Increasingly, individuals are accumulating digital assets that they may want to pass on after their death. Social media accounts, websites, online libraries of content and the like can often be inherited like any other asset. Accordingly, individuals working on their estate planning should address how they want the executor of their estate to handle such assets in order to avoid complications after their death.
Types of digital assets
Most people think of assets as anything with financial value. There are many types of digital assets that can have significant financial value and should be considered and included in your estate plan. For example:
- Revenue-earning YouTube, Instagram, Tumblr and other social media accounts.
- Bitcoins: “crypto-currency” which are tracked and traded online.
- Domain names.
- Cloud storage accounts, which may contain valuable assets, like coding, software, photographs, designs or other sensitive or proprietary data.
- Video game characters. For example, characters, which only exist in the game cloud (online gaming), are created by players and can sell for as much as $2000.
Estate planning, however, should not be limited to those assets with financial value. Provisions can and should be made for assets with sentimental value, such as:
- Facebook accounts: Individuals should leave directions for their executor concerning whether to continue or close the account and what to do with photographs stored on the site.
- Movies and music purchased and stored online (some of which may be non-transferrable at death, depending on the terms of the service agreement).
- Email accounts: These may contain a wealth of information, including e-statements from financial institutions.
New York law on digital assets
Absent effective planning (and sometimes despite the same), executors have faced obstacles in gaining access to a decedent’s digital assets and online records. That is because many user or service agreements contain very strict conditions for providing access to someone other than the user.
To mitigate such obstacles and in light of the increasing prevalence of digital assets, in September 2016, New York enacted Article 13-A of the Estates Power and Trust Law governing the administration of digital assets and setting forth procedures to permit access by a fiduciary to a decedent’s digital assets. The law establishes the power and authority of fiduciaries (executors, trustees, guardians) to deal with companies who maintain digital assets (called “custodians”).
Article 13-A requires that a custodian provide access to a fiduciary where there is “consent” from the user. This “consent” could be shown through a decedent’s will. Additionally, Article 13-A contemplates other forms of consent, namely, where a custodian offers an online tool allowing users to direct disclosure of their assets to a designated recipient. Such a direction, under the law, would override a contrary direction in the decedent’s will. For example, if an individual modified her online account to designate that her sister could access her account after death, but her will said her brother would get access, the account access would go to her sister.
However, Article 13-A does not eliminate the potential for conflict between a fiduciary and a custodian. Under the law, custodians have discretion in complying with a fiduciary’s request for access, even where there is express consent. For example, custodians are empowered to refuse to fully disclose and instead grant “partial” access to the user’s account “sufficient” to perform the fiduciary’s duties. In the event the fiduciary and custodian disagree on what is “sufficient,” an executor will need the help of an attorney or perhaps a court in obtaining access to the information they need.
Article 13-A also underscores the question of whether a fiduciary with access to the requisite passwords and login information could lawfully access accounts without notifying the custodian that she was doing so. The law prohibits a fiduciary authorized to access digital assets from “impersonating” a decedent. Although the meaning of “impersonation” in this context is not entirely clear, fiduciaries could run afoul of the law if they log into the decedent’s account and access information without presenting themselves to the custodian as a court-appointed fiduciary and making a request for access.
Best practices for estate planning
Individuals should safeguard account names, passwords, and other information on an encrypted file on a hard-drive, keep it updated and together with their will. In addition, individuals should do their research on service agreements with custodians and make sure they have not previously made a designation contrary to their will and their intent.
Executors should treat custodians of digital assets as they would any other custodian (such as a bank). They should follow procedures in Article 13-A for making requests for access and not take short-cuts such as logging into the decedent’s account to get information.
In exercising their duties, executors must act quickly when dealing with digital assets. Digital assets can be lost or lose value (for example, domain names can lapse if not timely renewed). In addition, individual’s wishes may need to be honored immediately (e.g. managing or closing a decedent’s Facebook wall). Therefore, executors should look to take control of digital assets as soon as possible.
As part of your estate planning, make sure you discuss your digital assets with a qualified attorney.
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This post does not constitute legal advice or establish an attorney-client relationship.