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2014 Legal Job Market Overview, Part 5—Hot Practice Areas – Digital Assets Planning

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Saving a Practice

The digitization of America and the world is becoming an unanticipated and very necessary practice-saver for the savviest estate planning practitioners whose livelihoods dried up when Congress in 2012 made permanent the $5 million individual and $10 million spousal estate tax exemptions. Just when it appeared that these attorneys were facing existential jeopardy, along came digitization to save the day. Given the breadth and depth of the digital revolution, estate, and business succession, planning has the potential to grow even bigger than traditional estate planning.

What Is a Digital Asset?

A good way to begin dissecting the term “digital asset” is to think about all of the digital facets of your personal and professional lives that rely on electronic data, products and media that have value to you, your family, and your business. This includes such items as: passwords, encryption, social media sites, lists and records of all kinds, images, important emails and email addresses, on-line bank accounts, automatic withdrawal recipients, bill-paying accounts, material stored in the cloud, literary endeavors, business and marketing plans, business contacts, vendor relationships, links to important websites, Internet domain names, anything that might qualify as intellectual property, other intellectual capital and intangibles, and much, much more. It also includes records of where are stored—external websites, laptops, desktop computers, hard drives, flash drives, CD’s, smart phones, tablets and other storage devices.

Technology has created a vast storehouse of individual and corporate digital , and continues to do so at a breathtaking pace.  Until very recently, digital never arose as a discussion point when contemplating estate or business succession plans.  But since estate plans are designed to pass to one’s heirs, digital are becoming increasingly important factors in estate planning.  Business owners too, have to be concerned with what will happen to their digital once they depart from the scene.

In addition to emotional value (e.g., family photos, letters/emails preserved in an electronic format), digital assets have come to have considerable monetary value as well.  Take online bank accounts, for example.  If these are not included in estate plans, survivors may not be able to access them.  For business owners, digital assets may now represent the majority of the business’s intellectual capital that is an integral part of what constitutes value.  Today, intellectual property and intangibles constitute 80 percent of the Fortune 1,000 corporations’ assets, a figure that has grown from less than 30 percent 25 years ago.

Current State of the Law

In a classic example of what I call the “law-technology gap” (i.e., where technology has leapt ahead of the law’s ability to understand and regulate it), states are also becoming cognizant of the issues surrounding digital assets.  To date, only seven states have addressed this issue legislatively with respect to estate planning:

Connecticut authorizes the personal representative of a deceased person’s estate to access or copy the contents of the deceased’s e–mail accounts.

Idaho authorizes an estate personal representative “to take control of, conduct, continue, or terminate” a deceased person’s e–mail account, social networking account, microblogging account, or any email service website.” Note: Idaho also grants conservators the power to “take control of, conduct, continue or terminate any accounts of the protected person on any social networking website, any microblogging or short message service website or any e-mail service website.”

Indiana allows the personal representative to access or copy any of the decedent’s documents or information stored electronically by a “custodian” (defined as “any person who electronically stores the documents or information of another person) and requires the custodian to retain a deceased person’s electronic information for two years after receiving a request for access or copies.

Nevada recently enacted a provision authorizing a personal representative to direct the termination of any online account or similar electronic or digital asset of the decedent, including accounts on any social networking website, web log service website, microblog service website, short message service website, and email service website, but excluding any financial account.

Oklahoma empowers an estate executor or administrator, where otherwise authorized, to take control of, conduct, continue, or terminate any accounts of a deceased person on any social networking website, any microblogging or short message service website or any e-mail service website.

Rhode Island allows a personal representative to access or copy the contents of a deceased person’s email accounts.

Virginia authorizes a personal representative of a deceased minor’s estate to assume the minor’s Terms of Service agreement for an online account “for purposes of consenting to and obtaining the disclosure of the contents of the minor’s communications and subscriber records pursuant to 18 U.S.C. § 2702.”  The law does not porvide the same authority with respect to the estate of an adult.

The National Conference of Commissioners on Uniform State Laws has formed a Committee on Fiduciary Access to Digital Assets to develop a proposal that could amend the Uniform Probate Code, the Uniform Trust Code, the Uniform Guardianship and Protective Proceedings Act, and the Uniform Power of Attorney Act, to vest fiduciaries with at least the authority to manage and distribute digital assets, copy or delete digital assets, and access digital assets. The Committee’s most recent draft proposal is available online.

Issues Surrounding Digital Assets

The major issues confronting digital assets practitioners include:

  • Inventorying digital assets could be a daunting task. Unlike paper records, individuals and businesses have been slow to realize both the value of such assets and the need to organize them in an orderly way.
  • Whether to list digital assets and their accompanying user IDs and passwords in a will, which is a matter of public record; alternatively, devising means of protecting their confidentiality.
  • How to protect the client’s valuable information by drafting and executing documentation that includes specific instructions about disposing of these records in the event of death or disability, and who should have access to and control of them.
  • Assisting the client in selecting a suitable “digital personal representative” and determining the extent of his/her duties and responsibilities in assuming control of and administering the digital estate.
  • Ascribing a dollar value to digital assets.  This is supremely difficult and there is little guidance currently available. This is of particular importance in a business context because it has implications for taxes as well as acquisition valuations. Neither the Financial Accounting Standards Board nor the International Accounting Standards Board have yet devised Generally Accepted Accounting Principles that companies can follow with respect to such valuations despite having wrestled with this important matter for several years now.
  • Terms of Service agreements between the deceased individual and the Internet company providing the service.
  • Federal and state laws that address unauthorized access to computers and data, such as the Stored Communications Act of 1986, 18 U.S.C. Secs. 2701-12, which prohibits consumer electronic-communications companies from disclosing the content of an individual´s account and communications and postings without the owner’s consent or a government order.

Practice Area Analysis and Predictions

Number of Job Opportunities

To make the 2014 hot list, a practice area must offer a large number of job opportunities relative to other practice options. There must also be either (1) high demand on the part of employers, and/or (2) solo practice options. Digital assets planning practice more than satisfies these criteria. This is going to be a huge practice opportunity as the world continues to move relentlessly from paper to digital. Everyone, with few exceptions, has amassed considerable quantities of digital information of central importance to them and their families. Everyone also eventually dies. Virtually every company and sole proprietor possesses digital assets critical to their businesses.

Staying Power beyond the Immediate Present

Until some new technology comes along and threatens the existence of digital assets like they have threatened paper, this legal practice is going to be around for a very long time.

An Upward Curve

Digital assets practice will only expand as time goes on. To date, this expansion has been exponential.

Relative Ease of Entry

Like many cutting-edge practices, digital assets planning is so new that there are virtually no barriers to entry. If you took a Trusts, Wills and Estates course in law school, you have all of the platform that you need to enter this practice. With a few learning curve additions, the same principles that govern the planning for tangible and non-digital intangible assets apply as well to digital assets.  Having said that, identifying, locating, and compiling digital assets is considerably more complicated (but not necessarily in a legal sense).  While most clients retain their assets and important documents in safe places, that is not the case with digital assets.  These are typically scattered all over the virtual world.

Moreover, putting digital assets in order and making that order known to family members and business colleagues runs the risk of rendering them insecure, thus presenting the practitioner with something of a conundrum.

Given the technology involved, it is a good idea to familiarize yourself with some of the technological, privacy and security issues surrounding each of the potential digital assets a client might possess.

If you want to pursue digital asset planning within a solo practice, the costs of entry are also low (which is true of almost all solo practices today). In addition to the basic requirements–computer, communications equipment, legal research subscription service–you will probably want to spend up to $1,000 or so for at least one specialized training course in digital asset planning (see below).

Geographic Scope

Digital assets are everywhere; consequently, potential clients are everywhere as well.

Enhancing Your Digital Asset Planning Credentials

Continuing and professional education programs about digital asset planning are beginning to emerge.  They include the following:

Society of Financial Planning Professionals-National Chapter http://www.financialpro.org#sthash.FAlcmWBk.dpuf – Estate Planning for Digital Assets (online)

Financial Planning Association http://www.fpanet.org – How to Help Clients Plan for Digital Estate Administration – On Demand

National Advisors Trust Company FSB http://www.nationaladvisorstrust.com#sthash.vYNKL39o.dpuf – The Internet Is Forever: What to Do with Digital Property After a Client’s Death (online)

State bar continuing legal education providers are beginning to offer courses in digital asset planning.

Conclusion

This nascent practice is currently primarily the province of sole practitioners and small law firms that handle individual and small business clients. However, mid-size and large law firms are becoming involved in order to serve their business and wealthy individual clients.

Digital assets practice is a “two-fer:” practitioners will be involved in both (1) estate and business succession planning; and (2) in executing such plans when the client dies or leaves the business. For many attorneys, this cutting-edge opportunity could be the “killer app” practice.

The prior LawCareers blog overviewed 11 hot practice areas for 2014 that the self-styled experts overlooked in all of their beginning-of-the-year predictions. In this blog, we take a more detailed look at one of these practice areas: Digital Assets Planning.

In the prior LawCareers blog, I described a set of five criteria—number of job opportunities; staying power; an upward curve; ease of entry; and geographic scope—that practice areas had to satisfy to make my 2014 “hot” list. Digital Asssets Planning more than satisfies each of the five criteria.Specific details follow below.

Saving a Practice

The digitization of America and the world is becoming an unanticipated and very necessary practice-saver for the savviest estate planning practitioners whose livelihoods dried up when Congress in 2012 made permanent the $5 million individual and $10 million spousal estate tax exemptions. Just when it appeared that these attorneys were facing existential jeopardy, along came digitization to save the day. Given the breadth and depth of the digital revolution, digital asset estate, and business succession, planning has the potential to grow even bigger than traditional estate planning.

What Is a Digital Asset?

A good way to begin dissecting the term “digital asset” is to think about all of the digital facets of your personal and professional lives that rely on electronic data, products and media that have value to you, your family, and your business. This includes such items as: passwords, encryption, social media sites, lists and records of all kinds, images, important emails and email addresses, on-line bank accounts, automatic withdrawal recipients, bill-paying accounts, material stored in the cloud, literary endeavors, business and marketing plans, business contacts, vendor relationships, links to important websites, Internet domain names, anything that might qualify as intellectual property, other intellectual capital and intangibles, and much, much more. It also includes records of where digital assets are stored—external websites, laptops, desktop computers, hard drives, flash drives, CD's, smart phones, tablets and other storage devices.

Technology has created a vast storehouse of individual and corporate digital assets, and continues to do so at a breathtaking pace.  Until very recently, digital assets never arose as a discussion point when contemplating estate or business succession plans.  But since estate plans are designed to pass assets to one’s heirs, digital assets are becoming increasingly important factors in estate planning.  Business owners too, have to be concerned with what will happen to their digital assets once they depart from the scene. 

In addition to emotional value (e.g., family photos, letters/emails preserved in an electronic format), digital assets have come to have considerable monetary value as well.  Take online bank accounts, for example.  If these are not included in estate plans, survivors may not be able to access them.  For business owners, digital assets may now represent the majority of the business’s intellectual capital that is an integral part of what constitutes value.  Today, intellectual property and intangibles constitute 80 percent of the Fortune 1,000 corporations’ assets, a figure that has grown from less than 30 percent 25 years ago.

Current State of the Law

In a classic example of what I call the “law-technology gap” (i.e., where technology has leapt ahead of the law’s ability to understand and regulate it), states are also becoming cognizant of the issues surrounding digital assets.  To date, only seven states have addressed this issue legislatively with respect to estate planning:

Connecticut authorizes the personal representative of a deceased person’s estate to access or copy the contents of the deceased’s e–mail accounts. 

Idaho authorizes an estate personal representative “to take control of, conduct, continue, or terminate” a deceased person’s e–mail account, social networking account, microblogging account, or any email service website." Note: Idaho also grants conservators the power to “take control of, conduct, continue or terminate any accounts of the protected person on any social networking website, any microblogging or short message service website or any e-mail service website.”

Indiana allows the personal representative to access or copy any of the decedent’s documents or information stored electronically by a “custodian” (defined as “any person who electronically stores the documents or information of another person) and requires the custodian to retain a deceased person’s electronic information for two years after receiving a request for access or copies.

Nevada recently enacted a provision authorizing a personal representative to direct the termination of any online account or similar electronic or digital asset of the decedent, including accounts on any social networking website, web log service website, microblog service website, short message service website, and email service website, but excluding any financial account.

Oklahoma empowers an estate executor or administrator, where otherwise authorized, to take control of, conduct, continue, or terminate any accounts of a deceased person on any social networking website, any microblogging or short message service website or any e-mail service website.

Rhode Island allows a personal representative to access or copy the contents of a deceased person’s email accounts.

Virginia authorizes a personal representative of a deceased minor’s estate to assume the minor’s Terms of Service agreement for an online account “for purposes of consenting to and obtaining the disclosure of the contents of the minor’s communications and subscriber records pursuant to 18 U.S.C. § 2702.”  The law does not porvide the same authority with respect to the estate of an adult.

The National Conference of Commissioners on Uniform State Laws has formed a Committee on Fiduciary Access to Digital Assets to develop a proposal that could amend the Uniform Probate Code, the Uniform Trust Code, the Uniform Guardianship and Protective Proceedings Act, and the Uniform Power of Attorney Act, to vest fiduciaries with at least the authority to manage and distribute digital assets, copy or delete digital assets, and access digital assets. The Committee’s most recent draft proposal is available online.

Issues Surrounding Digital Assets

The major issues confronting digital assets practitioners include: 

  • Inventorying digital assets could be a daunting task. Unlike paper records, individuals and businesses have been slow to realize both the value of such assets and the need to organize them in an orderly way. 
  • Whether to list digital assets and their accompanying user IDs and passwords in a will, which is a matter of public record; alternatively, devising means of protecting their confidentiality.
  • How to protect the client’s valuable information by drafting and executing documentation that includes specific instructions about disposing of these records in the event of death or disability, and who should have access to and control of them.
  • Assisting the client in selecting a suitable “digital personal representative” and determining the extent of his/her duties and responsibilities in assuming control of and administering the digital estate.
  • Ascribing a dollar value to digital assets.  This is supremely difficult and there is little guidance currently available. This is of particular importance in a business context because it has implications for taxes as well as acquisition valuations. Neither the Financial Accounting Standards Board nor the International Accounting Standards Board have yet devised Generally Accepted Accounting Principles that companies can follow with respect to such valuations despite having wrestled with this important matter for several years now.
  • Terms of Service agreements between the deceased individual and the Internet company providing the service.
  • Federal and state laws that address unauthorized access to computers and data, such as the Stored Communications Act of 1986, 18 U.S.C. Secs. 2701-12, which prohibits consumer electronic-communications companies from disclosing the content of an individual´s account and communications and postings without the owner’s consent or a government order.

Practice Area Analysis and Predictions

Number of Job Opportunities

To make the 2014 hot list, a practice area must offer a large number of job opportunities relative to other practice options. There must also be either (1) high demand on the part of employers, and/or (2) solo practice options. Digital assets planning practice more than satisfies these criteria. This is going to be a huge practice opportunity as the world continues to move relentlessly from paper to digital. Everyone, with few exceptions, has amassed considerable quantities of digital information of central importance to them and their families. Everyone also eventually dies. Virtually every company and sole proprietor possesses digital assets critical to their businesses.

Staying Power beyond the Immediate Present

Until some new technology comes along and threatens the existence of digital assets like they have threatened paper, this legal practice is going to be around for a very long time.

An Upward Curve

Digital assets practice will only expand as time goes on. To date, this expansion has been exponential.

Relative Ease of Entry

Like many cutting-edge practices, digital assets planning is so new that there are virtually no barriers to entry. If you took a Trusts, Wills and Estates course in law school, you have all of the platform that you need to enter this practice. With a few learning curve additions, the same principles that govern the planning for tangible and non-digital intangible assets apply as well to digital assets.  Having said that, identifying, locating, and compiling digital assets is considerably more complicated (but not necessarily in a legal sense).  While most clients retain their assets and important documents in safe places, that is not the case with digital assets.  These are typically scattered all over the virtual world.

Moreover, putting digital assets in order and making that order known to family members and business colleagues runs the risk of rendering them insecure, thus presenting the practitioner with something of a conundrum. 

Given the technology involved, it is a good idea to familiarize yourself with some of the technological, privacy and security issues surrounding each of the potential digital assets a client might possess.

If you want to pursue digital asset planning within a solo practice, the costs of entry are also low (which is true of almost all solo practices today). In addition to the basic requirements--computer, communications equipment, legal research subscription service--you will probably want to spend up to $1,000 or so for at least one specialized training course in digital asset planning (see below).

Geographic Scope

Digital assets are everywhere; consequently, potential clients are everywhere as well.

Enhancing Your Digital Asset Planning Credentials

Continuing and professional education programs about digital asset planning are beginning to emerge.  They include the following:

Society of Financial Planning Professionals-National Chapter http://www.financialpro.org#sthash.FAlcmWBk.dpuf - Estate Planning for Digital Assets (online)

Financial Planning Association http://www.fpanet.org - How to Help Clients Plan for Digital Estate Administration - On Demand

National Advisors Trust Company FSB http://www.nationaladvisorstrust.com#sthash.vYNKL39o.dpuf - The Internet Is Forever: What to Do with Digital Property After a Client’s Death (online)

State bar continuing legal education providers are beginning to offer courses in digital asset planning.

Conclusion

This nascent practice is currently primarily the province of sole practitioners and small law firms that handle individual and small business clients. However, mid-size and large law firms are becoming involved in order to serve their business and wealthy individual clients.

Digital assets practice is a “two-fer:" practitioners will be involved in both (1) estate and business succession planning; and (2) in executing such plans when the client dies or leaves the business. For many attorneys, this cutting-edge opportunity could be the “killer app” practice.

Next: 2014 Legal Job Market Overview, Part 6—Hot Practice Areas – Nontraditional Family Law


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Eleanore

Eleanore

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