With the availability of smartphones, laptops and tablets, it is nearly impossible for an hour to go by without technology touching our lives, both in business and in personal activities. Consider that for every minute of 2013, there were an estimated:
- 98,000 tweets and 320 new Twitter accounts.
- 100 new LinkedIn accounts.
- 700,000 Facebook status updates.
- 168 million emails sent.
In addition, $4.5 billion was spent on e-books and billions more on digital music and movies.
These “digital assets,” which have both monetary and sentimental value to families, need special consideration as part of a comprehensive estate plan. One stumbling block to creating a proper estate plan is that the laws on what happens to your “digital assets” when you die are quite murky. It is difficult even to pin down a definition of such assets.
For estate planning purposes, there are two key considerations. First, it’s important to think about how to dispose of the tangible asset or device on which the digital information is stored, such as a smartphone, server, Kindle, iPad, etc., and how a family member or fiduciary can access such information once in possession of the device. Think about how email accounts are viewed or Facebook is updated: You need a password to use the device; then you need a username and another passcode to open the application.
In the context of estate administration, sometimes digital assets will have monetary value. For instance, composers have been known to store musical scores on their devices. Or there may be purely sentimental value in digital assets such as pictures, journals, blogs and emails, which can give insight to families and friends and help provide closure after the sudden loss of a loved one. Without a plan, all of this valuable information could be lost.
The second key issue: Consideration should be given to the terms of the online accounts in which many of the assets are held. Is it possible for the online accounts to be inherited by surviving family members, or do the terms of service behind the “I Agree” box govern what happens to the account at the time of the holder’s death? In other words, could it be that no matter what your estate planning documents say, your fiduciaries will be unable to access the accounts after your death or disability because the terms of service dictate that access to online accounts terminates upon the death of the account holder?
While these questions are not easily answered, it is likely that the devices can be passed to surviving relatives or friends. The tricky part: Once a survivor receives the device, how does he or she obtain the usernames and passwords to access the digital assets? Conventional wisdom tells us to avoid writing down passwords and usernames because of concerns about fraud and identity theft. Many of us also have gone paperless because it is convenient and environmentally friendly to manage accounts and pay bills online. The other side of such efficiency, however, is that there may be no paper record of the account number, making it very difficult to handle estate matters in a timely fashion.
Timing is crucial in estate settlement matters to ensure that expenses are paid and there is no lapse in insurance coverage. Furthermore, individuals now routinely set up automatic bill payments for recurring expenses. If those payments are not stopped after a person’s death, it is possible for the account to be overdrawn without the knowledge of the executor, causing delays in settlement of the estate.
Therefore, it is a good idea to take an inventory of all digital assets and the usernames and passwords associated with the accounts holding those assets. This information can be stored in a safe deposit box or with the will and other important papers. As long as the list is kept secure and trusted individuals know where to find it, the administration of the estate will proceed more smoothly—or, if you are incapacitated, access to financial accounts can be immediate.
This inventory could contain information for all of your email accounts, various devices, social networking profiles, blogs and domain names, online financial accounts, photographic and musical accounts and airline reward accounts. Of course, the inventory must be updated on a regular basis. Although that is time-consuming, the inventory will be invaluable to friends and relatives.
Another option for safeguarding passwords and usernames is an online service. In the event of death or disability, the service will deliver the necessary information to the individual named in advance by the decedent or disabled individual. There are fees associated with these services, but the peace of mind can be worth the expense.
Still, the conflict between terms-of-service agreements and the provisions on access to digital assets under a will, trust or power of attorney is not easily resolved. Currently, only a handful of states—not including New York—authorize an executor or agent to have access to digital assets. The problem is that without a legislative change, the Computer Fraud and Abuse Act prohibits the unauthorized access to digital information by a fiduciary. Many executors and trustees will not want to risk criminal liability to access digital assets without authorization.
Hopefully, legislative changes are forthcoming, but in the meantime it is worthwhile to read those terms of service, because each agreement is different and some may allow account holders to choose what happens to their accounts in the event of death or disability.
In recent years, estate planning has become increasingly complicated as tax laws continue to be in flux. Planning for digital assets adds to the complexity. Although there are no certain answers to questions about how to definitively plan for such assets in New York, it is crucial to take an inventory of your assets, keep it updated and start a dialogue with your advisers on how best to plan for your unique situation.
Jeffrey LaBarge is a partner with Nixon Peabody LLP. He developed this column with colleague Stephanie Seiffert, counsel in the firm’s private clients, estate, trust and financial planning practice.
5/9/14 (c) 2014 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email email@example.com.