Tag Archives: Facebook

Facebook Beneficiary Designations

World Wide Web

When was your last Facebook post?  Maybe more importantly, when did you update your Facebook beneficiary designation? Facebook, the world’s most popular social network, recently changed its policy to allow users to designate a “legacy contact.” The legacy contact will be permitted to manage portions of the users’ account posthumously.

Facebook initially froze deceased users’ accounts upon receiving notice of the death.  This original, hard-line policy angered many users’ family members, heirs and other users who wanted to edit the deceased’s account or provide information to friends.  Google, traditionally at the forefront, became the first Internet company to permit users to select digital heir for its Gmail email service and other services.  Facebook has followed Google’s lead and finally welcomed legacy contacts.

The legacy contacts will be able to post to users’ pages, change the profile picture, and even respond to friend requests.  There are numerous settings and levels of permission which can be granted, including access to the decedents’ posts and photos. The legacy contact cannot edit the decedent’s posts or what his or her friends post.  The legacy contact will not have access to the decedent’s messages nor will the contact be allowed to delete the account.  Facebook users may still choose to have their entire account deleted at death.

To designate your legacy contact, go to ‘Settings’ and selected ‘Security’ and then click ‘Legacy Contact’ at the bottom of the page.  From there you can designate an existing Facebook friend and give that friend permission to download an archive of your data or choose to have your account deleted at death.  As with most initial policies, Facebook’s current offerings are not optimal.  You must name an existing Facebook user and you can only select one legacy contact.  So spouses who travel extensively together may consider naming another individual. If you do not name a legacy contact, Facebook will honor digital designations made in a traditional, legal will.  For assistance with these and any other beneficiary designations, please contact our experienced estate planning attorneys.

Facebook Billionaires Avoid Taxes with GRATs

Forbes recently highlighted how Facebook co-founders Mark Zuckerberg and Dustin Moskovitz established grantor retained annuity trusts (GRATs) to transfer significant amounts of wealth tax-free.  In 2008, Zuckerberg and Moskovitz established GRATs which will enable the Facebook executives to transfer as much as $185 million to future offspring or others without paying any gift tax.  Most wealthy individuals recognize that this year offers a golden opportunity to transfer $5.12 million in assets without incurring any gift tax. However, the Facebook executives followed a similar tax strategy to the Walmart founders, the Walton family, by funding their GRATs with their rapidly appreciating Facebook shares.

ImageGRATs function by allowing a grantor (Zuckerberg and Moskovitz) to place shares or other assets into an ­irrevocable trust and retain the right to ­receive an annual payment back from the trust for a period of time.  Typically, to avoid the risk of premature death, advisors select a shorter time period of 2 to 4 years. If the grantor survives that period, any property left in the trust when the annual payments end passes to family members, other beneficiaries, or another trust.

A crucial aspect is determining the value of the remainder interest in the annuity. In calculating how much value will be left at the end of the annuity term (the remainder) — and thus how big a gift the grantor is making — the IRS does look at the performance of the actual stock (or any other asset) in the trust. Instead, the IRS assumes the trust assets are earning a meager government-determined interest rate. With a zeroed-out, or “Walton” GRAT, the grantor receives an annuity that leaves nothing for heirs if assets grow only at the IRS’ lowly interest rate. If the assets grow faster, the excess goes to the heirs gift tax free. If assets or stock under-perform or decrease in value, there is no downside for the grantor because the annuity can be paid by returning some shares each year to the grantor.

As a result, a GRAT is an ideal instrument to shift assets you expect to suddenly increase in value.  Hence, rapidly appreciating stock of technology giants (Facebook) or growing retails empires (Walmart) have proven to be the perfect assets to utilize within a GRAT.  President Obama and Democrat legislators have targeted zeroed-out GRATs as tax loopholes of the wealthy and have proposed legislation which would eliminate their use.  Until that time, the GRAT remains a valuable wealth transfer tool.

Billion Dollar Tax Bill for Facebook CEO Zuckerberg


Facebook CEO Mark Zuckerberg will soon become a billionaire when the social media giant completes its initial public offering (IPO).   Despite the enormous benefit to his personal wealth, he will face some severe tax consequences from his proposed exercise of millions of stock options.

Zuckerberg currently owns almost 414 million shares of Facebook, but he also holds options to buy another 120 million shares at the bargain price of 6 cents a piece. Facebook said in its IPO paperwork that Zuckerberg plans to exercise those options and will sell some of his shares during Facebook’s initial offering to cover the tax bill.

Zuckerberg will pay ordinary income tax on the spread between the fair market value of Facebook shares when he exercise his options and the price he pays for the shares  – 6 cents.  Private analysts estimate the shares will go for $40 per share during the IPO.  At such an elevated price, Zuckerberg will owe roughly $1.5 to $2 billion in taxes.

Needless to say, Zuckerberg will pay tax at the highest marginal federal income tax rate of 35% .  In addition, as a California resident, Zuckerberg will pay state income tax at a 10.3% rate.  Why is Zuckerberg willing to shell out billions in tax?  Control.  The 27-year old CEO wants to retain as much control as possible over the continually growing Facebook empire.

Only in the twisted world of taxes could one go from paying what many believe to be the largest tax bill ever to paying no tax at all.  Zuckerberg may not pay any federal income taxes in 2013.  The Facebook Board of Directors, at Zuckerberg’s urging, has reduced his salary to $1 for 2012.

Online Estate Planning

Today, I can roll out of bed and with a few clicks on my phone, transfer money from my checking account to my online savings account, purchase a song on iTunes, and make a payment on my power bill. Years ago, each of these discrete activities would have required separate trips to various businesses. At the very least, each activity could not be accomplished online.

The shift to a virtual world directly affects our everyday lives and what occurs at our death. With the explosion of social media and increasingly more powerful smartphones, the significance of our online presence is not limited to financial accounts. Social media giants like Twitter and Facebook have adopted deceased user policies. Prior to the Virginia Tech massacre in 2007, Facebook automatically closed down user profiles after death. Students, families, and friends objected to this policy because they wanted to leave tributes and messages on the shooting victims’ profiles. Now, following notice of a deceased user, Facebook allows profiles to be “memorialized,” or changed into tribute pages without certain personal information.

Heirs may want to maintain sites or blogs with special sentimental value such as photo sharing sites like Kodak Gallery, Shutterfly, and Flickr. Many blog creators and Twitter users have hundreds if not thousands of followers. With all of the time and effort expended in creating and posting interesting content, the users would not likely want their online presence to vanish immediately upon their passing.

Can a surviving spouse access any of the online accounts mentioned above? For years, consumer advocates warned of the pitfalls of keeping a written list of our passwords. Create strong passwords with numbers, letters, symbols, and capitalized letters! Do not share your passwords with anyone! However, this caution-filled advice can create problems at death. I confronted this dilemma recently when a client sought to bequeath his online gaming account to a designated beneficiary. The client determined it was best if our office kept the login information rather than give the information to the designated trustee. The client confessed that he did not want the trustee to see how much he had expended (lost) on the hobby. For good reason, many of us would not want our loved ones to access our email and other online accounts.

Therein lies the dilemma. Several companies offer a potential solution. Three main competitors, AssetLock.net, Legacy Locker, and Deathswitch.com, are online services that allow users the ability to pass on their online assets. The companies give account access to various designated beneficiaries by giving the beneficiaries your passwords and can send final messages to friends. The online companies charge yearly or lifetime fees to act as your digital personal representatives. The conundrum is that these services will require human “verifiers” that the account holder is deceased and the online assets should be distributed.

The procedure for obtaining online account access can be even more burdensome if someone is incapacitated. If the incapacitated person has not executed a power of attorney, his or her spouse or family will need a guardian or conservator appointed. This may not suffice as certain financial institutions will require a court order customized to the particular account. All of these predicaments beg the question: What to do?

Individuals could give a lawyer or dependable relative all of the online account information. If you are fortunate to have several trustworthy loved ones, you could split up your accounts among a group of different people. The tried-and-true approach of leaving vital, important documents in a home safe or safety-deposit box could work well too. However, ensure that someone can access the safe or deposit box. At the very least, you should maintain a list of your online accounts and the domain names and inform someone where the list is.

Even if you have permission to use a spouse or family member’s online accounts during life, legally you may not be able to access their accounts after death. Notify the service provider so that others do not prey upon the account. Such notification will stop online bill pay services and other automated transactions. For those collecting Social Security benefits, loved ones must return any payments received after a recipient passes away. Benefits are often paid through direct deposit which should be stopped by notifying the bank and the Social Security Administration of the recipient’s death.

The law is sluggish in maintaining pace with the rapid evolution of online services. Clients and their counsel must be aware of the looming issues before losing Face(book) and turning to Google for solutions. If you have questions or concerns, you should contact an estate planning attorney.

This article appears in the December 13 edition of Northern Nevada Business Weekly.