One of the more-frequent situations that estate planners have to deal with, along with executors to wills, is the existence and growing popularity of digital accounts and other online assets, such as email, social networking sites like Facebook and its latest acquisition Instagram, along with online services like iCloud, to name but a few of the Internet accounts we may have these days.
We briefly discussed this topic at the beginning of a recent edition of our weekly radio and web broadcast on KDOW 1220 AM, Wealth Management and You with Connie Yi. Some of the points we covered are:
- Legislation is beginning to change regarding digital assets. Nebraska has new laws pending regarding online media and Internet accounts, which will provide the executor of an estate the authority access to the web accounts of that recently deceased person.
- Be careful where you publish your personal informationon the Internet. Facebook and other websites actually own the copyright to any content you post on that site, such as your written thoughts and ideas, photographs, and videos.
- Facebook’s memorial policy is currently to freeze an account if it is notified of an account-holder’s demise, though it may choose to allow it to remain online as an active wall of remembrance.
- The issuance of paper account statements by financial institutions is becoming more rare each day, so keeping track of the login credentials for the ever-increasing list of your online accounts is becoming increasingly more important. We recommend you:
(1) keep an organized list of all of your online account usernames and passwords in a secure-but-easy-to-remember-location,
(2) update the list as you make changes to your accounts – or at least periodically, and…
(3) share the location of your list with the executor of your will and/or the designated trustee of your estate, so it is quickly accessible when needed.
The next topic we discussed on this edition of our show was the rise of mortgage loan modification scams, as a result of the current real estate and mortgage default crisis.
If you have a troubled or underwater mortgage, and you are seeking a mortgage workout option, you probably fall into one of two categories:
- You have a financial hardshipand are fearful of foreclosure.
- You are stuck with an underwater house you no longer want but cannot sell, due to the current lousy conditions in the real estate market, though you are not facing financial hardship or fear losing your home.
If you fall into the first category and your mortgage is in default, your loan will be listed in a related database, which the financial institution that holds your mortgage will probably sell to a direct marketer.
Unscrupulous direct marketers will use those databases to contact distressed homeowners with “guaranteed” offers, which are designed to look like “official” letters from the federal government, to obtain an affordable loan modification.
Naturally, no such guarantees can possibly exist and the “$5000 check” included with the deceptive letter offering “help” is just as bogus. Never ever pay money intended to apply to your mortgage to any 3rd-party – always make mortgage payments directly to your lending institution.
As a result of all of these scams, recent legislation in California prevents anyone from accepting money up-front to assist with a loan modification, including attorneys who normally do collect retainer fees in advance, as a long-accepted industry standard.
If you want to create a mortgage workout, you should work directly with your lender and be very persistent – call every week, if that is what is needed to verify the status of your loan modification application and keep the process moving forward.
Though it would seem an obvious benefit to a lender to have you modify your loan rather default on it, which is also bad for the community, the packaging of mortgages as securities often prevents that logical solution from happening. We expanded on this topic during this broadcast, as we have previously discussed on-air and here.
Should you not qualify for a mortgage loan modification, a short sale of the property is another option, if the lender will agree, prior to default and foreclosure, neither of which is desirable or very beneficial to any person, institution, or neighborhood.
If you can short sell your house, you may receive a tax write-off. Before you attempt this or any other type of mortgage workout, seek tax advise from a professional, because you want to ensure that any steps you take do not have unknown tax implications down the road.
If your property is insolvent (you owe more on it than it is worth), but you cannot get approved for a loan modification or a short sale – and you do have the financial resources to maintain your mortgage in good standing but choose not to - you can choose to abandon a property in a strategic default and accept the risks and consequences.
Naturally, it is not so easy to just walk away from a house. One of the risks is that you may still be responsible for your homeowners association (HOA) dues and fees, until the next sale of the property is final and your name is no longer on the title to that piece of real estate.
Your HOA may sue you to collect the annual fee it is rightfully due, based on a legally-still-in-effect clause in the title. Given the slow recovery of the housing market, it may be several years before the property is sold again.
A strategic default may also cause your other lenders to freeze those credit accounts, so you may end up heading down a path that eventually leads to lots of lawsuits and/or bankruptcy. This should obviously be a strategy-of-last-resort.
If you missed the original broadcast of this show, you can listen to a podcast by directly streaming or downloading the MP3 file in our Radio Show Archive.
If you have questions or concerns about any of the topics mentioned above and would like a free consultation with Connie Yi, a California estate planning attorney, please contact us. We have four conveniently located offices around the Bay area: San Francisco, San Mateo, San Jose, and Pleasanton.