In last week's blog, I introduced the concept of including digital assets in your estate plan. Today's blog is a follow-up providing additional substantive information regarding estate planning issues and planning for digital assets.
Why Think About Digital Assets?
Everyone should be concerned about protecting and planning for their "digital assets," because soon almost all forms of information will be communicated, stored and processed digitally. More and more major businesses and industries are being run on software delivered as online services, from movies to healthcare to agricultural to national defense. Marc Andreessen, inventor of the web browser and founder of Netscape, summed up the phenomenon of digital assets well when he said, "Software is eating the world."
The Current Legal Framework Impacting Digital Assets
Most of us have gone through a process of "checking the box" and accepting the terms of service with respect to signing up for various software programs or online services. When we agree and accept the terms, they are binding and oftentimes contain provisions that are extremely one-sided in favor of the service provider. Almost uniformly, the proposed terms of service provisions limit access to the services and/or products to the individual who is enlisting and paying for the service. As a result, without the appropriate access information, including usernames, passwords or other codes, an individual who dies without leaving information as to how to access certain information with a service provider is protected by its terms of service agreement. In many instances, this results in a deceased individual's legal representative never getting access to the information.
In 2004, U.S. Marine Justin Ellsworth was killed inIraq. His father was denied access to his Yahoo email account, because Yahoo’s terms of service provisions state that there is no right of survivorship to access to an individual's email account, and the email account is non-transferrable to any legal representative or heir/beneficiary. In 2005, an Oakland County, Michigan, probate court ordered Yahoo to give Justin Ellsworth's father the contents of the email account, but not access to his son's email.
The Computer Fraud and Abuse Act
The Computer Fraud and Abuse Act (CFAA) is intended to reduce hacking of computer systems, in particular those belonging to federal government and financial institutions. Although this law is designed to protect information, it can be a two-edged sword. Section 1030(a)(2) of the Act makes it a criminal offense to intentionally access a computer without authorization to obtain information contained in a financial record of a financial institution. If your access is contrary to the terms of service, then you could be committing a crime, even if you are acting within the authority of an estate or power of attorney document for an incapacitated individual.
The Stored Communications Act – "Digital HIPAA Law"
The Stored Communications Act (SCA), 18 USC 2701, creates privacy rights to protect the contents of certain electronic communications and files from disclosure by certain providers of electronic communication services or remote computing services. Certain provisions of the Act prohibit a company that provides electronic communication service or remote computer service to the public (e.g., Apple, Facebook, Google, Microsoft, Yahoo) from divulging the contents of electronic communications or files unless there is an exception. Although there is a "lawful consent" exception, that exception only means that the online account service provider may “voluntarily” disclose the contents of the electronic communications and files protected under the SCA. What this actually means is that an individual "cannot compel" the service provider to disclose that information, even by bringing a civil action against the service provider. If there is any improper disclosure, the company faces severe penalties, which serves as a disincentive for companies to cooperate with individuals trying to access a deceased or incapacitated individual's account.
Many states' laws regarding digital assets are still unclear and behind the times. Federal and state laws penalize unauthorized access to computer systems and types of private or protected personal data. All 50 states have enacted laws similar to this.
These laws provide consumer protection against fraud and identity theft, but may have a chilling effect on fiduciaries and family members trying to access an incapacitated or deceased person's devices and electronically stored information/data.
Five states – Connecticut, Rhode Island, Oklahoma, Idaho and Indiana – currently have protection laws that also help executors, and at least nine other states are considering legislation to address these issues. However, the remaining 36 states do not have any coordinated or cohesive set of laws to deal with these issues. It is important to note that since most of the provider companies are located in California, their terms of service subject to users and choice of jurisdiction is normally California law, which is working to develop laws to govern access to information.
How to Plan Ahead
I advise that my clients consider including information in their estate planning documents about their digital assets. Planning ahead by preparing a complete list of passwords, online accounts and other digital property can provide fiduciaries and family members full access to the accounts and digital property, and keep the administrative costs and potential legal fees in having to initiate legal action against service providers from reducing the estate of assets that could otherwise be distributed to beneficiaries. Clients need to be aware and to create an inventory of digital assets that lists each asset, how to access it and any wishes regarding its disposition.
There are "digital estate services" to manage this type of information online. Although these online services can be useful in addressing the concern of properly accessing and disposing of one's digital assets in the event of death or incapacity, individuals should carefully research the service to determine whether the service is really "as advertised." Three companies that I have researched include:
Digital assets must be considered in any estate plan. Failure to plan for digital assets or provide access to a legal representative in the event of death or incapacity could result in a significant expense to an individual's estate to obtain access, if access can be obtained at all based on certain terms and conditions as discussed above.
Please think about types of assets that we all have and/or deal with that should be included in one's estate plan, including but not limited to:
Please do not hesitate to contact me if you have any questions regarding digital assets or any other matters related to estate planning.