Technology has brought upon us a variety of conveniences and efficiencies— but have you thought about how it could affect your legacy and beneficiaries? This article explores the importance of a comprehensive estate plan, including your digital assets.
Today, almost everyone has developed a digital life in some aspect or another, and using technology seems to occupy an increasingly significant portion of our lives. Because of this, it’s important to consider digital property as part of your estate plan, in order to ensure the protection of all of your assets and your legacy.
Estate Planning and Your Digital World
Incorporating digital assets into your estate plan may be a new process for many. So, let’s start with a general overview of what you’ll need to do, then dive into the details:
- Inventory your digital assets.
- Understand terms of digital services.
- Consider your options for protecting your digital assets.
- Determine who is able to help you.
What Are Digital Assets?
You might be surprised to discover how much of your life has become intertwined with technology. Perhaps photos and videos come to mind first, but most people also have digital assets well beyond that. Your digital assets can include your social media accounts, software licenses, and personal information. As with estate planning for hard assets, you can exercise more control if you act while you are able, anticipating what should happen if you are unable to act for yourself.
Almost all the states have enacted laws to address what happens to digital assets in case the owner dies.
The first law in this respect was enacted in 2002 by California, and the earlier laws dealt primarily with email accounts. As technology has developed, the state legislatures have been challenged to keep up. Many states have adopted some form of the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA), which defines a digital asset as: “an electronic record in which an individual has a right or interest. The term does not include an underlying asset or liability unless the asset or liability is itself an electronic record.”1 This can include items stored on a computer, tablet, smart phone, or other device as well as other information stored on websites or “in the cloud.” You can access a state-by-state comparison of these laws via the National Conference of State Legislatures (NCSL) here.
For some people, blogs, Facebook, and Twitter feeds have replaced diaries, journals, and photo albums which can have enormous personal significance to heirs and beneficiaries. However, problems can arise when the account owner just has a license to use an electronic resource rather than any actual ownership interest. However, in almost all cases, it will be beneficial to all concerned to designate someone who can gain access to your accounts once you have died or if you become incapacitated.
Investment Accounts and Business Records
Some investment accounts may have no connection to a physical space, and have few, if any, paper records. The records of other financial transactions such as lending and bank accounts may only be accessible online.
Also, many business records of service providers (e.g., lawyers, consultants) are stored electronically. Domain names may require passwords to renew. And, keep in mind, that domain names themselves can be quite valuable.
The accumulation in some loyalty programs, such as frequent flyer programs, can be significant and the rules of these individual programs can determine whether the points can be transferred at death. In some cases, it may be enough for the beneficiary to know the login information, while others might view redemption by anyone other than the account owner as fraudulent or require special steps before the beneficiary can access the benefits.
Terms of Service Agreements
What do you own versus what do you license? When accounts are opened online, many people will skip through the long, dense legal documents that might be presented. However, these Terms of Service Agreements can define what you can exercise control over. For example, Yahoo provides that an account cannot be transferred. The agreement states that “all Yahoo accounts are non-transferable, and any rights to them terminate upon the account holder’s death.”2
The potential issue to be aware of is that a service provider’s Terms of Service Agreement may limit access to the account owner only, thereby preventing a fiduciary from acting on the account at all.
In the case of Justin Ellsworth, the parents of a fallen soldier had to wage a multi-year legal battle with Yahoo to gain access to their messages that their son had stored on his account. Even after the parents prevailed, they were unable to retrieve all the emails that their son had sent.3
Making it Easier for Executors and Family Members
Appointing a representative and deciding when that appointment takes effect is vitally important. It may be as simple as relying on your executor or a family member to add this to their checklist of items to handle. If you don’t have a family member or close friend, you might consider a company offering digital asset management services. However, the reliability and durability of companies that offer this service need to be carefully considered and you might consider what happens if they need to be replaced either during your lifetime or thereafter. It’s important to plan ahead of time to ensure they will be able to carry out your wishes as closely as possible. If you fail to act, it may be impossible for them to get the job done.
Fiduciaries need to locate, access, protect and properly dispose of digital assets. Access to online accounts is important not just to resolve probate and preserve existing assets, but also to make sure that the deceased does not become the victim of identity theft. The problems they might have to overcome generally fall into three main areas.
1. Passwords: In many instances, it may be sufficient if your executor simply knows your accounts and passwords or where to find that information if something happens to you. Although people are sometimes admonished not to write down passwords, for most people it probably is best to have passwords written and accessible to only someone who will need to know about it in case something suddenly happens to you. This information could be kept in the same place as you store your will.
2. Digital Encryption: Perhaps not all digital assets are intended for another person, as there may be some documents that should not be shared. You might decide that some assets should expire when you do, or to contradict the adage that says you can’t take it with you. However, make sure that you have carefully considered exactly what you want to take to the grave, as mistakes in this area can be quite costly.
Assets which are encrypted can be lost if a password cannot be broken. For example, it was reported that Leonard Bernstein kept his memoir in a password-protected file on his computer and this valuable, interesting asset was lost when the password could not be broken. A good idea may be to have backup copies of information stored online—on a personal hard drive or storage media that will be accessible without any concern—about what provisions might be in a Terms of Service Agreement when your appointed representative needs to access it. Digital assets should be addressed in your will, trust (if applicable), and power of attorney, and all legal documents should be prepared by an attorney licensed in your state of residence.
3. Criminal Laws / Data Privacy Laws: Legal considerations should be carefully considered by your representative before he/she attempts to access any of your accounts. In addition to state laws noted herein, Federal laws can enter the picture. The Stored Communication Act and the Computer Fraud and Abuse Act provide criminal penalties for someone who intentionally exceeds their authorized access which is classified as a misdemeanor but can become a felony if done for profit or in the furtherance of another crime.4 Fortunately, these laws allow someone with lawful consent or authorization to access a device or service without committing a crime. So far, prosecutors have not shown a great deal of interest in pursuing minor violations of these laws where it is not combined with another crime, but there can be no assurance that this will continue, so it’s important to be aware and prepared.
Janney's Document Vault
Where can you keep all of this important information to
ensure it’s protected, but accessible to those authorized
when they need it? Janney’s Document Vault allows you
to store and access documents between you and your
Janney Financial Advisor, offered as a complimentary
service to all Janney clients who are registered users of
Online Access (our client account portal). You can store
estate planning documents and information, as well as
banking, retirement account, and insurance documents,
just to name a few. Visit www.MyJanney.com to learn more.
Working With Janney
Depending on your financial needs and personal preferences, you may opt to engage in a brokerage relationship, an advisory relationship or a combination of both. Each time you open an account, we will make recommendations on which type of relationship is in your best interest based on the information you provide when you complete or update your client profile.
When you engage in an advisory relationship, you will pay an asset-based fee which encompasses, among other things, a defined investment strategy, ongoing monitoring, and performance reporting. Your Financial Advisor will serve in a fiduciary capacity for your advisory accounts.
For more information about Janney, please see Janney’s Relationship Summary (Form CRS) on www.janney.com/crs which details all material facts about the scope and terms of our relationship with you and any potential conflicts of interest.
By establishing a relationship with us, we can build a tailored financial plan and make recommendations about solutions that are aligned with your best interest and unique needs, goals, and preferences. Contact us today to discuss how we can put a plan in place designed to help you reach your financial goals.
1. RUFADAA Sec. 2
4. 18 USC Sec. 2701 et. seq.
Janney Montgomery Scott LLC, its affiliates, and its employees are not in the business of providing tax, regulatory, accounting, or legal advice. These materials and any tax-related statements are not intended or written to be used, and cannot be used or relied upon, by any taxpayer for the purpose of avoiding tax penalties. Any such taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor.