How much of your life do you live online?
Increasingly, Americans’ bank, brokerage, credit card, and utilities statements arrive by email. Recurring expenses are paid automatically without any human action required; we pay other bills with a few clicks and keystrokes. Family photos gather in virtual albums on smartphones and photo sharing websites. We file our tax returns electronically; we may not even keep hard copies. The more tech-savvy folks may even have e-commerce businesses, own the rights to domain names, and write blogs. Whether an individual’s online activities have independent financial value or are merely the means of accessing hard assets of financial value, this phenomenon has far-reaching implications for estate planning and administration. As technology advances, the number of individuals affected can only increase.
When someone dies, an administrative process starts into motion. Information must be gathered: Was there a will? Were there any outstanding medical bills or other debts? What kind of assets did the decedent own, where are they, and what are they worth? Are there ongoing costs associated with maintaining the assets? Where can the beneficiaries be found? Will there be any tax due? The traditional approach for handling an estate administration involved sorting through paper files in the decedent’s home and office and waiting for the mail carrier to bring the mail. The bills and bank statements would arrive in due course and, eventually, bring answers to many of these questions.
In today’s world, this traditional approach is simply no longer adequate; snail-mail will not suffice to alert fiduciaries as to where the decedent kept accounts or what outstanding bills there may be. In addition, fiduciaries have to act quickly to identify and shut down automatic payments of recurring expenses; otherwise they risk personal liability for paying creditors out of order (as well as risking an account to be overdrawn) if the probate estate turns out to be insolvent.
What about online photo albums, social networking accounts, email accounts, and blogs? Even if a personal representative knows where to look, he or she cannot gain access without usernames and passwords, and many online service providers will not release passwords to anyone but the principal, even after his death. The family may lose forever a decedent’s email accounts, photos, and other digital media. If she owned a small business, she may have kept important customer, product or payment information stored electronically and it may be impossible to access this vital information. The business may suffer tremendous losses when pending orders go unfilled.
Online storage accounts may help: a service provider will store digital data and release it according to the owner’s instructions. In this case, the fiduciary would merely need to know that the principal is a participant in the service (no password required). These sites usually offer state-of-the-art security, but many are hosted by start-up companies with little capital; the company may no longer be in business when you need it (www.lastwishes.com has already folded). Google has caught on and offers one solution; its “Inactive Account Manager” allows users to plan in advance for what should be done with their Google accounts when they become inactive (as a result of death or otherwise).
Another alternative is to keep an updated, encrypted electronic file with a list of all passwords. The complex password needed to unlock the encrypted file should be stored separately, in safekeeping. This approach creates a treasure map that will lead the fiduciaries to digital assets.
At a minimum, individuals should include language in estate planning documents that specifically authorizes fiduciaries to access digital assets (perhaps even appointing a special “online executor” to take responsibility to shut down a decedent’s email accounts, social media profiles and blogs, or otherwise manage the decedent’s online identity) and plan ahead so that their fiduciaries will be able to find usernames and passwords when the time comes.
When someone dies who did not plan ahead for digital assets, sleuthing is necessary. Having access to the email account may provide a key to access other digital data (“lost password” tools allow for resetting passwords via email), and as a last (expensive) resort, the fiduciary can hire a data forensics expert to help. However, before accessing someone else’s digital assets, it is important to consider who has the right to view and access that data. Having the means to access information (i.e., username and password) is not the same as having the legal right to do so.
A handful of states (including Virginia, but not Maryland or DC) have already enacted laws granting fiduciaries a right of access to digital data, and over a dozen others are considering doing the same. The Uniform Law Commission (ULC) is currently working on a model act to govern fiduciary access to digital assets. The ULC task force is working closely with internet service providers in an effort to craft a workable law and expects to make considerable progress by summer 2014. However, federal privacy laws (i.e., the Stored Communications Act) and federal anti-hacking laws (i.e., the Computer Fraud and Abuse Act) have a broad reach, and internet service providers zealously protect their users’ private information with restrictive terms of service. State law may only do so much to assist and protect fiduciaries, who struggle to balance their fiduciary obligations against the intractable position of internet service providers and even the risk of federal criminal sanctions.
Stay tuned—we expect there will be considerable developments in this area in the next year or so, particularly after the ULC model act is finalized.
