It can take some arm twisting to get people to do estate planning. Nobody wants to contemplate the days when they’ll be but a memory to their loved ones.
While estate planning involves figuring out what to do with your financial assets, increasingly, much consideration should be given to your digital assets too.
Think about all that great digital stuff you have, online, in the cloud, on digital devices. What might be the value of photos, Tweets, blogs, iTunes, written correspondence, personal records and all manner of digital doings that reflect the life you lived?
The value of online assets is nearly $55,000 per internet user in America, writes Jamie Hopkins, associate director of the Retirement Income Program at The American College in his new study, Afterlife in the Cloud: Managing a Digital Estate.
He explains that assets can be valued in a number of ways. First, the digital asset could have sentimental value to you or your loved ones, such as photos, videos or e-mails. Secondly, digital assets can play a huge role in the operations and revenue generating aspects of business. "These business related digital assets should be viewed as any other business asset and properly maintained to protect the business and any succession plan," says Hopkins. "The failure to properly manage digital assets could result in significant financial losses to a business, or even in some cases result in the business losing all of its value."
Digital assets is a growing issue. "Whether it’s airline miles, or of much significance like domain names, failure to include that in your estate plan can cause these assets to go to people you didn’t intend," says John Palley, a certified specialist in estate planning and probate law with Meissner Joseph & Palley.
For sure, you likely need to include digital assets to your estate plan. Here’s where to start.
Read the fine print
It’s important to remember that the automatic copyright protection over your pictures and posts may be limited by the terms of service. The terms often include language limiting users’ rights to work that they post. "For instance on Instagram, users retain full ownership of their photos, but grant the application a non-exclusive, royalty-free license to the images. Instagram is not an exception," says Laurie Samay, client service associate with Palisades Hudson Financial Group. She says that Facebook, Twitter and Pinterest also specify similar licensing arrangements in their terms of service for anything users post to which they hold the copyright.
"It’s important to realize that by sharing a photo on Facebook or Twitter, you are voluntarily waiving some of your copyright protection to the image. Bloggers, as well as individuals, should keep an eye on any changes in terms of services for sites they currently use and carefully review the terms of service when signing up with a new platform. Any rights you give up in life won’t be recovered in death," says Samay.
Those, "I Agree," clicks have real consequences, says Eido Walny, founder of Walny Legal group. "Digital assets are a huge and new area of the law."
The bottom line, writes Hopkins, "The use of online account and the digital assets contained within are not always inheritable property as ‘the terms of the contract between online service providers and account holders govern the ownership and inheritability of digital assets’." Then too, ownership rights of digital assets held online by service providers might vary depending on the type of asset and service provider.
When digital assets are stored on the cloud, the assets are organized by a service provider. In order to take control of a digital asset stored on the cloud, the account name, user name and password are needed. While this protects you in life, it can be problematic for those you leave behind to get access.
In order to know the location of a person’s digital assets, one must know how many accounts and under what usernames they were created. Keeping track of all the passwords, usernames and accounts becomes a justifiable concern for digital asset tracking, points out Hopkins in his study.
"We handle this both by putting provisions in our estate planning documents and encouraging our clients to write down their passwords," says Justin Meyer, an attorney specializing in estate planning issues.
Come up with a strategy
As Hopkins explains, digital estate planning isn’t only about preserving the financial status of an estate, it’s also about legacy, identity, privacy and security. There are ways to protect yourself. Hopkins says wills are being modified to address digital assets. But Hopkins says that trusts are becoming a popular digital estate planning device. For one thing, trusts do not always have the strict requirements that wills can have, allowing for easier creation and modification, says Hopkins. Setting up a trust with a trustee and beneficiaries is unlikely in the case of most individuals as their digital assets might be modest.
Online digital estate planning services are in the embryonic stage so there is little cohesion or similarities between the services. Hopkins says that while online digital estate planning services have seen rapid growth since 2008, and are primarily designed to provide some type of digital estate management and planning service, very few of the services provide legal estate planning solutions. The online services are not as regulated as wills or trusts, allowing the users to modify their account information and last wishes, timely, easily and efficiently, says Hopkins. The online services create online accounts through which individuals can create a list of their digital assets and indicate what should happen, postmortem to these assets. In fact, says Hopkins, some services allow for features that will delete account and digital information upon the user’s death.
If you feel a little overwhelmed about what to do, Hopkins keeps it simple, "Take an inventory of your digital assets, decide what you want to preserve and where, and what legal mechanisms you should use to pass online assets on, whether it’s a will, a trust, or a digital service."