Studies have shown that in 2012, for the first time ever, one-half of all adults age 65 and over use the Internet or email, with 70 percent of them using the Internet daily and one-third of them using a social networking site.1
As a result, a client's potential estate has grown to include assets of the digital kind. Photo albums, diaries, and letters are rapidly being replaced by their electronic counterparts; interpersonal connections are being made through social networking websites; even banking is done online, from statements to phone camera check deposits. However, whereas photo albums, diaries, letters and address books are physical property passed on by the deceased to be cherished and enjoyed by their heirs, their electronic counterparts are often times not so easily identified or transferred. In addition, electronically stored information may be put beyond reach without usernames and passwords. Because clients may not consider these issues when profiling their overall estate, a diligent attorney must proactively draw the client's attention to these modern complexities and to his or her digital estate. This article is intended to identify and categorize digital assets and provide some steps for developing a digital estate plan.
Identifying Virtual Assets
Digital assets, also known as virtual assets, are electronic resources that can be owned or controlled and are electronically stored or maintained on computers and related technology. It is important to keep in mind that although the term "digital assets" is the more commonly used term with regard to this topic, the term "virtual assets" may be more appropriate, as many of these assets are not truly assets but rather licenses to use certain goods and services. These assets may be broken into four main categories, including: personal assets, social media assets, financial assets, and business assets. Although most clients' digital assets may only include the personal or social media kind, which generally have little or no monetary value, they play an increasingly important role in clients' lives, serving as the foundation for memories and valuable familial relationships.
Digital Personal Assets. Digital personal assets are typically electronically shared text and media files, such as records, photos, videos, diaries and journals. They have the same emotional value as their physical counterparts. Personal property like photos and journals can tell a person's life story, and passing that story on to loved ones is a significant component of estate planning. These assets may be priceless and have profound sentimental value. However, unlike in the past when such personal assets were in physical form, digital personal assets are more likely to go unaccounted for in their digital form, unknown to family and friends. They may be stored on a client's home computer, a flash drive, an external hard drive, an online photo sharing website or a cloud storage server. Even if their existence is known, access may be difficult to obtain without taking steps to pass on usernames and passwords.
Alternatively, for some clients, digital personal assets may consist of intimate and clandestine files that a client wants to keep secret. Once again, without proper planning, these files may fall into the hands of those who were never meant to see them.
Moreover, it is also important to consider the transferability of certain digital assets, such as media purchased through iTunes, Amazon and other services. Today, people spend thousands of dollars purchasing music, movies, television shows and books online. However, when such items are purchased online, it is really the right to use the item that has been purchased, without the physical manifestation of the property that would exist if the item was purchased in tangible form. These rights are governed by the contract between the user and the company, often in the form of a "terms of service" agreement that restricts downloads to prevent file sharing. So, unlike a CD or record, which could be easily passed on and used in any CD or record player, downloaded music and similar files will generally remain stuck to the account that originally purchased them or the device on which they originally were purchased.
Social Media Assets. Social media assets are accounts used for connecting with other people, such as email, Facebook, Twitter and Instagram. There are two distinct aspects to such accounts: The first is the account itself, that is, the email address, user name or Twitter handle; the second is the contents of such accounts, the virtual correspondence, the emails, posts, tweets or photos themselves. Common sense might indicate that an individual owns their username and the products of his or her virtual correspondence, but many online accounts are not actually property. Instead, these accounts are often just licenses governed by seldom read "Terms of Service." As a result, licenses that expire with the life of the holder may effectively preclude an account from being continued or transferred after death, and restrictive terms of service may prevent access to the virtual correspondence after death.
Social media assets must be considered with care. Email accounts may hold untold secrets into one's life and social networking sites are becoming a significant component of a person's reputation, not to mention a large part of one's digital legacy. These online services have various policies dealing with access after a user's death, generally with a focus on privacy that is not misplaced. For example, after an account holder's death, Facebook allows for a Facebook page to be memorialized, deleted, or continue to exist as is.2 Some websites may also allow family members to obtain the contents of the account with proof of death and relationship. Policies vary widely from website to website. However, even if a company's policy is extremely restrictive, that is not always the end of the road. A court order may trump the contract between the user and the company.
Consider the case of Justin Ellsworth. Justin was a Marine who was killed in Iraq.3 After Justin's death, his family wanted access to his Yahoo email account; however, the company refused based on its terms of service, which provides that accounts are nontransferable and terminate at death.4 Justin's family took Yahoo to court and an Oakland County probate judge eventually ordered Yahoo to turn the contents of the email account over to Justin's family.5 Access to the actual account or the ability to continue using the email address was never granted. Similarly, a court order from a local court in Wisconsin recently directed Facebook to give a family access to their deceased 21-year-old son's account.6 While these are certainly victories for the families, it is surely not difficult to imagine that most families do not want to spend resources, both financial and emotional, on similar court battles.
Digital Financial Assets. Accounts like Paypal, online gambling websites, massively multiplayer online games (MMOs), online bank accounts and bill-paying services are included in the financial assets category. Taking into account online services is a critical aspect of digital estate planning. First, access to online services may aid an executor in identifying traditional assets. For example, banking and brokerage statements may only be accessed online if the client has opted to go paperless. Additionally, nondigital assets such as reward and incentive programs, may require online access for management and transfer. Thus, an executor cannot rely on checking a decedent's file cabinet or snail mail for account statements. Besides having difficulty identifying assets, the fiduciary of a paperless decedent's estate who lacks access to a decedent's online services, may find that bills received online are going into default, or that online subscription services are continuing to unnecessarily charge the decedent's account.
In addition, resources held in online accounts like PayPal or gambling sites may go unmarshalled. In some instances, MMOs allow players to accumulate assets in the virtual online game that have actual real world value. Take the case of David Storey, a graduate student in Sydney, Australia who paid $26,500 in real money to purchase a virtual island in the MMO Entropia.7 Even more staggering than the price he paid for the island is that it brings him in over $100,000 a year in real money, by allowing other Entropia players to use the island.8 One can easily see how such an asset could go unmarshalled by an executor unaware of it existence or value.
Digital Business Assets. Digital business assets includes blogs and websites that are potentially valuable, or the goodwill associated with an eBay or Etsy store. Website domain names are transferable assets registered to each owner. Website and blog content belongs to the writer under copyright law. Copyright law protects "original works of authorship" from the moment the work "is created and fixed in a tangible form that it is perceptible either directly or with the aid of a machine or device."9 Works subject to copyright and the corresponding rights are transferable during life or upon death.10 Thus, a website subject to a copyright can be transferred at death via will, trust, or by operation of law. Consequently, where such a website, or an eBay or Etsy store, is owned by an individual, as opposed to an undying business entity, there should be a plan to carry out the owner's post-mortem desires with respect to the store or website.
Some clients may wish to have their websites or blogs continued after their death by another person, while other clients may wish it to be stopped. Popular blogs can be extremely profitable as a result of advertising revenue, and should be continued or sold. Depending on the generality of a website address, it may have value separate from the decedent's underlying business.
Regardless of which category a particular digital asset falls into, all of them could become virtually inaccessible without proper planning. While usernames and passwords protect individuals' online presence, problems may arise when an account holder passes away or becomes incapacitated, leaving no one else with access to his or her online accounts. Moreover, account ownership and the ability for a decedent's representative to access online accounts after death varies by service provider. Thus, the surest way for a decedent's representative to gain access to online accounts is to have the usernames and passwords. This not only prevents problems with access, but may also guard against the increased potential for online identity theft that occurs when a person in unable to monitor online accounts by reason of death or incapacity. As a result, digital assets and information should be accounted for when developing a comprehensive estate plan.
The main problem with digital estate planning is the dearth of legal precedent that exists with respect to digital assets. Currently, only five states deal with digital assets in their estate laws: Connecticut,11 Rhode Island,12 Indiana,13 Oklahoma14 and Idaho.15 Connecticut's and Rhode Island's statutes are limited to providing estate fiduciaries with access to a decedent's emails.16 Indiana's statute is a bit more comprehensive, covering electronically stored documents.17 Oklahoma's and Idaho's statutes are the most comprehensive, providing that executors or administrators may take over digital assets such as social networking and email accounts.18 However, these statutes are limited to their respective states, leaving the legal landscape with respect to digital assets largely unclear. That said, there are several steps that can be taken to deal with a client's digital estate.
The first step is for the client to take inventory of his or her digital assets. This list should include a list of all digital assets with their name, location (i.e., website address), username, password and other login information, such as the answers to user confirmation questions. The digital assets inventory should also include whether any money is involved with the digital asset, such as an existing account balance. In addition, the policy or terms of service for each digital asset should also be reviewed to determine existing transferability and access rights. It is also critical to determine what authorizations will be necessary for dealing with each digital asset after death and to include this information in the digital assets inventory.