Just as fast as Facebook outpaced Myspace in the social media wars, technology has outpaced the law’s ability to come to grips with the protection of digital assets.
Estate planners have started to see more clients’ digital assets outlive them, and they’re now tasked with helping families manage that digital legacy. Challenges include the ownership, transfer and disposition of digital assets, ranging from passwords to web domains to financial accounts.
“There’s no paper trail anymore,” said Sharon Klein, Wilmington Trust’s managing director of family office services and wealth strategies, at a “Money and the Modern Family” press briefing last week in New York. “How does the executor get access to digital assets?”
The digital asset issue has become such a hot-button issue that seven states now have laws in place for estate planners and 13 other states have pending legislation, said Klein, who is based in New York and serves as chair of the New York City Bar’s Trusts, Estates and Surrogate’s Court Committee.
For example, New York State lawmakers this year passed a bill that authorizes the fiduciary of a deceased client to take control of certain website accounts of the deceased, and to continue or terminate the account on any social networking website, microblogging or email service.
“Executors can face…challenges in marshaling assets – indeed even discovering assets – the information about which is digitally stored,” Klein wrote in a New York legislation update, noting that the new law gives fiduciaries access to, ownership of or a copy of property within 60 days upon written request to the property’s custodian.
But estate planners should take action before such extreme steps become necessary, Klein said. Here are some of her suggested best practices for protecting digital assets, along with more tips from other estate-planning experts.
1) Manage passwords. Klein recommends that web accounts, user names and passwords be tracked, updated and stored in a safe place. They can be stored online, she said, but she also recommended keeping a paper printout stored in a safe place.
2) Don’t put passwords in a will. A will is a public document, so passwords should not be written into a will, although domain names can be added, Klein says.
3) Conduct a thorough accounting of all online assets. Such assets may include websites, personal and business email, accounts on social networks such as Facebook and Twitter, blogs, creative works, digital photographs, music, playlists, videos, games, medical records, tax returns, online bank accounts and broker accounts, eBay accounts or stores, PayPal, Amazon accounts, online bill paying and loyalty programs, write certified public accountants James and Patricia Hopson in a Journal of Financial Planning essay, Planning for Clients’ Digital Assets.
“In addition,” the Hopsons write, “there is the actual hardware, such as computers, backup drives or other such devices, and commercial digital storage sites where many of these assets are stored. Each account and/or computer may have different usernames, passwords and security questions.”
4) Read the fine print. Each online service provider has its own terms of service, and those terms often say that accounts or passwords can’t be transferred to anyone else.
“Those restrictions pose a challenge for heirs who might want to access your email account, for example, to retrieve bills and other documents,” wrote Eleanor Laise in May for Kiplinger’s Retirement Report. “Providers differ on how they handle the accounts of deceased users, but some are starting to help users plan their digital afterlife. The Yahoo terms of service, for example, say that ‘any rights to your Yahoo! ID or contents within your account terminate upon your death,’ and accounts may be deleted if a death certificate is submitted.”
5) Do some homework. Evan Carroll, co-author of Your Digital Afterlife, spoke this spring at the National Association of Personal Financial Advisors annual conference in Las Vegas about how to leave online assets to caring curators. Clearly, Carroll hit a nerve: the blogosphere buzzed about his NAPFA presentation, with both Rick Epple of Epple Financial Advisors and David Hailey of Paragon Financial Advisors urging executors to research the issue of digital assets.
“What would happen to all of these things upon my death?” Hailey wrote. “Is my spouse completely prepared to take over the daily management of our lives in my absence without access to all of these digital assets? Unfortunately the answer for me is no. I suspect the answer may be the same for many of you.”
Read T3 Conference: Estate Planning for Digital Assets to Take Center Stage at ThinkAdvisor.