Wills have long been the cornerstone of estate plans. This legal document allows you to plan a practical and cost effective transfer of your property to your family and selected beneficiaries. When most people prepare their wills, they often only consider their physical property, but little thought is given to intangible property.
According to a recent Pew Research Center survey, 87 percent of American adults use the Internet. In an increasingly digital world, many of our important personal and financial assets are stored online. So what happens to that precious information when you’re gone?
The Value of Digital Property
Estate planning of digital assets is a relatively new focus for concern for both consumers and their attorneys – and something that shouldn’t be overlooked.
Your heirs may not be able to find or access all of your digital assets if you don’t include them in your estate plan.
“Digital assets hold both financial and sentimental value to family and friends that should be addressed in the estate planning and administration process,” says James Lamm, an estate planning and tax attorney at Gray Plant Mooty law firm in Minneapolis, Minn.
Today, information that is important to an estate administration after a person becomes incapacitated or dies is commonly stored electronically and can only be accessed by using the person’s username and password.
For example, financial information regarding bank accounts, recurring expenses, insurance, and debts are tied to the user. If those files cannot be found or accessed quickly, it can have negative financial effects on the estate.
On the other hand, social networking accounts and personal Web pages generally don’t have financial value, but may have sentimental value and are cherished by family and friends.
Because digital assets aren’t easily accessible or identifiable, they present some unique issues in estate planning.
“The first challenges are finding the person’s digital property and identifying which digital property is valuable or significant. Additional obstacles with digital property that you don’t have with traditional property are passwords, encryption, computer crime laws, and data privacy laws. Any one of them can make it practically impossible to do anything with the digital property unless you’ve planned ahead,” says Lamm.
Planning a Digital Inventory
The best way to protect your digital assets is to include them in your estate plan, via a will or trust, and designate a fiduciary to execute your wishes.
Lamm advises to specifically grant your fiduciary access in your will by including an enhancement in your estate plan that states your fiduciary has your authorization and lawful consent to access your online accounts and data in the event of your incapacity or death. This should help you access the contents of online accounts through the service providers.
Your estate plan should include a list of your online accounts to help locate valuable or significant digital property. The first step to protecting your assets is creating a comprehensive inventory. The May 2013 issue of Estate Planning Magazine suggests the following:
- Computer and phone information: List all of your personal and professional computers, tablets notebooks and smartphones. Identify the username and password to access each device.
- Email information: List all of your email addresses and indicate the passwords.
- Social networking websites: List the username and passwords to each of your social networking profiles and how you want your account managed or deleted in the event your death or disability.
- Blog, webpages, and domain names: List all of your blogs, webpages and domain names and indicate the registrar/host for each.
- Online financial information: List each bank and brokerage account for which you have online access, and indicate your username and password for each account.
- Digital photos: If you take photos digitally, describe where you store your photos, list any photo sharing websites that you use, and indicate your username and password for each site.
- Other online accounts/information: List any other online accounts or digital information that may be important or valuable and describe what you would like to happen to that account.
- Confidentiality: If there is any sensitive information in the online accounts listed that you want to keep secret from family and friends, you should indicate how that information should be handled.
Lamm says you should not include actual usernames and passwords in your will, as it eventually becomes public record. But rather, include instructions on where that important information is stored – either on a hard drive or another safe place, such as a safe deposit box.
Fiduciary Access To Digital Assets
Having an estate plan that includes your digital assets doesn’t mean that your heirs will gain automatic access to your accounts.
The rights of ownership, control and access of digital assets are far more complex than physical property. Attorney Lamm says that “you might store text, photos, videos, and other data in your online accounts, but access to that data is defined by the Terms of Service contact with the provider.”
On his website DigitalPassing.com, Lamm explains that Terms of Service contracts for some online account providers prevent anyone other than the individual user from accessing the user’s account, regardless of whether the fiduciary has the user’s password.
Few laws exist on the rights of fiduciaries over digital assets. Current federal laws on unauthorized computer access and data privacy, namely the Stored Communications Act and the Computer Fraud and Abuse Act, were passed in 1986 and have not kept pace with changing technology. These laws are significant obstacles to fiduciary access to digital assets.
As of today, only seven states in the U.S. have enacted legislation specifically allowing personal representatives to access certain types of a deceased’s digital assets, and the laws vary widely.
The Uniform Law Commission has been working for the past two years on the Uniform Fiduciary Access to Digital Assets Act. The purpose of this uniform law is to vest fiduciaries with authority to access, control, or copy digital assets, while respecting the privacy and intent of the account holder. Their goal is to provide a well-crafted law that all states can adopt, bringing certainty and predictability for account holders, fiduciaries, service providers, and courts.
Lamm stresses that until the laws are changed, taking the steps to safeguard your digital assets isn’t infallible. But it will make it easier to have your wishes followed if you put them in writing.
“The best advice I can give, whether it’s digital property or not, is to make sure your advisers know everything significant or of value to you, incorporate that into your plan, and plan ahead,” says Lamm.
Of course, it’s always best to consult a licensed estate planning attorney in your state to create a digital estate plan.