessible. There is no way to recover these accounts if they are lost. 

Whether you want to use password managers or maintain a physical list, you should make a note for your fiduciary so that they can access this information upon your death. Otherwise, the information could be lost, inaccessible or could cause trouble in gaining access if necessary.

About the Author: Andrew Bradley is a paralegals in the firm’s Wills, Trusts & Estates Group.

Estate Taxes Across the U.S.

It is human nature to feel that we are overtaxed.  And yes, rates for one tax or another will vary from state to state. 

We have what are commonly referred to as death taxes.  These are usually identified as an inheritance tax or an estate tax and vary by state.  Estate taxes are based on the size of the estate while inheritance taxes are based on the relationship of the decedent to the beneficiary. 

Another death tax is the federal estate tax which is based on the size of the estate.  Currently, the federal estate tax does not come into play unless you have assets in the neighborhood of $12 million.  However, you must keep in mind that, come 2026, that number is expected to drop significantly and more estates are likely to incur a federal estate tax liability.  Federal estate taxes are IN ADDITION to any state death taxes which may be payable. 

Here is a short comparison of estate and gift taxes by state across the nation:

NEW JERSEY – There is no estate tax, however there is an inheritance tax.  The inheritance tax can be up to 15 percent based upon the relationship, but spouses and lineal descendants – children, grandchildren – and charities are exempt from inheritance taxes.  Other beneficiaries are taxed at the rate of 15 percent.

PENNSYLVANIA – There is no estate tax, but there is an inheritance tax for anyone but a spouse or a charity.  Children and grandchildren pay tax of 4.5 percent of their inheritance, siblings to the decedent are taxed at 12 percent and all others are taxed at 15 percent. 

CONNECTICUT – There is an estate tax on par with the federal estate tax.  However, should you be lucky enough to have an estate valued at $129 million or more, there is a cap of $15 million in Connecticut estate taxes.  Further, Connecticut is the only jurisdiction in the U.S. with a gift tax.

IOWA – Here again, there is no estate tax but there is currently an inheritance tax which will be phased out or repealed completely for individuals dying after December 31, 2024. 

NEBRASKA – While there is no estate tax, depending on the relationship and age of the beneficiary, inheritance tax can range up to 15 percent.

WASHINGTON DC – There is an estate tax for estates in excess of $4.3 million.

RHODE ISLAND – No inheritance tax but there is an estate tax that will kick in once an estate reaches $1.648 million.

VERMONT – Interestingly, Vermont has a flat tax rate of 16 percent for estates in excess of $5 million.

WASHINGTON STATE – While there is no inheritance tax, there is a state estate tax for estates over $2.193 million.

NEW YORK – An estate tax is assessed for estates in excess of $6.11 million.  Unsurprisingly, New York has a twist in their estate tax with a built in “cliff.”  For instance, if an estate is between 100% and 105% of the exemption amount, there’s a rapid phase-out of the exemption which estates in excess of 105 percent of the exemption amount will lose the benefit of the exemption amount entirely and be subject to tax from dollar one!  In addition, if the decedent made a taxable gift within three years of death, the taxable gift amount is brought back into the estate for estate tax purposes.

Regardless of where you live, you are subject to taxes.  But, as we know, we all pay taxes in one way or another.  So I leave you with this question – what’s the best state to live in, with regard to taxes?

Your Spouse Has Passed – Now What?

Your spouse has passed – what do you need to do? 

Many times, there may be very little for you, as the surviving spouse, to do after the funeral.  However, everyone is different and what your relative or neighbor may have experienced is not what is true for your situation. 

The list below is but only a few thoughts for you to consider, but remember it is not exclusive and should not be relied upon for being legal advice – only for you to consider.  The best advice is to contact your attorney for definitive actions to be taken. 

  • If you and your spouse owned assets jointly, most likely they were owned as tenants by the entireties – upon the death of one, the surviving spouse owns the entire asset.  What action might be necessary to remove the deceased spouse’s name from the asset? 
  • However, there are other forms of ownership – tenants in common – in which each spouse owned one-half of the asset and upon a spouse’s death, their one-half interest is considered a probate asset and does not necessarily pass to the surviving spouse. 
  • If the deceased spouse owned assets jointly with someone other than the surviving spouse, be aware that the asset most likely passes by operation of law to the surviving owner.  Determination must be made to determine ownership.
  • What assets were owned by your spouse either individually, jointly or with a beneficiary designation?  Some or all of the assets could be subject to estate tax – inheritance or estate tax.
  • Does the deceased spouse’s Will need to be probated?  The best answer comes only after speaking with an attorney.
  • Social Security was most likely notified by the funeral director of the death but the surviving spouse needs to follow up with the SSA for determination of future benefits. 
  • Was the deceased spouse receiving benefits from a retirement-type plan or a former employer? 
  • Do you need to address medical insurance coverage?
  • Is it necessary to prepare and file a state inheritance tax return? 
  • Is it advisable or necessary to prepare and file a federal estate tax return – especially to preserve the unused spousal federal estate tax exemption?
  • What is the impact on your individual income tax returns?
  • Does the surviving spouse need to update their estate planning documents?

Frequently upon the death of a spouse, the surviving spouse will visit a financial institution to notify them of the death.  As the surviving spouse, you want to make certain that someone can help you in the event of your inability to handle your own affairs.  When visiting the financial institution, it may be recommended that you add your child on the account.  BEWARE:  If you add your child as a joint owner, your assets could become subject to your child’s creditors.  Is this your intention?  OR, is it your intention to only grant permission for your child to have signatory permission on the account – but not be an owner?  Has the financial institution recommended that you put a beneficiary designation on the asset(s)?

There is no one answer that fits all circumstances.  Before you do anything with the financial institution, make certain that your wishes are being carried out.  Often times financial institutions advise surviving spouses to put a child’s name on their account.  And, what happens is that the child is made a joint owner and only discovered after the fact.  And, sometimes when it is too late to protect the asset.

Your best bet is to contact an attorney for consulting on what the best direction is for your situation. 

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