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Digital Estate Planning: Is Google Your Next Estate Planner?

Digital Estate Planning: Is Google Your Next Estate Planner?

Wake up.

Brush teeth.

Check e-mail.

Internet usage is a daily activity for almost 90 per cent of the US.[1] Internet users check their personal e-mail roughly 34 times per day.[2] To give some perspective, the average American brushes their hair roughly four times per week, brushes their teeth 1.1 times per day, and only 20 per cent of the population exercises daily.[3] Sending e-mails, taking iPhone pictures, making social media updates and conducting online banking are now routine activities. They generate an enormous amount of electronic information, referred to as digital assets, which can have substantial monetary and sentimental value.

…the unique nature of digital assets, coupled with the fact that many digital assets will long outlive their owners, presents new challenges to traditional estate planning techniques…

While many people do not have an estate plan in place for the disposition of their traditional assets, even fewer have a specifically designed digital estate plan to manage their digital assets upon death. By the end of 2012, almost 30 million Facebook accounts had outlived their owners, but only three million had been memorialised [4] for their deceased owners. This leaves millions of photographs, private messages, and other digital assets stored on the deceased’s Facebook account, which is inaccessible to his or her family and friends.[5] These forgotten pages become a virtual shrine, creating ‘a pixilated Dorian Gray, colored by iPhone photos, ‘pokes’, and ‘LOLs’ — possibly for an eternity.'[6] As such, the unique nature of digital assets, coupled with the fact that many digital assets will long outlive their owners, present new challenges to traditional estate planning techniques, requiring more complex planning techniques than previously used for the disposition and management of traditional estates.

To illustrate the importance of digital estate planning consider John Doe, a married man with two young children. He is the sole owner and manager of a small custom furniture business, which owns a large amount of expensive machinery, has five employees, and operates through a web-based proprietary computer software program used to design the custom furniture. Further, the majority of the company’s sales come through his online store, e-mails, and the company’s webpage — where accounts payable, accounts receivables and current furniture orders are tracked. Furthermore, like many people in the US, he does his personal banking online, where he pays the majority of his family’s bills and manages their finances. However, Mr. Doe is the only person in his family and in the company that knows how to access all of these online accounts.

Now imagine that Mr Doe abruptly dies, leaving no guidance, access information or comprehensive list of his digital assets. The many people that rely on daily access to his digital accounts will be left without a workable option. His family, during a very difficult emotional time, will be left without any convenient way to access their deceased father’s online accounts, including their online bank accounts, leaving them without a convenient way to pay their bills. Furthermore, they might be left totally unaware of crucial online accounts, possibly containing important financial documents for the family’s wellbeing. Furthermore, any accounts where Mr Doe opted to go ‘paperless’ [7] might now be completely lost.  In addition, Mr Doe’s business will come to a complete halt as his employees will be unable to operate the business without access to any of the company’s banking, online software and client information. However, a proper digital estate plan could have identified the location of all of Mr Doe’s online accounts, provided access information and helped to better prepare his family and business in the event of his premature death.

As the example of Mr Doe illustrates, the benefits of digital estate planning can often be more profound for the deceased’s family than for the deceased.  Immediately after losing a beloved family member, such as a spouse or parent, the last thing people will want to deal with is trying to figure out the deceased’s passwords, account log-in names and location of digital assets.  A lot of grief for surviving family members can be saved if proper digital estate planning is performed. As such, the desire to make life more manageable for family members, coupled with the desire to protect valuable digital assets and unique digital asset challenges, has led to an increase in the need for a well designed digital estate plan. In response, a variety of online digital asset management and digital estate services have been developed by companies, including Google, which began rolling out digital estate planning services in April 2013, securing the notion that digital estate planning is serious business.

This article presents a brief discussion of what exactly digital assets are and why proper digital estate planning is so important. In addition, it examines why complicated digital asset ownership rights are often serious impediments to proper digital estate planning.  Next, the article examines Google’s newly developed digital estate planning services and how these services might shape the future of digital estates. Ultimately, the article’s main goal is to stress the need for increased awareness regarding the importance of properly managing one’s digital legacy in an increasingly digitalised world.

A lot of grief for surviving family members can be saved if proper digital estate planning is performed.

Living in the cloud: digital assets

The proliferation of the digital world has had a profound impact on asset management and wealth accumulation, resulting in the digitalisation of traditional assets into electronically stored information. The digitalisation of assets has transformed traditional assets such as movies, songs, papers, work documents, letters, books, photographs, businesses and even social lives into electronically stored information in binary code, referred to as digital assets. Digital assets are often located in e-mail accounts, online banking and financial accounts, social network accounts, digital media accounts or in a variety of other online accounts. While digital assets can be and often are business related, they also include personal assets such as family photographs, home movies, and personal e-mails.

Digital assets are often stored electronically with third party online service providers (e.g. Google, AOL, Facebook, Twitter, Wells Fargo, etc.) or directly on an electronic storage device. To ensure safety, privacy and proper digital asset account management, the online service providers require users to develop unique online account identifiers, such as usernames and passwords, which are only known by the unique user. While this provides a level of efficiency and security for the user, it makes tracking and accessing these digital assets a real issue after the owner is deceased. For example, the typical internet user has 26 unique online accounts and over 10 different passwords for these accounts, creating a tracking nightmare for a deceased’s estate.[8]

However, digital assets do not include the electronic storage devices that house this information, such as computers, phones, TVs and similar electronic devices, but merely the information contained within. These electronic storage devices allow people to access, transfer, manage, edit and create digital assets from all over the world. However, many digital assets are now being stored in the ‘cloud’ through a wide variety of online service providers who manage, protect and store the digital assets. This creates unique challenges to the ownership of these digital assets as third parties now control access to the information.

Furthermore, digital assets are an important part of a deceased’s estate. Digital assets often include photographs, home movies and e-mails which are often inaccessible except in digital form. Digital assets can contain a tremendous amount of sentimental value to a deceased’s family and friends. For example, having access to family photographs and home movies stored electronically could have a huge impact on a family’s ability to preserve a deceased family member’s legacy as the existence of hard copy photographs and home movies are becoming increasingly scarce. In addition to the enormous amount of sentimental value in digital assets, the average US internet user has more than $55,000 of digital assets stored in over 2,700 digital files.[9] However, there is a downside of having a large number of valuable digital files as these digital assets have become attractive targets for post-mortem and digital theft. Furthermore, it makes tracking, managing and transferring the digital assets increasingly complicated as many of the digital assets are password encrypted to protect against the aforementioned theft concerns. Ultimately, the need for proper digital estate planning is supported by serious financial, practical, security and sentimental incentives.

Ownership challenges to your digital legacy

In addition to the accessibility problems detailed above, a variety of other unique issues plague digital asset estate planning. Of them, the most important issue facing digital estate planning is the ownership and transferability issues surrounding digital assets. The federal Computer Fraud and Abuse Act (CFAA), 18 USC Sec 1030 et al, governs certain issues regarding unauthorised access to computers and online accounts. Transferring passwords and accounts could potentially violate the CFAA, creating complications for the transferability of digital assets.  However, if an estate does not have access to account information and passwords, the digital assets stored in these accounts will likely be lost or remain frozen online long after the owner’s death. Additionally, online service providers often limit the ownership rights of digital assets stored with them and, in some extreme cases, completely prohibit the transferability of the digital assets even if the user created and paid for their property.

…there is no clear legislation controlling digital asset ownership and transferability upon death and the court did not appear to rely on any established precedent.

For example, in 2012 it was widely publicised that actor Bruce Willis was contemplating suing Apple over the ownership rights to his iTunes music downloads.[10] It was reported that Bruce Willis had an extensive iTunes library, purchased over multiple years, which he wanted to leave to his daughters upon his death. However, according to iTunes’s ‘Terms and Conditions’, the iTunes purchaser is only granted a ‘nontransferable license’ and cannot transfer any applications or downloads to anyone else.[11] As such, every iTunes album, song, or movie purchased are for the owner’s eyes and ears only, conferring completely different ownership rights than buying a hard copy CD, album, or DVD movie, which could be transferred to designated recipients upon death. Ultimately, Mr. Willis decided against suing iTunes, and the transferability of his digital library remains unresolved.

In addition to iTunes’ agreement, a variety of other online service providers have similar contractual restrictions.  For example, Yahoo!’s ‘Terms of Service’ also severely limits one’s ability to control his or her digital assets stored with Yahoo.com. The ‘Terms of Service’ states:

No Right of Survivorship and Non-Transferability. You agree that your Yahoo! account is non-transferable and any rights to your Yahoo! ID or contents within your account terminate upon your death. Upon receipt of a copy of a death certificate, your account may be terminated and all contents therein permanently deleted.[12]

As such, Yahoo! essentially only provides its users with a lifetime license to use their services and access their online accounts.

In 2004, Yahoo! actively enforced its non-transferability clause, denying Justin Ellsworth’s family access to his e-mail account.[13] Justin Ellsworth was a Michigan resident who passed away in Iraq while serving as a US Marine. His father sought to access his son’s e-mail as part of the estate. However, Yahoo! denied access, stating that it violated their ‘Terms of Service’.  Ultimately, the Oakland County Probate Court entered an order compelling Yahoo! to turn over the contents of the e-mail account. While the Ellsworth case ended in favour of the estate, the struggle between probate and online service provider’s terms of service is likely to continue since there is no clear legislation controlling digital asset ownership and transferability upon death and the court did not appear to rely on any established precedent. In addition, the lengthy legal struggle between Ellsworth’s father and Yahoo! created an additional level of grief for the family, which could have been mitigated through certain digital estate planning techniques.

Google: your new estate attorney

In response to the unique challenges of digital estate planning, digital asset management companies and digital estate planning services developed to assist individuals in the management and dispersement of their digital assets upon death. These digital estate services can help provide individuals with a way to manage and keep track of their digital assets, accounts, and passwords. Additionally, these digital estate planning services attempt to tackle the concern of using a will to transfer digital assets. Wills become public and, therefore, are not a good avenue for listing digital assets, account names and passwords because of safety and privacy concerns. Although their intentions are progressive, individuals have not embraced digital estate planning companies. Individuals worry about the solvency and longevity of digital estate planning companies that have limited business history.[14] Additionally, many of these digital estate planning services are not performed by lawyers; they are owned and operated by software developers. As such, their viability as a solution to the challenges of digital estate planning has been limited.

In addition, merely providing access to a deceased’s online account is not always sufficient. For example, Eva Kripke managed her husband’s finances after he was diagnosed with Lewy body dementia.[15] However, in 2011, the Bank of America denied Eva Kripke access to her husband’s online bank account even though she had a power of attorney for her husband.  She had previously been able to log into her husband’s online account but eventually became locked out when she could not answer his security questions. As such, the Bank of America would no longer allow her access to the account, despite her knowledge of the password, account and power of attorney. This example illustrates the importance of having proper ownership of the digital assets and not merely temporary access to the accounts.

Ultimately, Facebook’s memorialisation feature and Google’s digital estate planning service now offer users a unique way to manage their digital assets…

As such, before digital estate planning services can be successful, courts must address the issue of digital asset ownership and clarify the role of online service provider terms of service agreements. In addition to the courts addressing this issue, these ownership and transferability issues could be resolved in two other ways.[16] First, state or federal legislation could change the ownership and transferability rights of digital assets, essentially forcing online service providers to allow for the transferability of digital assets upon death. Another option, perhaps the more practical and workable solution, is for online service providers to handle the transferability of their users’ digital assets through a voluntary service option. In fact, Google has decided to offer an in-house digital estate planning service for the disposition of its users’ digital assets stored with Google services.[17]

In April 2013, Google announced the activation of a new service, ‘Inactive Account Manager’, designed to place an individual user in control of his or her account information upon their death or a prolonged inactive period.[18] The goal is to provide a Google user with control of his or her digital assets stored within Google accounts. The user will be able to set inactive time frames, receive updates when the inactive timeframe is approaching, notify family members or other contacts of his or her inactive status and share access information with them, or delete any or all of their account information upon inactive status.[19]  Google’s service provides its users with a level of control and ownership that is currently unique to digital asset management with online account providers.  While many service providers are trying to find ways to limit the transferability of digital assets, Google has opened up the door for users to properly manage and dispose of their digital assets right through Google’s own services.

Conclusion

The digitalisation of traditional assets has resulted in large amounts of wealth, both personal and business related, being stored online, on digital devices and in the cloud. Since these assets are often spread out across various social networks, email accounts, online service providers and digital devices, they cannot always be easily accessed, found and transferred from one person to another upon the owner’s death. Furthermore, an online service provider’s ‘terms of service’ contract can restrict a user’s ownership rights by severely curtailing his or her ability to transfer digital assets at death. The digitalisation of assets and the growing perplexity of digital asset ownership rights have created a variety of unique challenges that are unknown to the average person, leaving them inadequately prepared for the disposition of their digital estate. However, online service providers are well positioned to offer new avenues to dispose of digital property without a will, trust, or probate court, as they are the key holders to the digital assets.

Ultimately, Facebook’s memorialisation feature and Google’s digital estate planning service now offer users a unique way to manage their digital assets without using traditional estate planning techniques such as wills or trusts. However, it is unlikely that all online service providers will adopt such user friendly services and terms of service because it could place a heavy burden on the service provider. So whether it is your Facebook, Twitter, Bank of America, iTunes, or Gmail account, without proper planning these assets could be lost, destroyed, or become inaccessible upon your death, depriving your family and friends of a significant portion of your digital legacy.[20] As such, individuals will need to actively manage their own digital assets and develop a digital estate plan in conjunction with their overall estate plan. However, the lack of clear federal and state laws regarding digital asset ownership and transferability rights, along with policy variances among online service providers will slow progress in this arena. Over the next few years, the digital estate planning process will likely need constant updates and review to keep pace with technology evolution and legal developments in ownership rights of digital assets.

Jamie Hopkins
Assistant Professor of Taxation
Assistant Director of the New York Life Center for Retirement Income

 

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