Tag Archive | "Law Tips"

Law Tips: Estate Planning Does Not Include Just Grandma’s Cameo Brooch Anymore

Digital assets are working their way into everyone’s life…and afterlife…like it or not! Our estate law faculty member, Professor Gerry Beyer, advises that: “Estate planning attorneys need to comprehend fully that this is not a trivial consideration and that it is a developing area of law.” Gerry Beyer, Professor of Law at Texas Tech University School of Law, has timely information for Law Tips readers on the digital assets that are probably already in your clients’ possession:

For hundreds of years, we have viewed personal property as falling into two major categories – tangible (items you can see or hold) and intangible (items that lack physicality). Recently, a new subdivision of personal property has emerged that many label as “digital assets.” There is no real consensus about the property category in which digital assets belong. Some experts say they are intellectual property, some say they are intangible property, and others say they can easily be transformed from one form of personal property to another with the click of a “print” button. See Scott Zucker, Digital Assets: Estate Planning for Online Accounts Becoming Essential (Part II), The Zucker Law Firm PLLC (Dec. 16, 2010). In actuality, some accounts that we consider “assets” are simply licenses to use a website’s service that generally expire upon death. See Steven Maimes, Understand and Manage Digital Property, The Trust Advisor Blog (Nov. 20, 2009).

Digital assets may represent a sizable portion of a client’s estate. A survey conducted by McAfee, Inc. revealed that the average perceived value of digital assets for a person living in the United States is $54,722. McAfee Reveals Average Internet User Has More Than $37.000 in Underprotected ‘Digital Assets’, McAfee.com, (Sept. 27, 2011) (the $37,000 figure is the global average).

While estate planners have perfected techniques used to transfer types of property that have been around for a long time, most estate planners have not figured out how to address the disposition of digital assets. It is important to understand digital assets and to incorporate the disposition of them into clients’ estate plans.

What are digital assets:

The term “digital asset” does not have a well established definition as the pace of technology is faster than the law can adapt. One of the best definitions is found in a proposed Oregon statute:

“Digital assets” means text, images, multimedia information, or personal property stored in a digital format, whether stored on a server, computer, or other electronic device which currently exists or may exist as technology develops, and regardless of the ownership of the physical device upon which the digital asset is stored. Digital assets include, without limitation, any words, characters, codes, or contractual rights necessary to access the digital assets.

Digital Assets Legislative Proposal, OREGON STATE BAR (May 9, 2012).

Digital assets can be classified in numerous different ways, and the types of property and accounts are constantly changing. People may accumulate different categories of digital assets: personal, social media, financial, and business. The individual may also have a license or property ownership interest in the asset. See Laura Hoexter and Alexandra Gerson, Who Inherits My Facebook? Estate Planning or Digital Assets (June 25, 2012). Although there is some overlap, of course, clients may need to make different plans for each.

Personal

The first category includes personal assets stored on a computer or smart phone, or uploaded onto a web site such as Flickr or Shutterfly. These can include treasured photographs or videos, e-mails, or even play lists. Photo albums can be stored on an individual’s hard drive or created through an on-line system. (They also can be created through social media, as discussed below.) People can store medical records and tax documents for themselves or family members. The list of what a client’s computers can hold is, almost literally, infinite. Each of these assets requires different means of access – separate passwords.

Social Media

Social media assets involve interactions with other people on websites, Facebook, MySpace, Linkedln, and Twitter, as well as e-mail accounts. These sites are used not only for messaging and social interaction, but they also can serve as storage for photos, videos, and other electronic files.

Financial Accounts

Though some bank and investment accounts have no connection to brick-and-mortar buildings, most retain some connection to a physical space. They are, however, increasingly designed to be accessed via the Internet with few paper records or monthly statements. For example, an individual can maintain an Amazon.com account, be registered with PayPal, Bitcoin, or other financial sites, have an e-Bay account, and subscribe to magazines and other media providers. Many people make extensive arrangements to pay bills online such as income taxes, mortgages, car loans, credit cards, cell phone and trash disposal.

Business Accounts

An individual engaged in any type of commercial practice is likely to store some information on computers. Businesses collect data such as customer orders and preferences, home and shipping addresses, credit card data, bank account numbers, and even personal information such as birth dates and the names of family members and friends. Physicians store patient information. eBay sellers have an established presence and reputation. Lawyers might store client files or use a Dropbox.com-type service that allows a legal team spread across the United States to access litigation documents through shared folders.

Domain Names or Blogs

A domain name or blog can be valuable, yet access and renewal may only be possible through a password or e-mail.

Loyalty Program Benefits

In today’s highly competitive business environment, there are numerous options for customers to make the most of their travel and spending habits. Airlines have created programs in which frequent flyers accumulate “miles” or “points” they may use towards free or discounted trips. Some credit card companies offer users an opportunity to earn “cash back” on their purchases or accumulate “points” which the cardholder may then use for discounted merchandise, travel, or services. Retail stores often allow shoppers to accumulate benefits including discounts and credit vouchers. Some members of these programs accumulate a staggering amount of points or miles and then die without having “spent” them. For example, there are reports that “members of frequent-flyer programs are holding at least 3.5 trillion in unused miles.” Managing Your Frequent-Flyer Miles (last visited Oct. 21, 20 12). See also Becky Yerak, Online Accounts After Death: Remember Digital Property When Listing Assets, CHICAGO TRIB., Aug. 26, 2012.

The rules of the loyalty program to which the client belongs plays the key role in determining whether the accrued points may be transferred.

Other Digital Assets

Your client may own or control virtually endless other types of digital assets. For example, your client may own valuable “money,” avatars, or virtual property in online games such as World of Warcraft or Second Life.

Yes, complications surround planning for digital assets, but all clients need to understand the ramifications of failing to do so. Cases will arise regarding terms of service agreements, rights of beneficiaries, and the success of online afterlife management companies. Until the courts and legislatures clarify the law, estate planners need to be especially mindful in planning for these frequently overlooked assets.

I thank Professor Beyer for providing this overview of the developing world of digital assets and their importance in estate planning.

_________________________________________________________________________________

About our Law Tips faculty participant:
Prof. Gerry W. Beyer is the Governor Preston E. Smith Regents Professor of Law at Texas Tech University School of Law, Lubbock, TX. He joined the faculty at Texas Tech in June 2005. Previously, Prof. Beyer taught at St. Mary’s University and has served as a visiting professor at several other law schools. He was also the recipient of the 2012-2013 Outstanding Researcher Award from the Texas Tech School of Law. As a state and nationally recognized expert in estate planning, Prof. Beyer is a highly sought after lecturer. He has authored and co-authored numerous books and articles focusing on various aspects of estate planning, including a two volume treatise on Texas wills law, an estate planning casebook, and the Wills, Trusts, and Estates volume of the Examples & Explanationsseries. Professor Beyer received his J.D. from the Ohio State University and his LL.M. and J.S.D. degrees from the University of Illinois.

About our Law Tips blogger:
Nancy Hurley has long-standing connections with Indiana lawyers. She was formerly a member of the ISBA and IBF staffs for over 30 years. Nancy’s latest lifestyle venture is with ICLEF. We are utilizing her exceptional writing and interviewing skills while exploring how her Indiana-lawyer background fits with ICLEF’s needs. When she isn’t ferreting out new topics for Law Tips, her work can be found in our Speaker Spotlight blogs, postings on the ICLEF Facebook and Twitter pages, and other places her legal experience lends itself.

Thank you for reading Law Tips. You may subscribe to this weekly blog through the RSS link at the top of this page.  Also, you are encouraged to comment below or email Nancy. She welcomes your input as she continues to sift through the treasure trove of knowledge of our CLE faculty to share with you.

ICLEF • Indiana Continuing Legal Education Forum, Indianapolis, IN

Posted in Law Blogs, Law Tips0 Comments

Law Tips: Do You Understand Conflicts of Interest?

What are the areas of ethics that are often misunderstood by practicing lawyers? According to our long-standing ethics experts, one of them involves the lawyer’s duty of loyalty to the client, or conflicts of interest. Chuck Kidd and Kevin McGoff, ICLEF ethics faculty, bring essential reminders to practitioners of the most common ways in which lawyers get themselves sanctioned. “Conflicts of Interest” is on the list of top ten grievance complaints they often discuss. Here’s their advice on the subject:

Conflicts of Interest

This is one of the areas of ethics that concerns practicing lawyers the most, but appears to be one of the least well understood by the bar. In essence, the conflict of interest rules govern different aspects of the lawyer’s duty of loyalty to the client. Some rules act to protect the client from conflicts with other clients, other rules act to protect the client from their own lawyer and still others act to protect former clients from some of the dangers of conflicting interests after the representation is over.

Cases are legion which explore all the contours of this area of ethics. Certainly any written work exploring this subject would be a respectable tome. In the final analysis, these cases revolve around the question: “to whom does the lawyer’s loyalty run?” If the answer isn’t unequivocally, “the client,” then a conflict of interest almost undoubtedly exists. One case illustrates the extent to which conflict questions can be simultaneously complex and very apparent.

In Matter of Watson, 733 N.E.2d 934 (Ind. 2000), Respondent wrote a will for an 85-year-old man who was the largest single shareholder in an Indiana telephone company. The Respondent’s mother was the second largest shareholder in the company. Subsequently, Respondent prepared for the testator a codicil which granted an option to the company, upon the testator’s death, to purchase these shares at a price reflecting the stated book value. After the testator died, the board of directors elected to exercise the option to purchase the estate’s shares at the listed book value.  About two years later, Respondent, his mother, and the company’s remaining shareholders sold all of the company’s stock, realizing an amount per share in excess of two times that paid to the testator’s estate for the shares.

The Supreme Court found that the Respondent knew or should have known that the option for the company to buy the shares at book value was setting a price which could be substantially less than fair market value. Respondent was found to have violated Prof. Cond. R. 1.8(c) because he drafted the codicils when it was reasonably foreseeable that the instruments had the potential for providing a substantial gift to him and his mother. As a result, Respondent was suspended from the practice of law for sixty days.

Following are additional cases Mr. Kidd and Mr. McGoff offer as examples of conflict of interest issues:

  • Matter of Godshalk, 987 N.E.2d 1095 (Ind. 2013)
  • Matter of Ross, 982 N.E.2d 295 (Ind. 2012)
  • Matter of McKinney, 948 N.E.2d 1154 (Ind. 2011)
  • Matter of Pugleise, 941 N.E.2d 1044 (Ind. 2011)

Knowing that keeping abreast of ethics issues is of paramount importance to all Indiana lawyers, we are grateful to Chuck Kidd and Kevin McGoff for their contributions. Their enjoyable mode of presentation adds that special element that isn’t included in all ethics programs. You have opportunities to experience their most current ethics updates as Kidd and McGoff appear again as the kickoff presentation for the 36th Annual Judge Robert H. Staton Indiana Law UpdateTM at the Indiana Convention Center in Indianapolis, September 23-24. Also, the popular Vignettes of Legal EthicsTM program is scheduled live in two locations around Indiana in October and November.

_________________________________________________________________________________

About our Law Tips faculty participants:
Charles M. Kidd, Staff Attorney, Indiana Supreme Court Disciplinary Commission, is a former Indiana Deputy Attorney General (1988-1991). He is author of numerous continuing legal education works including the Survey of Recent Developments in Professional Responsibility in volumes 26 through 28 and 30 through 36 of the Indiana Law Review.

Kevin McGoff, Bingham Greenebaum Doll LLP, Indianapolis, is an experienced professional liability and litigation attorney. He represents attorneys and judges in professional licensure matters, assists lawyers and law firms on issues pertaining to firm management, law firm dissolution and organization, malpractice, legal ethics and related litigation. Kevin has more than 32 years of experience defending lawyers and other professionals in state and federal court at trials and on appeal.

About our Law Tips blogger:
Nancy Hurley has long-standing connections with Indiana lawyers. She was formerly a member of the ISBA and IBF staffs for over 30 years. Nancy’s latest lifestyle venture is with ICLEF. We are utilizing her exceptional writing and interviewing skills while exploring how her Indiana-lawyer background fits with ICLEF’s needs. When she isn’t ferreting out new topics for Law Tips, her work can be found in our Speaker Spotlight blogs, postings on the ICLEF Facebook and Twitter pages, and other places her legal experience lends itself.

Thank you for reading Law Tips. You may subscribe to this weekly blog through the RSS link at the top of this page.  Also, you are encouraged to comment below or email Nancy. She welcomes your input as she continues to sift through the treasure trove of knowledge of our CLE faculty to share with you.

ICLEF • Indiana Continuing Legal Education Forum, Indianapolis, IN

Posted in Law Tips, Sale/Featured Items0 Comments

Law Tips: Preventing Financial Exploitation of Your Elderly and Disabled Clients

Welcome back. Thanks to the generous contributions of Jim Voelz, Voelz Law Firm, Columbus, Indiana, Law Tips is looking into the “hidden epidemic” of financial exploitation of the elderly and disabled. This week Jim’s counsel delves into advising clients on gifting of assets and limiting their financial power of attorney. He will also recommend protective steps clients can take to avoid being financially exploited.      

To Gift Or Not To Gift:

Elder law attorneys are frequently asked to give advice about whether the client’s home and other assets should be gifted. Many of our clients and their families know about the high costs of care in the home, an assisted living facility, and a nursing home. They have heard about other folks who have lost their homes, farms, and other assets to pay for the costs of their care, and they do not want that to happen to them. So how are we going to help these clients, and what are we going to advise them to do about their concerns?

I want to focus on the situation where you are asked to give your client advice about gifting when your client is elderly with no immediate health issues that would require care at home, in an assisted living facility, or in a nursing home at any time in the foreseeable future. The issue is whether the client should gift their home and/or other substantial assets now to protect them.

One  option is to advise the client to gift the home and/or other assets now in the hope of getting past the five year lookback from the date of a future Medicaid application that requires the reporting of uncompensated transfers that give rise to a period of ineligibility to receive Medicaid benefits (“transfer penalty”). An argument for this could be that gifts that are made more than five years prior to the filing of a Medicaid application are protected and have no effect on Medicaid eligibility.

What advice should you give?

Your advice should protect the best interests of your client. I suggest that you review in detail all of the potential risks and disadvantages of gifting with your client.

(Law Tips note: The Voelz Law Firm outlines issues for clients in a firm letter describing the potential problems that can arise as a result of gifting assets, such as estate planning problems, loss of control of property and tax consequences. The letter is shared during Jim’s CLE presentation.)

We keep copies of this letter in our conference rooms, because we use these letters often. We give a copy to our client and a copy to each of the family members or other persons who are attending the conference with the client, and we keep a dated copy in our client’s file as documentation of our advice.

After this review, in almost all of our cases, our client decides not to make any gifts. However, if a client still wants to make a gift of their home or other assets, then we usually ask our client to think about what we discussed and schedule a second appointment to have further discussions. If, at that second appointment, the client still wants to gift, then we meet with the client alone, if other family members or others attend this conference, to make sure this is really what our client wants to do without being influenced by other persons who are attending the conference.

We always advise our clients to have a Financial Power of Attorney in place, and we have discussions with our clients about whether they should include certain provisions in their Financial Power of Attorney that could lead toward protecting some of their property if it would make sense to qualify them for Medicaid or other governmental benefits, such as the VA Aid and Attendance Pension, in the future. (See Indiana Code 35-46-1-12.)

If an attorney prepares a Financial Power of Attorney that gives the attorney-in-fact unlimited and unrestricted authority to gift or loan in unlimited amounts, then these provisions can subject your client to the risk of being financially exploited by the attorney-in-fact.

I would suggest the following to reduce or eliminate this risk:

1. Prepare power of attorney provisions that require other persons to agree before gifting or loaning can be done and/or that require the prior approval of an attorney in conjunction with a plan to qualify the client for Medicaid or other governmental benefits.

2. Meet with the client and with the attorney-in-fact to explain the power of attorney and its provisions. This will serve to educate the attorney-in-fact and will also provide an opportunity for you to introduce yourself to the attorney-in-fact, as your client’s attorney, so that you will be consulted in the future.

3. Provide the attorney-in-fact with instructions on how to properly use the power of attorney.

Advice For Your Clients On How To Avoid Being Financially Exploited

An elder law attorney should also be able to advise a client about how to avoid being financially exploited. Here are some suggestions that could be made to a client:

– You should establish your safety net of trustworthy and reliable persons. Sign a Power of Attorney that appoints a person who is 100%trustworthy and who will always act in your best interests. Do this before you have a serious health issue or impairment. If you do not have such a person, then appoint a bank or credit union who has a trust department who will agree to be appointed to handle your financial affairs, if necessary.

– You should establish relationships with experienced professionals who have a good reputation such as an accountant, financial advisor, and attorney and consult with your appropriate advisors before you engage in any questionable transaction.

– Sign-up for the “do not call” list to help stop telephone solicitations at www.in.gov/attorneygeneral (Register For Do Not Call). This does not eliminate all telemarketing calls so do not talk to unknown persons who are trying to sell or give something to you.

– Do not keep a large balance of money in your checking account, arrange for direct deposit of your income, and set-up automatic bill pay for your utility bills and other regular expenses.

– Do not hire caregivers or others who would work in your home without a background check.

– Do not leave your mail in an unsecured mailbox and shred documents with personal identifying information.

– Do not give any stranger or new acquaintance your birth date, Social Security number, or any information regarding your accounts or financial information.

– If you lack mental capacity or become impaired, then allow someone who is 100% trustworthy and reliable and who will always act in your best interests to take over management of your financial affairs.

– Report any questionable request or solicitation to your trusted relative or person.

– Report any suspected or attempted financial exploitation to law enforcement and/or to the Adult Protective Services officer in your area.

 

Thanks again to Jim Voelz for sharing his expertise in the prevention of financial exploitation of elderly and disabled clients.  If you missed his first Law Tips column, you will find it below.  For a comprehensive update in elder law from an outstanding panel, check out the 2014 Elder Law Institute on October 9-10, 2014.

_________________________________________________________________________________

About our Law Tips faculty participant:
James K. Voelz, Voelz Law, LLC, Columbus, Indiana. Mr. Voelz ‘s law practice primarily involves estate and disability planning, estate and trust settlement, elder law, and Medicaid qualification services. Jim is a member of Hoosier Hills Estate Planning Council, National Academy of Elder Law Attorneys and its Indiana Chapter, and the Indiana State Bar Association’s Elder Law and Probate, Trust and Real Property Sections. Mr. Voelz serves on the Committee on Character and Fitness of the Indiana Supreme Court.  And he is also the author of “Senior Moments” newsletter.

About our Law Tips blogger:
Nancy Hurley has long-standing connections with Indiana lawyers. She was formerly a member of the ISBA and IBF staffs for over 30 years. Nancy’s latest lifestyle venture is with ICLEF. We are utilizing her exceptional writing and interviewing skills while exploring how her Indiana-lawyer background fits with ICLEF’s needs. When she isn’t ferreting out new topics for Law Tips, her work can be found in our Speaker Spotlight blogs, postings on the ICLEF Facebook and Twitter pages, and other places her legal experience lends itself.

Thank you for reading Law Tips. You may subscribe to this weekly blog through the RSS link at the top of this page.  Also, you are encouraged to comment below or email Nancy. She welcomes your input as she continues to sift through the treasure trove of knowledge of our CLE faculty to share with you.

ICLEF • Indiana Continuing Legal Education Forum, Indianapolis, IN

Posted in Law Tips, News0 Comments

5 Hot Tips On Trust Administration

If you are involved in trusts, this is your opportunity to brush up. I have five tips for you on trust administration from Ellen Deeter, a lawyer with extensive background in the area. Ms. Deeter spent most of the past 35 years working in bank trust departments, including as senior trust counsel.  Ellen generously agreed to share her expertise with Law Tips readers.

Tip #1 – Read the entire trust agreement!

• After you have read the trust agreement from beginning to end, including the “boilerplate”, read it again. And then a third time.

• Next, write out a synopsis of the trust agreement, highlighting key provisions. Pay particular attention to the provisions identifying the beneficiaries (current and future), noting mandatory and discretionary distributions, termination provisions, and allocations between principal and income.

• Every time you receive a request for a distribution refer back to the document and make sure that the request is:

1. from someone entitled to receive it.

2. for a purpose that is allowed in the document.

Tip #2 – Read and know the Indiana statutes on trusts (make Indiana Code Title 30 your friend).

• In addition to the Indiana Trust Code, also become familiar with the Indiana Probate Code, the Uniform Principal and Income Act, Total Return Unitrusts. Don’t forget the Internal Revenue Code and the provisions governing the taxation of trusts.

Tip #3 – Establish a process, follow it consistently; communicate.

• Don’t wait until you get a request from a beneficiary for a discretionary distribution to let him or her know the type of information you will need to evaluate the request. Establish ground rules ahead of time for how the request is to be made and the types of documentation that they will need to provide.

• Explain to beneficiaries that the trustee has a duty to both income beneficiaries and remaindermen.

• Let beneficiaries know how the trust (and beneficiaries) are taxed on income earned in the trust and when to expect to receive their Schedule K -1s.

Tip #4 – Understand the difference between accounting income and accounting principal.

Become familiar with the Indiana Uniform Principal and Income Act. Read the document to detennine if the trust agreement makes provisions contrary to the act (which it may) or whether the trust agreement gives the trustee discretion on allocating receipts and disbursements between income and principal.

• Explain to the beneficiaries what the term “net income” means. General (simplified) rule: interest, dividends, rents, royalties less 1/2the trustee fee.

Tip #5 – Document your files.

• Beneficiaries are entitled to inspect your files. Remember that as you write notes to the file.

• Beneficiaries have been known to be litigious (surprise, surprise). Keep copies of all correspondence and emails. Make written, contemporaneous notes of telephone conversations and meetings. Follow meetings up with letters confirming the discussion

Ms. Deeter’s bonus tip: Realize what you DON’T know and engage professionals to assist you. 

I hope you polished your trust administration skills through Ellen Deeter’s review. If you would like to take advantage of the CLE program that includes her discussion of trusts, look for the Video Replay or On Demand Seminar of 120 Hot Tips in Probate, Guardianships, Trusts and Tax by Clicking Here.

_________________________________________________________________________________

About our Law Tips faculty participant:
Ellen M. Deeter earned her J.D. magna cum laude from Indiana University School of Law at Indianapolis in 1982. She started her career as an inheritance tax examiner for the Indiana Department of Revenue in 1978. Since that time Ms. Deeter has spent most of her career with bank trust departments, including Indiana National Bank, Wachovia Bank, N.A. and Merchants National Bank. She recently retired from The National Bank of Indianapolis, where she worked in various roles over 18 years, including serving as the Manager of the Personal Trusts and Estates Group and as Senior Trust Counsel.  She also is a Certified Trust and Financial Advisor.

About our Law Tips blogger:
Nancy Hurley has long-standing connections with Indiana lawyers. She was formerly a member of the ISBA and IBF staffs for over 30 years. Nancy’s latest lifestyle venture is with ICLEF. We are utilizing her exceptional writing and interviewing skills while exploring how her Indiana-lawyer background fits with ICLEF’s needs. When she isn’t ferreting out new topics for Law Tips, her work can be found in our Speaker Spotlight blogs, postings on the ICLEF Facebook and Twitter pages, and other places her legal experience lends itself.

Thank you for reading Law Tips. You may subscribe to this weekly blog through the RSS link at the top of this page.  Also, you are encouraged to comment below or email Nancy. She welcomes your input as she continues to sift through the treasure trove of knowledge of our CLE faculty to share with you.

ICLEF • Indiana Continuing Legal Education Forum, Indianapolis, IN

Posted in Law Blogs, Law Tips0 Comments