Estate Planning and Administration for Digital Assets
Increasingly, a larger portion of our clients’ financial and social lives are taking place online. The use of the internet by our clients for these purposes is only going to increase and be more common in the future. Therefore, attorneys must be better informed regarding digital assets so as to properly advise our clients. The universe of issues surrounding the digital assets is vast and this article will address only some of the issues related to estate planning and estate administration for digital assets.
Categories of Digital Assets
There are several categories of digital assets. Personal digital assets would include photograph and video storage and sharing sites such as Flickr and Shutterfly. Websites are also used to store personal information and documents including medical records and tax documents. Social media digital assets include Facebook, Twitter, email accounts, websites, and blogs. Information, such as monthly statements regarding financial assets, including bank and brokerage accounts, may be delivered online to a client’s email account without a paper statement being mailed to the client’s home. Similarly, a client may receive monthly bills such for loans, mortgages, credit cards and utility bills delivered to an email account and may also pay those bills online or may have such bills paid automatically through preauthorized withdrawals from the client’s bank account. Some of these accounts are not actually assets at all but rather are simply licenses to use a website’s services that generally expire upon the user’s death. Steven Maimes, Understand and Manage Digital Property, The Trust Advisor Blog (November 2009), http://thetrustadvisor.com/news/understand-and-manage-digital-property.
Web Site Policies on Releasing Information
A few states have statutes that address access to a decedent’s email account. Connecticut and Rhode Island have enacted legislation requiring email service providers to provide an executor or administrator with access to or copies of the contents of the email account of its customers. Conn. Gen. Stat. Section 45a-334a; Rhode Island Stat. Section 33-27-1 through 5. Indiana has enacted broader legislation that applies to any person who electronically stores the documents or information of another person and requires such persons to provide to the executor or administrator access to or copies of such electronically stored documents and information. Ind. Code Section 29-1-13-1.1. Oklahoma’s legislation provides that the executor or administrator of an estate shall have the power, where otherwise provided (emphasis added) to take control of, conduct, continue, or terminate any accounts of a deceased person on any social networking website, any microblogging or short message service website or any e-mail service websites. Oklahoma Stat. 58-269. Idaho’s legislation is similar to Oklahoma’s but does not contain the phrase “where otherwise provided.” Idaho Stat. 15-5-424. The difference between the Oklahoma and Idaho statutes is significant since many companies, through their user agreements, control access to their customers’ accounts following the customer’s death. In the future it should be expected that additional states will enact legislation addressing access to a decedent’s electronically stored information.
Estate Planning Considerations
The absence of legislation in this area in most states makes it crucial that lawyers be prepared to assist clients in planning for their digital assets upon their disability or death. When working with a client to prepare his or her estate plan, an attorney should recommend that the client prepare an inventory of each of his or her digital assets. The inventory should contain instructions on how to access the digital asset including the domain name of the site and any usernames, passwords, and the answers to any security questions necessary to access the site. The client should be advised to update the inventory on a regular basis. The inventory then may be saved in hard copy or it may be saved on a CD, DVD, flash drive, or in a cloud with remote access secured by a password. The client should inform someone of the location of the inventory and its password. While the client may provide the password to the inventory to an attorney, it is not recommended that an attorney have a copy of the inventory itself to avoid allegations that would inadvertently caused the confidentiality of the information contained in the inventory to be breached.
In addition to saving this inventory in the manners described, there are also companies whose business it is to store such information. Examples of such companies include Entrustet, Legacy Locker, and Datainherit. One of the problems with relying on these companies, however, is that they are still new start-ups and may no longer be in business when their services are needed by the decedent’s family.
Such an inventory will assist the Personal Representative in marshaling the electronic assets of the estate and preserving not only those assets with monetary value but also electronic assets such as photographs and videos that have sentimental value. If the Personal Representative does not have the information contained in the inventory, there is a risk that such assets may be lost forever. For example, Leonard Bernstein, who died in 1990, left a manuscript for his memoir in a password protected file. Unfortunately, the password has still not been located, making the manuscript inaccessible.
The inventory will also assist the Personal Representative in identifying the deadline for renewing valuable domain names. Joseph M. Mentrek, Estate Planning in a Digital World, 19 Ohio Probate L.J. 195 (May/June 2009). Finally, an inventory may be crucial if the decedent was the proprietor of an internet based company. Without such valuable information, sales could be lost, items not shipped to customer, and inventory depleted if the decedent is the only individual with access to the necessary passwords. Tamara Schweitzner, Passing on Your Digital Data, Inc., Mar. 1, 2010, available at http://www.inc.com/magazine/20100301/passing-on-your-digital-data.html.
Powers of Attorney should specifically authorize the attorney-in-fact to access the electronic accounts in the event of the client’s incapacity. Similarly, a client’s will should specifically authorize the Personal Representative to access the client’s electronic accounts. However, the terms of the user agreements may attempt to restrict access to digital assets only to the account holder. It has been suggested that the account holder for digital assets should be a revocable trust since the revocable trust will survive the incapacity or death of the grantor and enable the successor trustee to access the account information. Beyer and Griffin, Estate Planning for Digital Assets, Estate Planning Studies (July 2011).
Estate Administration Considerations
In administering estates, the decedent’s Personal Representative and family should attempt to locate the decedent’s digital assets. Some of these accounts may not be located until January of the year following the year of death when IRS form 1099s are issued by banks and other financial institutions. However, if the accounts do not pay interest, then they may be more difficult to locate. In order to locate such accounts the Personal Representative should determine how the decedent paid his or her bills, particularly those bills that were recurring on a monthly basis. These recurring bills may have been paid using an online bank account. In addition, the decedent’s prior bank statements should be reviewed since the decedent may have retained the account but simply decided to receive the monthly statements electronically each month. Also, the Personal Representative should contact the major financial institutions in the area where the decedent resided and inquire whether the decedent had an account at the institution. A similar letter should be sent to the major online financial institutions such as ING and U.S. Bank. Finally, the Personal Representative or the decedent’s family should check the unclaimed funds pool of States in which the decedent resided. Deidre Wachbrit Braverman, Estate Planning for the Digital Age: Online Assets, National Business Institute (2010).
The area of planning for digital assets is a developing area of the law. It is certain that cases will be decided regarding the rights of the decedent’s family and Personal Representative to access such digital assets. In spite of the complexities inherent in this area and the current lack of clarity, it is nevertheless imperative that clients and lawyers plan as adequately as they can for the client’s digital assets. Failure to properly plan may lead to unintended consequences for the decedent’s family including increased time and expense in administering the estate and the possible loss of significant assets. These results can be avoided or mitigated by engaging in estate planning that includes digital assets.
Frank Baldino is a partner in the firm of Lerch, Early & Brewer, Chtd. In Bethesda, Maryland, and the co-chair of the firm’s estates and trusts practice group. He may be reached at firstname.lastname@example.org or (301) 657-0185.
This article originally appeared in The Maryland Bar Journal, Volume XLV, Number 6, November/December 2012. Republished with permission from the Maryland State Bar Association.