• Massachusetts case addresses digital assets—In Ajemian v. Yahoo (478 Mass. 169 (2017)), the Massachusetts Supreme Judicial Court addressed whether the personal representatives of a decedent’s estate had a right to access the decedent’s personal email account managed by Yahoo.
John Ajemian died at a young age in a bicycle accident. His brother and sister were appointed as the personal representatives of his estate and sought access to his Yahoo account. Yahoo agreed to turn over certain limited information to them when presented with a court order, but refused to provide them unfettered access to the account.
The estate and Yahoo each filed for summary judgment. John’s siblings claimed that as personal representatives of the estate, they were entitled to access the email account because it was an asset of the estate. Yahoo claimed that it was prohibited from permitting access to the account under the federal Stored Communications Act (the SCA) and, in the alternative, it wasn’t obligated to allow them access under the terms of service (TOS) that John agreed to when opening the account.
The court held that the SCA didn’t prohibit Yahoo from disclosing John’s emails. The SCA allows disclosure with the “lawful consent” of the originator. The court determined that a personal representative of the estate could lawfully consent to the disclosure under the SCA. First, the court reasoned that to find otherwise would result in a preemption of state law. Second, it concluded that Congress intended for lawful consent to encompass certain forms of implicit consent. It also noted that the general purposes of the SCA were to prevent unauthorized access by law enforcement and private parties, not personal representatives of estates working to manage estate assets. As a result, Yahoo wasn’t required to permit access to the account, but it couldn’t claim that it was prohibited from doing so.
Then, the court remanded to the lower court on the issue of whether the TOS constituted a binding contract. Therefore, there was no resolution as to whether the TOS allowed Yahoo to refuse to grant access.
In summary, the case acknowledges that John’s email account is an estate asset of which the personal representative may seek access and control. While the SCA doesn’t preclude a personal representative from accessing the account, it isn’t clear if the fine print relating to the email account in this case would prevent access.
While state law on digital assets is evolving (and the interplay with federal law is complicated), estate planners should consider including provisions that authorize fiduciaries to handle digital assets even though there’s currently no guarantee that such provisions will be effective. Such provisions should be discussed with clients, as many might not want to give family members access to certain digital assets following their death, such as emails.
• Internal Revenue Service releases 2018 inflation adjustments—In Revenue Procedure 2017-58, the IRS published the inflation adjustments for tax items for 2018.
For an estate of any decedent dying in calendar year 2018, the basic exclusion amount is $5.6 million for determining the amount of the unified credit against estate tax under Internal Revenue Code Section 2010. The exemption for generation-skipping transfer tax, which is determined by reference to the unified credit, will also be $5.6 million.
The annual exclusion is also (finally) increased. In 2018, the first $15,000 of qualifying gifts to any person are excluded from the calculation of taxable gifts under IRC Section 2503 made during that year.
For calendar year 2018, the first $152,000 (up from $149,000) of qualifying gifts to a non-citizen spouse who isn’t a U.S. citizen (other than gifts of future interests in property) are excluded from the total amount of taxable gifts under IRC Sections 2503 and 2523(i)(2) made during that year.
• Estate tax revenue rose in 2016—While new tax proposals look to increase estate tax exemptions, the IRS released data showing that estate tax revenue in 2016 exceeded that of 2015.
The number of taxable estates rose and generated net revenue of about $18.3 billion in 2016, as compared to $17.1 billion in 2015. Most taxable estates were between $5 million and $10 million, but a small number of returns generated the most revenue: 300 estates in excess of $50 million paid about $7.6 billion in tax.