Digital Immortality: Estate Planning For Digital Assets And Online Financial Accounts


by Jim Wegner

Wegner, James
jwegner@mcgrathnorth.com
(402) 341-3070

Dave and Sue had a modest estate, one well below the $10 million value they could pass to their children free of federal estate tax under current law. They had a comprehensive estate plan in effect to ensure proper management of their property if they became incapacitated, and to address the disposition of their property upon their deaths. Even though they didn’t need to worry about estate taxes, they periodically reviewed their estate plans with their attorney and amended their plans as necessary to ensure that their property would be distributed as they intended. The periodic reviews gave them comfort that the clarity of their written plans would minimize disagreements and stress for their children when Dave and Sue passed.

Since our last estate planning meeting, Sue and Dave “went digital.” Their daughter Megan went away to college, and in order to keep in contact, Sue and Dave each opened an email account, Sue joined Facebook and friended Megan, they Skyped with Megan regularly, and they shared photos on Flickr. Dave connected with his colleagues and clients on LinkedIn. From there, their digital lives mushroomed. They decided to maintain their brokerage accounts online with their brokerage firms, eliminating all the paper they received in the mail. They maintained and stored their bank accounts and credit card accounts online as well. Their health savings accounts and medical insurance claims were made and maintained online, and monthly records were stored in digital (pdf) format on their administrator’s server. They scanned any paper they still received and stored it on their computer or in “the cloud.” In short, Sue and Dave fully embraced the digital age. What Sue and Dave didn’t realize was that, as their lives became digital, the dynamics of their estate plans changed as well.

Why consider digital property in estate plans?

As Sue and Dave learned, digital storage and digital communication are quickly replacing physical document storage, letters and regular mail. However, current contract, property and probate laws have not kept up with the rapid expansion of digital property and online accounts. It appears that only a few states have enacted digital estate laws. For example, Oklahoma and Idaho have enacted laws which allow a personal representative to take control of a decedent’s accounts on any social networking website, any blogging or short message service website, or any email service website. Practically, these laws may be helpful to show that the personal representative has authority to act on behalf of the decedent, but they may be contrary to the terms of the service contract that the decedent agreed to when signing onto the account. Many online accounts in their terms of service provide that the online account is the property of the provider, so even though the statutes give the personal representative the right to access the deceased user’s information, the provider may deny the request, potentially resulting in litigation to decide who has rights in the account.

Additionally, virtually every service provider requires a username and password to access their accounts. Unless survivors are informed that the accounts exist, and are given the username and password, the survivors may need to resort to the courts to gain access. Thus, these and similar laws may not provide the necessary rights to control online accounts after death or incapacity. So, until laws are enacted that clarify survivors’ rights in digital assets, everyone should establish a separate plan to deal with their digital property, whether on computer or online, when they die or become incapacitated.

What is Digital Property?

Digital property includes any data or digital material stored on your computer or on other digital media, such as CDs, DVDs, flash drives, or other media (photos, video and audio files). These types of digital property may be difficult to find after the owner dies unless the survivors know where to look for them.

Digital property also includes any online accounts, such as email, Internet accounts, and other data stored on remote servers, including domain names, online brokerage and credit accounts, financial records, blogs, or social networking accounts such as Facebook, LinkedIn, MySpace, or Twitter. A username and password are normally required to access online accounts, so personal representatives will need such information to carry out the decedent’s desires.

While many digital assets do not have monetary value, many have sentimental value to family members. Therefore it is important to consider every category of digital assets when drafting an estate plan.

What should I do to implement my digital estate plan?

The goals of digital estate planning are to protect the existence of your digital property after death, to prevent sites from destroying the property before your digital personal representative can access and save the property if desired, and to transfer any assets of sentimental or real value to your heirs. To do so, digital estate planning normally includes the following steps:

1.    Identify Your Digital Assets.  Generally, the first step in estate planning for your tangible assets, such as real and tangible personal property, is to inventory all of your property to determine how it is owned, where it is located and how and when you would like it to be distributed to your heirs at death. Identifying your property will help your personal representative or trustee ensure your assets are distributed as intended. Similarly, creating a list of your digital property will help your “digital personal representative or trustee” to identify your many digital assets so that they can be archived, deleted, or passed on (if possible) in accordance with your intentions. This may be more challenging than it first appears. Therefore, it may be helpful to categorize your property.
a.    Hardware.  Identify all of your hardware, such as your home computer, office computer, laptop, iPad, smartphone, backup devices, and summarize the locations of important information on each, such as computer folders and places you keep personal, financial and customer documents.
b.    Software.  List important software programs you use, such as tax preparation software, Word or Excel documents, or financial data in Quicken, and locations of saved documents and files for each.
c.    Online Information and Accounts.  List your social media accounts, such as Facebook, Twitter, MySpace; email accounts; websites, blogs; online backup sites; online sites on which you store documents, photos or other files; and other sites to which you belong. You also should list all your accounts that store your credit information, such as shopping sites; and list online brokerage accounts, bank accounts or other accounts that store your information digitally rather than send you paper statements.

For each of these accounts, you should give detailed instructions regarding how you access the account, the domain name, and username and password.

2.    Designate Your Digital Personal Representative or Trustee.  In estate planning for your tangible property, a personal representative or trustee is designated to administer  your  estate after death.  Typically, your spouse or another trusted person is designated. However, the personal representative of your estate of tangible property may not be the right person to administer your digital estate. Therefore, you should consider each of your digital assets, decide who is most appropriate to manage them after your death, designate specific knowledgeable people and give them authority to manage your digital assets. Your digital executor or trustee should be somewhat technologically literate. You also need to be comfortable with the person having access to your digital information after your death. For example, you may prefer to designate a separate person to access certain private emails or confidential digital information instead of the personal representative administrating your tangible assets. That person could be designated as a co-personal representative, or co-trustee, with specific responsibility for your digital property; or instead could be an advisor to your personal representative, depending on how much authority you want your digital personal representative to have.

3.    List Your Desires for Each Account.  The investments and money summarized in your digital financial accounts, such as online bank and brokerage accounts, generally will pass according to your Will or Trust documents. For the information in those accounts, and for your other digital assets, you should provide detailed instructions for what you want to happen to the account and its content. Do you want your Facebook friends or LinkedIn connections to be notified of your passing? Do you want your digital account to be archived, frozen, continued or closed? Do you want the site information to be downloaded so that it can be preserved after your death? Is there value to the account information that may be realized by your estate after you pass away? Depending on the site, there may be a number of choices that you can consider and designate in your digital estate plan. Keep in mind that it may not be possible to implement all of your choices, depending on the policies of the applicable online provider. The policies of some of the more popular online accounts are summarized at the end of this article.

4.    Create a Separate Document with Digital Asset Information.  All of the above information may be maintained in a separate document, printed and kept in a safe place with your other estate plan documents, or it may be stored on a computer or other digital media. Alternatively, you could inform your attorney or trustee where the list is kept and have him or her disclose the location following your death or incapacity.

A more formal approach would be to place the information in your Will or Revocable Living Trust. When a Will is admitted to probate, the information becomes public information and can be viewed by anyone. Therefore, it would be preferable to document your account information in a trust. Digital property could be titled in the trust during your lifetime, and at your death, your digital property held by the trust would be viewed as owned by the trust, so it would avoid the probate process and should not become public. A trust also could incorporate by reference an existing list that describes digital assets and designates the recipients. Another option would be to create a specific “digital asset trust” to hold your digital property and the information on how to deal with it. The trust could be the owner of your digital property and would survive death, thus allowing others to access the information.

As more people become comfortable with the ease and convenience of moving important documents and information onto their computers or online, it is necessary to establish a safe and secure method to access digital property following incapacity or death. The probate process and laws have not kept pace with the development of digital assets. Therefore, it is important to incorporate your digital assets in your estate plan. An estate plan that specifically addresses digital assets can help to ensure that your wishes are followed and minimize disagreements and stress for your heirs. Please contact a member of the McGrath North Tax Group to create your digital estate plan or to incorporate your digital assets into your current plan.

Provider Policies.  Several of the more popular online accounts, and their current policies for a deceased’s account, include:Yahoo! Mail: Generally, a court order is required for release of the deceased’s account. The account may be closed by providing a copy of decedent’s death certificate.Gmail/Google/Hotmail: Personal representative or agent (providing copy of death certificate and paperwork showing he or she is authorized, and answering verification questions) can delete the deceased’s account or receive a CD of the contents. Gmail and Google also require providing an email correspondence between the family member and the account owner.LinkedIn: Close or memorialize the account. If memorialized, profile access is restricted and messaging functionality is removed.

Facebook: Remove or memorialize the account. If memorialized, other Facebook members can interact with the deceased’s wall, access is restricted to “friends,” all contact information is deleted, and future log-ins are prevented.

MySpace: Delete, remove content from, or preserve the deceased’s profile. Person requesting must provide person’s relationship to deceased, proof of death, and deceased’s MySpace ID.

Twitter: Remove the account or receive an archive of the deceased’s tweets. Provide relationship to the deceased, the deceased’s username, and a link to a public obituary.

 

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