Most practitioners know that digital assets should be considered a part of any estate plan. It’s been said (or maybe I dreamed it) that: “You can describe it [the RAP] in a nutshell, but you cannot keep it there.”
Knowing that digital assets need to be planned for, versus actually knowing how to plan for them, are two different animals entirely. Professor Jamie Patrick Hopkins and graduate fellow Ilya A. Lipkin, in their excellently written and reasoned recent article, elegantly identify the problems of planning for digital assets and touch on a few possible solutions.
As the authors aptly point out, most estate plans are going without planning for these assets: “[T]he majority of Americans are vastly unprepared for their digital afterlife, unintentionally foregoing digital estate planning altogether and leaving their assets trapped in digital purgatory.” Here, I’m not sure this space is so much “digital purgatory” as it is “digital infinity” or “digital vapor space.” I tend to think that 90 percent of plans don’t adequately address what executors should be doing.
The authors describe digital assets as videos, text documents, records, music, emails, online subscriptions, online rewards, cell phone apps, social media information, games and the like. They also emphasize the importance of including metadata in the planning, which the authors define as, “information about when the digital asset was created, by whom it was created, when it was last accessed, and whether it was edited or altered.”
Life would be easy if we could merely provide, via bequest, “all of my digital assets shall be considered as part of the residue of my estate, and collected and disposed of as part of the residue as my executor determines appropriate.” But, unlike other assets—cash, marketable securities and even real estate—digital assets pose logistical problems in assessing what the decedent has and what the executor should do.
As an example, the authors point out the problem of identifying and accessing digital assets. Who out there has had an executor try to do this?
The authors estimate that an average Internet user has 26 different accounts and 10 unique passwords. Can the executor find this stuff? Perhaps we should advise clients to make lists, but attorneys really don’t want to be the keeper of these lists (think liability concerns if the accounts get hacked). These lists also shouldn’t be contained in the will, as that’s a public document; we could include the list in a living trust, but realistically, the list should be outside of the main estate-planning documents.
The authors touch on a few routes as to how to manage digital assets. Certainly, at a minimum, the client should compile and retain a comprehensive record of the digital assets, their locations and their respective login information.
I would go further. Planners are ignoring the area because we all know that partial solutions don’t adequately address it. But, I would encourage all to begin to plan for this area, as follows:
1. Include a clause in the will or living trust authorizing the fiduciary to act with regard to digital assets:
Digital Assets. To have full authority and power to access, use and take control of all electronic and computer equipment that comprises a portion of the trust estate, including, but not limited to, desktops, laptops, tablets, peripherals, storage devices, mobile telephones, smartphones, and any similar equipment that receives, stores, processes, or sends electronic data and records; to access, modify, delete, control, transfer and otherwise deal with, digital assets that comprise a portion of the trust estate, including, but not limited to, emails, documents, images, audio, video, software licenses, domain registrations, and similar digital files, regardless of the ownership of the physical device upon which the digital asset is stored; to access, modify, delete, control, transfer and otherwise deal with, any digital accounts that comprise a portion of the trust estate, including, but not limited to, email accounts, social network accounts, social media accounts, file sharing accounts, financial management accounts, domain registration accounts, domain name service accounts, web hosting accounts, tax preparation service accounts, online stores, affiliate programs, and other online accounts; provided, however, that the trustee shall have no duty or obligation to review any electronic or computer equipment, and the trustee’s judgment as to the actions to take or not take in regard shall not be subject to review.
2. Discuss with clients the need for them to identify and make a list of digital assets (and to email the planner the list periodically).
3. Discuss with clients who will have access to the passwords. It shouldn’t be the attorney.
4. Mention that a plan should be put in place to destroy certain digital information, if the client believes it worthwhile.
5. Digital assets on USB and similar storage devices need to be part of the digital item list. I tend to think of USB drives as additional clutter, but if they’re catalogued and stored together (each one identified), they can actually reduce clutter.
The authors conclude that this is an area in its infancy and will require more thought. That’s the truth. Digital planning is burgeoning. We’re in the first inning of a long game as to how to correctly plan for these assets, and the authors are pointing us in the right direction.