What does your estate look like? Presumably, it includes tangible items that have monetary and possibly sentimental value—real estate, cash, a home library, artwork or the box of photographs under your bed.
But does the estate also include items that would be impossible to stash under the bed?
By this, I mean electronic assets. Nowadays, bank records may be entirely electronic. Indeed, with the emergence of Bitcoin, currency itself sometimes exists solely in electronic form. Most correspondence is conducted through e-mail, and photographs are shared through digital albums on Facebook and Instagram, among other social networking sites.
Our reliance on technology continues to transform our lifestyles, so our concept of what constitutes an estate must adjust with it. The modern estate almost certainly includes digital assets, such as those mentioned above, but although planning for digital assets has become a hot topic in the trusts and estates world, no truly satisfactory solution for handling such assets in an efficient and uniform manner has emerged.
One of the issues has to do with access.
Unlike a book collection or a photo album, virtually all digital assets are hidden behind user names and passwords. Many people do not save passwords. If they do keep an updated list, the information is sometimes not recorded in a way that’s readily accessible to a fiduciary when the need to access a client’s assets arises. How can a fiduciary gain access to password-protected assets? Will he or she have to rummage through a sock drawer in hopes of finding password lists? More fundamentally, will a fiduciary even be entitled to access a client’s assets when a client has either passed away or is unable to give the fiduciary authorization?
Providing Access
In looking at what will happen to clients’ digital assets after their death, it is important to distinguish between accounts such as Facebook and Instagram, which hold personal content, and accounts such as iTunes and Kindle, which hold content that, technically speaking, does not belong to the client.
Some service providers already allow users to arrange posthumous access to their accounts. Google, for example, allows users to select digital heirs or “inactive account managers” for its cloud services, including its popular e-mail service. On the Google account settings page, users can specify what should happen to their Gmail messages and data from several other Google services if their account becomes inactive for any reason. They can choose to have data deleted after three, six, nine or 12 months of inactivity, or you can select trusted contacts to receive data from Google services.
Similarly, Facebook allows users to designate a “legacy contact” to manage an account posthumously. The legacy contacts cannot log in as the account holder or view their private messages, but they can make a post on the account holder’s Facebook page, respond to friend requests, update the cover photo and profile information and archive posts. The legacy contact is also permitted to have the page deleted entirely.
Twitter will remove a deceased person’s account, but will not provide account access to the executor or any other person.
Accounts that house e-book collections, game purchases and music and video libraries are also considered digital assets, although these are controlled by the original service provider’s end user license agreement (EULA). Under these agreements, when people click “buy” in the Kindle or Apple store, they are not purchasing content, but are instead licensing it for personal use only. Most, if not all, EULAs stipulate that any rights buyers have to the digital products may not be transferred or assigned to third parties without authorization. The end result is that, as long as heirs have access to an account, they can continue to enjoy the account holder’s content. However, there is no way for a client to legally transfer ownership of those assets to someone else.
In contrast, Bitcoins and other digital currencies are considered property and are disposable in a will or estate planning trust. The IRS says Bitcoins should not be treated as currency for tax purposes, so they will get a step-up or step-down in basis at death to the then-current market value. As with other digital assets, fiduciaries should be made aware by clients that they hold Bitcoins and be given the ability to gain access if the need arises—otherwise the currency will die with the clients.
Legal Ambiguities
While digital services continue to grapple with posthumous access policies, there is almost no legal guidance or authority to assist executors in identifying, collecting or distributing digital assets. The laws governing access to digital assets are a jumble of federal and state laws, including privacy laws and intellectual property and copyright laws. While several states have laws that authorize fiduciary access to digital assets under certain circumstances, they are limited to specific types of assets, such as the e-mail or online accounts of deceased minors.
In 2014, the Uniform Law Commission, a group of attorneys tasked with drafting model legislation, addressed the limited legislative response by releasing the Uniform Fiduciary Access to Digital Assets Act (UFADAA). Its purpose was to “vest fiduciaries with the authority to access, control or copy digital assets and accounts.” The goal was “to remove barriers to a fiduciary’s access to electronic records and to leave unaffected other law, such as fiduciary, probate, trust, banking, investment, securities and agency law.”
UFADAA created unique rules for four different types of fiduciaries: personal representatives or executors, conservators, attorneys-in-fact and trustees. Access to digital assets was generally permitted to all fiduciaries, although the path to achieving access differed slightly from one to another.
More than 27 states were on their way to adopting UFADAA rules shortly after the model legislation was issued, but the efforts ran into opposition from the technology and Internet industries, which felt the proposed laws violated the privacy rights of consumers and improperly overrode the industry’s terms-of-service agreements. Industry groups created their own alternative legislation that greatly restricts fiduciary right of access.
In response to the pushback by industry, the Uniform Law Commission revised its model last year. In the 2014 version, a personal representative’s access to digital communications and other digital assets was permitted unless the decedent opted out. Under the 2015 version, however, access to digital communications is not permitted unless the decedent opts in and consents to disclosure before death. Thus, if a person dies without a will, no access will be granted. Access to other digital assets is permitted unless the decedent opts out. Attorneys-in-fact, conservators and trustees can still access digital communications and other digital assets, but they face restrictions. The custodians of the assets may, in many instances, require a court order before granting access.
Under the 2014 version of the act, boilerplate agreements with a digital service provider limiting a fiduciary’s access to a decedent’s digital assets or accounts were made void by law as against public policy. Under the 2015 version, however, a user’s direction prevails over the terms-of-service contract if the direction can be modified or deleted at all times. A user’s direction in a will, trust or power of attorney also prevails over the boilerplate, but if the user provides no direction, the boilerplate provisions of a terms-of-service contract will prevail.
Although we do not know how many states will adopt the UFADAA or what form the laws may take, the message is clear: Given the importance of digital assets in everyday living, it is imperative to think through what you want to have happen to your digital assets after your death. At the very least, clients need to communicate their wishes to an estate planner so that their estate planning documents can memorialize their directives. These instructions should include what information should be deleted or destroyed after death.
Logins and Passwords
In the face of all the uncertainties in the law, it may still be best for clients to avoid these issues altogether by giving their fiduciaries easy access to their login information and passwords. This, of course, presents practical problems regarding the storage and format of this information and how to keep it updated and safe. Some websites provide online password storage services, but this solution may be risky since the possibility exists that website security may be compromised. There are also a number of so-called “afterlife management companies” that offer storage and post-mortem services. Unfortunately, the staying power of these services is still in doubt. For example, Legacy Locker, where customers saved online account information and designated beneficiaries for each account, was acquired by PasswordBox, which had a different focus but continued to include Legacy Locker features. But now PasswordBox has been acquired by Intel and the future of the Legacy Locker features under Intel’s ownership is uncertain.
Until other solutions emerge and mature, self-management may be a client’s best option for passing on digital assets. This could be as simple as gathering all login and digital asset information, storing it on a thumb drive and putting the drive in a safe place that is accessible to fiduciaries if the client passes on.
Marjorie Suisman practices in the trusts and estates area at the law firm Davis, Malm & D’Agostine in Boston. She can be reached at msuisman@davismalm.com.
