Now more than ever, digital asset planning is a critical component of any estate and business succession plan. The majority of people have more digital assets than they realize. This article will discuss the main categories of digital assets, the reason to plan for these assets, the types of digital assets that cannot be transferred, and the current state of the law.
Presently, there is no uniformly accepted definition of “digital assets”. Digital assets are not computers, smartphones, or iPads; but rather, digital assets are all the information stored on these types of electronic devices. This includes digitally stored content, online accounts and files stored on digital devices, and accounts maintained and managed online.
There are five main categories of digital assets:
- Electronic Documents. This consists of electronic documents that are stored on a digital device, in a cloud, or in another software-sharing platform.
- Social Media Outlets. This category encompasses Facebook, Twitter, Linked-in, Snapchat, and Shutterfly accounts, etc.
- Financial Assets. Digital financial assets are financial information stored on a digital device or an account maintained online. This also includes paperless billing and statement information, bitcoins, PayPal, Amazon, eBay accounts, and other digital accounts or data that is associated with a monetary value.
- Business Accounts. Digital business assets include, but are not limited to, digital customer information, databases, trademarks, trade-secrets, websites, domain names, and Dropbox accounts, etc.
- Miscellaneous. Other miscellaneous digital assets are blogs, music, videos, online gaming, loyalty programs, and YouTube accounts, etc.
There are many important reasons to plan for your digital assets. Ensuring that your wishes are followed with the management, transfer and/or disposal of your digital assets at your death or incapacity is becoming increasingly critical as our online and digital presence becomes more merged with our physical realities. Right now, there is only a handful of States that have enacted laws regarding the transfer of digital assets at the user’s incapacity or death. Planning for the transfer and/or disposal of digital assets makes the transition easier for the executor of your estate or the agent under your power of attorney by avoiding unnecessary delays in the management or disposal of digital assets. This is accomplished by including provisions that address accessing, controlling, and transferring digital information and digital assets in your Will and financial Power of Attorney documents. Keeping an inventory of your digital assets can also be vital in identifying the asset and the location. However, any inventory of assets should be stored in a secure location. As we move towards a paperless world, digital assets will exponentially increase, as technology becomes more increasingly intertwined with daily activities.
Planning for digital assets also guards against identity theft. The percentages of online shopping and online business activities have never been higher. The average person has their credit card information stored on multiple sites on multiple devices all of which have different saved and stored information and passcodes. Online fraud and identity theft is also at an unprecedented high – and expected to rise at a brisk pace as our online activities surge. Our online digital presence is outliving our physical presence. Planning for digital assets decreases the chance of someone stealing your identity after your death. Planning also avoids a loss of assets at death that are transferrable because not all digital assets can actually be transferred. A few digital assets that cannot be transferred at death include: iTunes, E-books, Yahoo, Google Play, Amazon and Apple accounts, etc. These digital assets are subject to User License Agreements that prohibit the sharing and transfer of these assets. Digital assets with a User License Agreement only give the user the right to license the asset for the user’s lifetime. For example, since a user legally only has access to their iTunes account for their lifetime, the user cannot technically transfer the collection of music and movies at death. Planning for the disposition of these assets can be difficult if not prohibited. However, there are a few potential advanced planning techniques that can extend the time-frame in which a user would have access to these assets. A qualified estate-planning attorney should be contacted to discuss these techniques.
Some digital assets have monetary value (bitcoins, and PayPal and eBay), but many digital assets have sentimental importance (photo/video sharing websites and pages, etc.) that is priceless. If digital assets are not identified, they can be almost impossible to discover. Pictures, videos and email messages of a loved one can be forever lost if the source storing these items is not disclosed; likewise, digital assets with a monetary value can also cause a loss if the asset remains unknown. For example, if Joe maintains a blog and was paid by advertisers to direct traffic to a particular website, and then Joe dies, Joe’s estate could lose the revenue generated by Joe’s blog if the executor was unaware of the blog.
The management and disposition of digital assets is growing more complex and should be given more attention by attorneys, accountants, and financial planners that are creating personal and business plans for clients, planning equals protecting.
Many States have not yet enacted laws to govern the transfer and/or disposal of digital assets at death or incapacity. Technology develops much more quickly than legislation. However, there is currently a Federal law proposed to address digital assets at the user’s death. If the Fiduciary Access to Digital Assets Act (created by the uniform law commission) is passed, this act will ensure that an account-holder retains control of his or her digital property and can plan for its ultimate disposition after death. Unless the account-holder instructs otherwise, legally appointed fiduciaries will have the same access to digital assets as they have always had to tangible assets, and the same duty to comply with the account-holder’s instructions; provided, however, that electronic communications are protected from disclosure without the user’s consent.
This article provided an overview on the main categories of digital assets, the reasons to plan for these assets, digital assets that cannot be transferred, and the current state of the law. This area of the law is still emerging and can be complex to navigate, but planning for digital assets is now an integral part of any estate or business succession plan.