Estate Planning for Digital Assets

Estate planning for digital assets has become a popular topic of late for the estate planning community. 

These are just a few of the articles you may find of interest:

See, e.g., Beyer & Griffin, Estate Planning for Digital Assets

Beyer and Cahn: When You Pass On, Don’t Leave the Passwords Behind: Planning for Digital Assets

Connor: Digital Life after Death: The Issue of Planning for a Person’s Digital Assets after Death

The classic example of not planning for the disposition of a digital asset is explained in the article by Beyer and Griffin at pages 2-3:

“…consider the case of Leonard Bernstein, who died in 1990, leaving the manuscript for his memoir entitled “Blue Ink” on his computer in a password-protected file. To this day, no one has been able to break the password and access what may be a very interesting and valuable document.”

When I attended law school in the 1960’s, no one had even heard of the term “digital property.” When we studied property, we studied real property and personal property. In turn, personal property was further subdivided into tangible and intangible personal property. If digital property had been in existence in the 1960’s, no doubt it would have been classified as intangible personal property since such items appear to represent an asset you can not physically feel or touch. Beyer and Griffin, supra, defined digital assets to include:

“any online account that you own or any file that you store on your computer or that you store in the cloud” (citing Nathan Lustig, Digital Estate Planning: What are Digital Assets? En trust et HIWI Blog

Thus, email accounts such as Hotmail and Gmail, videos on YouTube; blogs on WordPress; PayPal accounts, online banking; and social networking accounts such as Twitter and Facebook are just some of the examples of digital assets.

You might ask yourself as I did about whether this is much ado about nothing. After all, I have a LinkedIn account, a Yahoo email (which I have not used in four years) and I am on Facebook. I do not recall posting anything on Facebook and respond to the LinkedIn account only when someone wishes to be linked to me.

Nevertheless, Beyer and Griffin list at least seven reasons why it is important to plan for digital assets. They are:

1. Making Things Easier on Executors and Family Members
Although in my case, I doubt whether anything of value can be found in my digital inventory, many individuals may have stored an incredible amount of information (some of value) on-line ranging from eBay accounts, multiple email accounts, social networking accounts, online bill-paying arrangements, etc. Going through a decedent’s on-line inventory may be as complicated as sorting through file cabinets of paper documents if access to the on-line material is problematic after the deceased death.

Most on-line digital assets are mere licenses and many service agreements with respect to theses accounts expire upon the decedent’s death or are not user friendly to the decedent’s personal representative. Moreover, the personal representative’s authority over these digital assets is unclear in most states, although there is a trend emerging whereby state legislators are focusing on this problem. See Beyer and Griffin, Supra, citing recent legislation in Oklahoma and Idaho.

At a very minimum, for lifetime access in the event an individual becomes incompetent, the individual’s power of attorney should allow access to the individual’s digital assets in order to pay the incompetent’s living expenses and his/her bills. Unfortunately, without passwords, the power of attorney may not be sufficient.

2. To Prevent Identity Theft
Obviously, we are all vulnerable to identity theft and the more information we store on-line the more risk we expose ourselves to such theft. Protecting against identity theft is possible but access to the decedent’s online accounts will be necessary.

3. To Prevent Content Theft
Family members and personal representatives will need access to an online account to protect a decedent’s copyrighted Blogs as another individual may copy the decedent’s work if not protected.

4. To Prevent Losses to the Estate
Here the two authors cite the Leonard Bernstein example cited above.

5. To Avoid Losing the Deceased’s Story
Here Beyer and Griffin make reference to the increasing tendency of individuals to store family history (photographs, family journals, etc.) on-line. Access to these on-line family histories may be precluded absent a plan to allow access after a descendant’s death.

The last two reasons cited by Beyer and Griffin for estate planning for digital assets are to (1) to prevent unwanted secrets from being discovered (e.g., hurtful emails) by making sure such material is deleted upon death or by a trusted individual, and (2) to prepare for an expanding use of the information age.

Planning Possibilities
This is a difficult problem as very few people want to share their secret password(s) with other persons.

Long term the solution is probably model legislation allowing people to place the secret information for accessing digital assets in a secret virtual vault in the probate court which could be accessed by the decedent’s authorized representative upon that person’s incapacity or death. The secret vault could in effect be web-based that would allow individuals to change passwords and to update the information contained in the virtual vault from time-to-time.

In the meantime, what other solutions are possible and what should you avoid? Beyer and Griffin like the idea of drafting a separate document selling forth in detail on the individual’s online account passwords, security questions, and answers. The document can give detail information-from deleting it to transferring it to family matters. If this route is chosen, care should be taken to ensure that it is kept in a secure place to avoid improper use, such as a home safe, or a bank safety deposit box with other valuables and important estate planning documents.

I suggest you read the Beyer and Griffin article in its entirety as it contains other suggestions to solve this problem of passing on digital assets. Long-term, as I mentioned above there is a need for uniform legislation allowing individuals to store information electronically with the local probate court, allowing access to the decedent’s personal representative at death or an individual’s agent under a durable power of attorney during a lifetime.

Your online assets are an important part of your estate plan. Call us at 816-561-5000 or send a message below to schedule an appointment.

*This post was originally published on January 20, 2012