We've all done just that, probably more often than we should admit. On the way to getting started with a new social media or online service, most of us didn't actually read the terms of service. Have you ever stopped to consider what happens to your email, online accounts, digital photos, videos and other digital assets when you die? Probably not. Chances are that your clients haven't either. The answers aren't as clear as we might think, yet it's our job to help our clients understand digital assets as a part of their estate planning.

Digital assets are increasingly becoming a significant part of the legacy our clients leave behind. Unfortunately, the contract they probably didn't read may deny their executors access to their accounts, blocking the executors from carrying out specified wishes. In some cases, the site may even delete the account at death, destroying assets of monetary value. Even more essential to protect is an estate's financial information that may be stored only in digital form, secured by passwords and thus inaccessible to the executor and family.

Many of us might think that our clients don't have digital assets. While that's an easy way to ignore this issue, it couldn't be further from the truth. Most, if not all, clients have some information stored in digital form, whether they know it or not. As younger generations begin planning their estates, the quantity of these assets will increase. Our clients' executors will need to access and deal with this digital information after death, but without our help, they might not even know that this information exists — much less how to access it. Estate planners need to understand digital assets, provide tools to help clients inventory their digital assets and suggest approaches at the estate-planning stage to handle these important items.

What are Digital Assets?

The first step is to define digital assets. In short, digital assets are anything someone owns that's in a digital file stored either on a device the person owns (that is, stored locally) or elsewhere on devices accessed by contract with the owner. This latter type of digital assets includes everything stored online (that is, in the “cloud”) at various social media sites or other websites.

Types of Digital Assets

When discussing digital assets with your clients, it's important to understand specific assets and the technical complexities of each. Here's a brief overview of the different types of digital assets:

Devices and data

Computer, storage and mobile devices are clearly tangible, personal property that will be distributed as part of the estate. As we advise our clients on these devices' disposition, it's worth noting that they're often configured to access online and email accounts. As such, clients should give special attention to the fate of these devices. Perhaps more important than the devices' financial value as tangible property, we also need to consider the sentimental and financial value of the digital assets that may be stored on these devices. These digital assets may represent significant valuable property, independent of the device. This means that we may need to advise our clients to consider their devices and their digital assets separately.

Assets on these devices to consider include photos, videos, music and documents. For example, a photographer's estate may contain a computer worth $1,000, but his photo collection on that computer may be worth many thousands of dollars.

Also, while some data may be licensed only to the deceased and not legally divisible (such as rights-managed movies), there may be transferable licenses to software that may exceed the value of the device where they're stored.

Email

Email is similar to data, as it's often stored on a device owned by the client, but there are a few significant differences. First, email that has been received is essentially a file stored on a device or cloud-based service, but there's also the ability to continue receiving new email messages. This latter concept, which we refer to as “access to the account,” is important because email often serves as a “master key” to other online accounts. If you've ever forgotten your password, you'll remember the email that you received with the information to reset your password. Online services in effect use the email address as a unique and personal identifier and as such trust it as a means of resetting an account password. Therefore, if an executor or other party has access to receive new messages at the email account, he can reset the password of other online accounts.

Clients need to provide information about how they store and access their email (username, password and service provider). It's important to note that some email accounts are operated by the clients' Internet Service Provider (ISP) and as such the clients might pay for that account along with their Internet access. Other email accounts are web-based, operated by companies such as Google, Yahoo! and Microsoft. These web-based accounts are often free to use but subject to the particular terms of service of the providers, which have their own policies that apply upon the death of the account holder.

Online accounts

Clients are increasingly using online or cloud-based services to store their digital assets. The largest examples are social media sites, including Facebook, Twitter, LinkedIn, Flickr and YouTube. These sites store content including writings, photographs and videos. Almost all of these services are free (some have premium-paid accounts) and are accessed using a username and password. Most of their terms of service don't address death, but some have policies that state what will happen upon the death of an account holder.

Facebook will allow anyone who can cite a link to an obituary of the decedent to request that the account be “memorialized.” In this process, some personal information is removed, including contact information and status updates from the account, the username and password are disabled, but the profile continues to be displayed to existing friends so that they can post memories or condolences on the decedent's Facebook wall. Twitter will allow the executor, with legal documentation, to request an archive of the decedent's public tweets and close the account. Some services citing privacy concerns, like LiveJournal, afford no access to anyone following the death of the account holder.

While executors may be aware of the decedent's social media accounts, they might not be as familiar with sites that store personal content like Google Docs, Dropbox and online backup accounts. These services function much like a computer drive that's located at the service provider and holds content that belongs to the user and is sometimes shared with other users. The policies for these services vary widely, although most of them don't mention death in their terms.

Financial accounts

In April 2010, the U.S. Department of the Treasury announced its all-electronic initiative. It will stop issuing paper savings bonds in January 2012, and all Social Security payments after March 2013 will be electronic. The department isn't alone in its transition to digital — banks and other financial institutions are increasingly forcing their customers to create and manage their finances online.

Additionally, there are online accounts that connect directly to bank accounts. PayPal enables individuals to purchase products online and send or receive money directly to their checking accounts. Amazon and other online retailers can connect directly to bank accounts as well.

It's critical that the executor control these accounts. It's also critical that the executor has access to the decedent's email accounts, since email accounts can be used to reset access to these online accounts.

Online business

While this article is about personal assets, the line between personal digital assets and those of a business may be blurred. Bloggers, small online retailers and avid eBay users are great examples.

Usually these individuals will have a domain name for their website and a hosting provider, although many individuals not engaged in online business also have websites. It's important to note that the domain name is a lease with a registrar, usually paid in annual increments, and is associated with a particular name and email address. While the fees for domain registration, Domain Name System (DNS) hosting and web hosting are often paid to one company, they also could be divided among several service providers. Failure to pay one or more of these providers could cause the website to stop working.

Those with online businesses often enroll in advertising programs, affiliate programs or operate their own online store. Usually these services are managed completely online, and revenue is deposited into users' bank accounts or an account like PayPal. Executors need to know about any online revenue stream and ensure that the accounts are continued or are properly closed. Executors may even be responsible for preventing wastage of these online revenue streams and might be liable for any decline in business at the owner's death.

Current State of Affairs

The issue of digital assets is just now emerging because, until recently, most personal digital content was stored locally on personal computers or devices. The result has been litigation, with likely more litigation to come.

For example, in 2004, Justin Ellsworth, a U.S. Marine, was killed in action while serving in Iraq. His father, John, often communicated with him via email and sought access to his son's Yahoo! email account following his son's death. Yahoo! denied his request, citing this clause in the terms of service to which Justin agreed:

No Right of Survivorship and Non-Transferability. You agree that your Yahoo! account is non-transferable and any rights to your Yahoo! ID or contents within your account terminate upon your death. Upon receipt of a copy of a death certificate, your account may be terminated and all contents therein permanently deleted.1

John took the issue to court, and in early 2005 the Probate Court of Oakland County Michigan ordered Yahoo! to give him the contents of (but not access to) his son's emails.2 In contrast, Gmail's policy allows executors access to a decedent's email account if they provide proper documentation.3

Realizing the importance of digital assets, four states to date have enacted statutes that specifically grant executors the ability to handle such assets. The earliest from Connecticut4 and Rhode Island5 are limited to email accounts. A 2010 Oklahoma statute6 covers a broader version of digital assets. In 2011, Idaho passed an amendment7 to its laws based upon the Oklahoma statute.

Many of the online services' contracts state that California law will control because it's the home (principal place of business) to many of these companies. It's questionable whether the estate laws of a decedent's resident state would supersede the contractual agreements with the various online services, making for future litigation.

The best course is for clients to include information in their estate-planning documents about their digital assets. Having an inventory of digital assets, complete with relevant usernames, passwords and instructions can be invaluable to an executor when handling these issues. Without this information, it can take months, if not years, to resolve these issues.

Inventory the Assets

All of these considerations are likely overwhelming to most estates lawyers who haven't been required thus far to understand technology or online services. There's a simple way to get started that will help you help your clients.

Your clients need to create an inventory of digital assets that lists each asset, how to access it and any wishes regarding its disposition. Obviously, since a decedent's will becomes publicly available after death, a list of user names and passwords should never be included. Instead, clients need to create and maintain a list of these assets in a separate document, perhaps even referenced in the will. It's also critical that this list be created in a way that will allow the client to easily manage it, since new accounts are typically added frequently and technology is developing rapidly.8

While some clients may choose to maintain their lists on paper, other clients will store and manage their inventory on their computers, a thumb drive or online. There are also new “digital estate services” that permit individuals to manage their inventory securely online. These services maintain the inventory and securely control its transition to the executor or other recipient upon death.

Drafting the Documents

Now that you and your client know what digital assets exist, what should you do? The answer may depend on the specific asset and the contract terms surrounding it. If a particular asset is important, either in a personal or economic sense, then you must review those contract terms individually to develop a plan for handling that digital asset. This work is much like the work estate planners typically do for special assets, like a closely held business or contract rights, to make sure the asset passes correctly and is handled properly at death.

Beyond the specific reviews and tailored work, some general planning for digital assets might facilitate handling those assets either during life or at death.

First, the attorney-in-fact, under a durable power of attorney (POA), could be given access to and control of digital assets. While a broadly drafted POA should already give power over digital assets, the law surrounding these assets is developing. This creates confusion for both the attorney-in-fact and for those asked to deal with the attorney-in-fact. One approach that might comfort the parties involved and thus ease the ability of the attorney-in-fact to deal with these assets, is to provide a specific power for those assets. “Sample POA Language,” p. 70, gives an example of the language you could use in a durable POA form to give the attorney-in-fact this power. That language is general in nature and would need to be modified for specific documents under relevant state laws.

Alternatively, a person could have a separate durable POA focused on digital assets specifically; however, he must coordinate the two POAs. This separate power might be particularly appropriate if the ordinary attorney-in-fact lacks the know-how to handle digital assets or if some of the digital assets might best be handled by others.

Second, after death, an executor under broad executor powers should be able to handle digital assets, but until this developing area of the law is clarified, a specific power in the will, along the following lines, might facilitate the executor's ability to act:

“Digital Assets. My executor shall have the power to access, handle, distribute and dispose of my digital assets.”

Often the executor named in the will isn't the person with the ability to handle digital assets. In that case, the will might allow the executor to engage someone else to handle the digital assets. You could use language such as:

“I authorize my executor to engage _____________ to assist in accessing, handling, distributing and disposing of my digital assets.”

Sometimes clients will want specific directions on to whom digital assets should pass, or who should have access to or copies of these assets. Unlike most other assets, digital assets might pass to several individuals, with each receiving his own copy. While the will could provide specific directions, a direction outside the will might suffice in many cases, much like the often-used incorporation by reference of a list outside the will for tangible personal property, which may be mandatory under state law. For example, the will might state:

“I have prepared a memorandum with instructions concerning my digital assets and their access, handling, distribution and disposition. I direct my executor and beneficiaries to follow my instructions concerning my digital assets.”

Finally, and perhaps most importantly, the will needs to explain what digital assets are. “Specify Digital Assets in Will,” this page, gives some sample language you can adapt for your use.

Of course, the developments in digital assets are continuing and any definitional language must be sufficiently broad to capture many future generations of digital assets. When implementing this language for clients, it's worth reviewing the list of possibilities with them frequently to ensure that each digital asset of particular importance is addressed.

Endnotes

  1. Yahoo! terms are available at http://info.yahoo.com/legal/us/yahoo/utos/utos-173.html.
  2. Information is excerpted from Evan E. Carroll and John W. Romano, Your Digital Afterlife: When Facebook, Flickr and Twitter Are Your Estate, What's Your Legacy? (New Riders Press 2011).
  3. Google outlines its requirements for executors at https://mail.google.com/support/bin/answer.py?answer=14300.
  4. Connecticut Public Act No. 05-136.
  5. Rhode Island General Laws Title 33, Chapter 27.
  6. Oklahoma Statutes Section 58-269.
  7. Idaho Code Section 15-5-424 Part Z.
  8. Your Digital Afterlife, supra note 2, provides a step-by-step process and templates that clients can use to inventory their digital assets. More information is available at www.yourdigitalafterlife.com.

Evan E. Carroll, far left, and John W. Romano are technology researchers and authors of Your Digital Afterlife: When Facebook, Flickr and Twitter Are Your Estate, What's Your Legacy? Jean Gordon Carter is a partner in the Raleigh, N.C. office of Hunton & Williams LLP

Specify Digital Assets in Will

Here's some sample language you can include

Digital Assets

“Digital assets” includes files stored on my digital devices, including but not limited to, desktops, laptops, tablets, peripherals, storage devices, mobile telephones, smartphones, and any similar digital device which currently exists or may exist as technology develops or such comparable items as technology develops. The term “digital assets” also includes but is not limited to emails received, email accounts, digital music, digital photographs, digital videos, software licenses, social network accounts, file sharing accounts, financial accounts, domain registrations, DNS service accounts, web hosting accounts, tax preparation service accounts, online stores, affiliate programs, other online accounts and similar digital items which currently exist or may exist as technology develops or such comparable items as technology develops, regardless of the ownership of the physical device upon which the digital item is stored.
www.digitalestateresource.com

Sample POA Language

Give the attorney-in-fact a specific power for the digital assets

Digital Assets

My attorney-in-fact shall have (i) the power to access, use and control my digital devices, including but not limited to, desktops, laptops, tablets, peripherals, storage devices, mobile telephones, smartphones, and any similar digital device which currently exists or may exist as technology develops or such comparable items as technology develops for the purpose of accessing, modifying, deleting, controlling or transferring my digital assets, and (ii) the power to access, modify, delete, control and transfer my digital assets, including but not limited to, my emails received, email accounts, digital music, digital photographs, digital videos, software licenses, social network accounts, file sharing accounts, financial accounts, domain registrations, DNS service accounts, web hosting accounts, tax preparation service accounts, online stores, affiliate programs, other online accounts and similar digital items which currently exist or may exist as technology develops or such comparable items as technology develops.
www.digitalestateresource.com