The arrival of the digital age has spawned the necessity of additional planning for our estate planning clients.
We have historically viewed personal property as falling into two major categories, tangible (items you can see or hold) and intangible (items that lack physical attributes). Recently, a new subdivision of personal property has emerged, that is commonly being referred to as “digital assets.” There is not universal agreement about the property category in which digital assets belong. Some say they are intellectual property, while others classify them as intangible property. In fact, some digital assets may not be a property interest at all, but are more accurately licenses to use a website's or digital account's services that generally expire upon death. Increasingly, digital assets may represent a sizeable portion of a client's estate. Despite this relatively recent phenomenon, most estate planners have not figured out how to address the handling and disposition of digital assets. It is important to understand digital assets and to incorporate the disposition of them into clients' estate plans.
Digital assets can be classified in various categories, including (1) personal assets which may be stored on a computer, server, external hard drive or smart phone, in the Cloud, or uploaded onto a web site such as Flickr or Shutterfly, such as photographs, videos, e-mails, instant messages, playlists, medical records or tax or business documents or records; (2) social media assets including the websites Facebook, LinkedIn and Twitter, as well as e-mail accounts; (3) financial accounts and records, such as traditional bank and investment accounts, accounts with Amazon, PayPal or other financial sites, an eBay account, or subscriptions to electronic magazines or other media providers; (4) domain names and blogs; (5) loyalty program benefits, such as the accumulation of miles or points through frequent flyer programs or credit card accounts.
Access to most, if not all, of these “digital assets” requires the use of one or more usernames, passwords, e-mails, responses to security questions, or other access codes.
Planning for digital assets is made difficult due to a number of issues, including, but not necessarily limited to, (1) the potential application of federal laws and regulations relating to unauthorized access to various digital assets and the “vehicles” used to store such digital assets, and certain federal privacy laws; (2) the current dearth of laws of the various states relating to digital assets, and the fact that any such state laws that do exist may be inadequate as the pace of technology is faster than the laws can adapt (Michigan has not yet passed any law relating to planning for digital assets); and (3) the policies and rules contained in the various “user agreements” that govern online accounts and service providers, and the lack of uniformity with respect to any such “user agreements.”
The legal uncertainties surrounding the handling and disposition of digital assets reinforces the importance of planning to increase the likelihood that a client’s wishes concerning the disposition of any digital assets will be carried out.
Currently, many attorneys do not include such planning as part of their traditional estate plan services; however, they should begin to do so.
The following should be considered in helping to create a client's digital estate plan: (1) include questions about digital assets in the client's initial estate planning questionnaire; (2) develop an inventory of a client’s digital assets, which would include usernames, passwords, URLs, answers to “secret” questions, and how and where the digital assets are held or stored (consider whether such information should be listed on one or multiple inventories for safety purposes); (3) locate and utilize a safe place to store the inventory documents; (4) name a digital asset “fiduciary,” including an agent in a durable power of attorney, a personal representative in a will, and, if applicable, a successor trustee in a trust; and (4) provide specific instructions for the handling and disposition of a client's digital assets upon disability and death.
The time for planning for digital assets has arrived. The laws regarding the handling of and planning for digital assets at the time of disability and death will continue to develop and evolve. It is imperative to continue to monitor new and changing laws in this area. Further, it is important to stay up to date on how various service providers are dealing with access to digital assets at death and advise clients accordingly.
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Mark E. Kellogg is a shareholder at Fraser Trebilcock Davis & Dunlap, P.C., who has devoted his 27 years of practice to the needs of family and closely held businesses and enterprises. For more information or to discuss your estate planning needs, he may be reached at mkellogg@fraserlawfirm.com or 517.377.E
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