Bar News - March 16, 2012
Elder, Estate Planning and Probate Law: Estate Planning for Digital Assets
By: Tina L. Annis and Jeffrey J. Zellers
To say that the digital age is well upon us would be an understatement, and yet estate planning for digital assets has barely begun.
Digital devices, local servers and the cloud store billions of pieces of valuable, confidential and proprietary information. Sixty percent of Americans pay at least some of their bills online. More and more people use financial sites such as Mint, Quicken and Turbo Tax to store information. Email and texting have become the choice method of communication for todayís generation. Facebook has over 800 million users. Given the importance of peopleís "virtual lives" and the very real digital assets, estate planners should be discussing digital asset planning with their clients.
There are a variety of "digital assets" which attorneys and their clients may need to consider as part of the estate plan. Some assets have market value, such as the proprietary information or intellectual property of a business client or the PayPal account of an individual. Websites, blogs and domain names are now important assets for many businesses. Other digital assets are of a personal nature, including email and social networking accounts like Facebook and Twitter. It has become increasingly popular to store purchased music and personal, copyrighted photographs online. Even online game accounts are potential assets. What happens to these digital assets, their value and who has control over them, post-mortem, should be of concern to clients and their attorneys.
Digital estate planning relates both to the assets themselves and to the method for accessing the assets. The issues are not dissimilar to the dilemma often presented by the inaccessible safe deposit box. However, in the case of digital assets, without proper planning, we may not know that the "box" even exists and, if we do, we may neither have the key nor be able to drill the box open. Moreover, without steel doors to protect the digital asset, the assets may be left vulnerable to theft after a clientís death.
Most digital assets are accessed with a unique user name and password combination. Everyone knows the importance of guarding passwords carefully and changing them periodically, in order to protect against identity theft and hackers. However, when an individual dies, family members may not have access to this information. Probate lawyers often advise executors to look for the decedentís "important papers" and collect the decedentís mail in order to discover information about debts and assets. These actions will not suffice when it comes to digital assets.
Whether the clientís concern regarding the digital asset is privacy, control, identity theft or loss of market value, identification of the assets and planning for post-mortem access or destruction are key steps in the planning process.
Digital-savvy estate planners can advise their clients to take some basic steps. First, the client should assemble a complete inventory of all digital assets, including a list of user names and passwords. The client should state his/her wishes with respect to each of the assets, including whether accounts should be maintained, closed or destroyed. The client should then consider how to ensure that this information will be available to his / her executor while maintaining its security. Clients may choose to place the list in a safe deposit box or give the information to a trusted family member (parents might consider giving a list of user names to one child and passwords to another). Clients might also ask their attorney to hold the information with other estate planning documents. These simplistic solutions, however, are not ideal, given the security risks and the need to update passwords frequently.
Recently, new businesses have emerged to help people plan for their digital assets. The most popular to date are Legacy Locker, SecureSafe and Entrust. Each service allows users to securely store passwords and inventory lists, with a "digital executor" authorized to access the information upon verification of the userís death. The client may also indicate their wishes with respect to each digital asset, such as whether the account should stay open, get transferred to someone else, or be deleted. There are free accounts for storing a limited number of passwords, and additional services with fees ranging from $30 to $300 or more per year.
The lack of a uniform law or a uniform approach among internet businesses complicates the planning process. Assuming that a family member can access a decedentís digital assets, providers have different policies regarding the treatment of the asset upon death. With regard to email, some companies, like Gmail, may grant family members full access to the account. Others, like Hotmail, will provide family members with a CD of prior emails, but no ongoing access to the account. Still others, like Yahoo, will not release any information and will terminate the account upon notification of death. Of course, if the email provider is not notified of the death and a family member has access to the login information, then the account can continue to be accessed. Identity theft is an obvious risk.
Social media services also have varying policies. Facebook will memorialize the profile of a deceased user, which prevents access to the account but leaves the decedentís "wall" open for family and friends to pay their respects. Alternatively, the family can request that the account be removed entirely. Upon notification of a death, Facebook will remove the decedentís profile from public search results and prevent future log-in attempts by others. Twitterís policy is to allow the "next of kin" to both close the account and obtain an archive of all of the decedentís public tweets. LinkedIn will allow a family member to close a deceased userís account by submitting an online form.
The existing policies for termination of email and social media accounts each include a verification process, whereby the interested family member must provide evidence of the decedentís death, usually in the form of an obituary or death certificate. The policies do not, however, require a fiduciaryís Certificate of Appointment from a court, leaving open the possibility for controversy between an appointed fiduciary and other family members seeking access to the digital assets.
The treatment of digital assets in the event of incapacity is also important to consider. The same issues regarding access to passwords and accounts apply in the case of a client who has become incapacitated. Estate planners should add language to the durable power of attorney to specifically authorize agents to access this kind of information. Use of powers of attorney in this context is relatively new, and companies are nervous about allowing third party access to digital information, so detail and specificity in the power of attorney is key. Clients with extensive digital assets should be sure that the agent they select is sufficiently tech savvy to deal with the various accounts and online services.
The law has yet to catch up with the digital world. Without case law or statutory guidance on these issues, lawyers and their clients may find themselves charting new territory when dealing with the digital assets of a decedent. In the meantime, estate planners should begin discussing their clientís wishes and incorporating this important information into the overall estate plan as best they can.
Jeff Zellers is a shareholder of Ransmeier & Spellman. He has an LLM in tax law and has assisted businesses and individuals for over twenty-five years in meeting their business, professional and personal goals.
Tina Annis is a shareholder at Ransmeier & Spellman in Concord and has more than 10 years of experience advising families on estate planning, tax and elder law matters.