Estate Planning Digital Assets
Written by Jacque Mingle
Posted on Feb 27, 2015
Facebook’s announcement this month that they have decided what to do with user accounts when a user dies points to the fact that estate planning for digital assets is still an evolving area.
Facebook users now can designate a “legacy contact,” someone who can post messages to the deceased user’s timeline, respond to friend requests, and update a profile picture or cover photo. (Users alternatively can choose to have their page deleted or memorialized without allowing anyone access.)
But Facebook pages are just a small part of a person’s digital life. People have personal assets stored on computers or smart phones, or on websites such as Flickr or Shutterfly. These can include photos, videos, e-mails, manuscripts, family histories, medical histories, tax returns, estate planning documents, and personal information such as birthdates, names of family members and friends or family recipes. Then there’s social media: Facebook, LinkedIn, Twitter, Pinterest, Instagram, and e-mail. These accounts also can store photos, videos, and other electronic files.
Some people have financial assets online: PayPal, Bitcoin, an e-Bay account, or Amazon. Plus online bill-pay for mortgages, car loans, credit cards, water, gas, telephone, cell phone, cable, etc. Businesses store other important information such as customer orders, home and shipping addresses, credit card data, and bank account numbers. A domain name or blog can be valuable, and renewal may only be possible through a password or e-mail. Someone also might use something like dropbox.com for sharing files or use “the cloud” for storing them. Then there are frequent flier or customer points you can accumulate but might be able to access only via a website.
When you are not there or are unable to handle your digital affairs, it can get messy quickly. For starters, electronic bills for utilities, loans, insurance, and other expenses need to be discovered quickly and paid to prevent cancellations and defaults. The old standard detective method of collecting a deceased or incapacitated individual’s mail to get a handle on their expenses and assets won’t work in this new world.
Family members increasingly won’t stumble upon a dusty box or photo album holding their history of photos, letters, or diaries. They’ll be locked out of a Facebook account.
For all of these reasons, it’s important to deal with what will happen to your digital life in the event you become incapacitated and when you die.
Websites, blogs, and registered domain names are generally transferable under standard property and copyright laws. But many online accounts (such as e-mail and social media accounts) may not be; they’re governed by each site’s terms of service. Terms of service can vary widely. Some sites will allow a person with the appropriate legal authority to access your accounts upon your death. Others will put your accounts in a “memorial state” or permanently delete your account upon proper notification of your death. Here’s what might happen with some commonly held accounts.
It’s also unclear whether your nominated agent or personal representative could legally obtain access to your digital assets. The relevant laws have not kept pace with the way people live their lives today. Only a small number of states have estate laws that specifically cover digital assets (Arizona does not), and those laws are relatively new and untested. An outfit called the Uniform Law Commission, which periodically studies and recommends laws in evolving areas, studied digital assets, and its recommendations arrived last year. Only Delaware has enacted legislation based on the uniform law, and so far in 2015 fourteen other states are considering it. However, there is much uncertainty, particularly because the new state laws might conflict with federal privacy law.
There are two main unresolved issues. 1) whether state law can authorize a fiduciary to access digital property when federal law prohibits unauthorized access; and 2) whether a fiduciary can request that a service provider disclose records. (Here’s more on the state/federal conflict.)
It would be unwise to wait for the Legislature or Congress to come to the rescue. What can you do now?
1. Inventory your assets. Keep an ongoing list of where your assets are located and how they are accessed (e.g., username, password, “secret” security answers). Update the list periodically. Here’s an inventory document to help you stay organized:
There are also numerous password and account management apps that can help you with the balancing act between protecting privacy and allowing necessary access if something happens:
2. Be careful where this list is stored. Giving it to a family member or friends while you are alive can backfire — a dishonest friend would be able to steal your money. The list probably should be kept with your will or trust and durable power of attorney; if your attorney retains documents, the office can deliver the document to your agent or personal representative upon your incapacity or death. Be sure the office has a secure way to hold the document. Tell your agent or personal representative where they can find the list.
3. Indicate what you wish to happen to your digital assets (e.g., transfer to an heir or terminate) and who will be responsible for carrying out those wishes. (You can, for instance, name a specific trustee or executor for those assets.) Share this list with your estate planning attorney, who can help you incorporate it into your plan.
4. Recheck your estate plan. Look at your durable power of attorney to see whether your agent is expressly given the power to manage your digital assets if you become incapacitated, and at your will or living trust, to make sure your executor or trustee has the same authority upon your death.
5. Make physical copies of materials stored on Internet sites or “inside” of devices, or at least create additional copies on accessible digital media such as a DVD, a portable hard drive, or flash drive. (Be mindful that certain technologies may become obsolete. Remember floppy disks?) Also, store these in a safe place.
This article was inspired by (and heavily borrows from) Prof. Gerry W. Beyer’s presentation at the Southern Arizona Estate Planning Council’s Estate Planner’s Day.