Digital assets are property and thereby allow the owner to manage, transfer, and bequeath them. However, the actual owner of a digital asset might not always be clear. For example, the creator of the digital asset might merely hold a lifetime lease, and the service provider who stores the digital asset might have full ownership rights. Therefore, individuals incorporating digital asset planning into an overall estate plan must consider the nature of and practical limitations surrounding a transfer of digital property. The transfer of digital assets generally involves the following four issues:
Proper digital estate planning must account for the digital asset transferor’s security concerns. Wills are poor legal devices for managing digital asset information because traditional wills become public, thus exposing the location and access information of the digital assets to potential threats. Including passwords and other confidential information in a will is likely to endanger the security of one’s digital assets and could undermine the entire estate plan. Cybercrime represents a real and serious threat to any digital estate transfer. Identity theft is the fastest growing crime in the world, impacting over 27,000 people worldwide each day to the tune of an estimated $56 billion each year. In 2010, the IRS allocated over $12 million to over 5,000 stolen identities of deceased U.S. citizens, in connection with scams perpetrated via the decedent’s “Electronic Survivorship and Non-Transferability” clause of its terms and conditions, will permanently delete contents of the user’s account upon the user’s death.
Google’s policy differs slightly, stating that in some “rare cases” it may provide a deceased user’s content to an authorized representative. Hotmail/Outlook states that it will provide a copy of email messages, contact lists, attachments, and other content after proper authentication of ownership. Social media site terms and conditions may also vary. Ultimately, digital assets held or stored by online service providers will be subject to the terms of the service contract, binding the account holder and the service provider.33 Disputes pertaining to the digital asset ownership in reference to online accounts are settled by courts construing the terms and conditions of the contract of the third-party online provider through the application of state law.
After providing for the location, accessibility, and ownership of a digital asset, one must then determine the individual’s estate plan wishes and legacy goals. People generally do not have specific digital estate plans in place, often attributable to the fact they are unaware of the importance of developing a specialized digital estate plan.39 Many people mistakenly believe that the only benefit of estate planning is the disbursement of assets upon death according to one’s wishes.
However, security issues, protecting a legacy (including a personal, family, or commercial image), and fulfillment of an overall estate plan are equally important. Uncertainty as to the dissemination and management of assets often arises in the absence of an estate plan, potentially creating significant strife for family members. It is therefore imperative for estate planning attorneys to consider digital assets in addition to physical or traditional assets to ensure both the fulfillment of their client’s wishes and the safe and efficient transfer of digital assets to the next generation.
A “digital asset,” for the purposes of digital estate planning, is any “asset that exists only as a numeric encoding expressed in binary form,” i.e., anything of value stored electronically. Digital assets are created and may exist in both personal and business settings. For instance, an individual’s digital asset estate may consist of videos, text documents, photographs, music, emails, online subscriptions, cell phone applications, video games, online personal social media accounts, and other similar items. In the business setting, the digital estate may contain valuable information such as mailing addresses, customer lists, online storefronts, business bank accounts, payroll systems, computer software, business plans, and other digitized assets. Data about the digital asset, commonly referred to as metadata, is also considered part of the digital asset. Metadata may contain information about when the digital asset was created, by whom it was created, when it was last accessed, and whether it was edited or altered. Additionally, metadata may be used to authenticate and describe the digital asset and enhance retrieval of similarly situated assets. As such, metadata can be invaluable in lawsuits and ownership disputes regarding digital assets. It is important to distinguish items that do not constitute digital assets. Specifically, digital assets do not include the electronic storage units within which they are held—such as computers, servers, video game consoles, cameras, and cell phones. While digital storage units are vital to the maintenance, collection, and distribution of digital assets, they are not the primary focus of digital estate planning.
Transferring property, wealth, assets, and family heirlooms from one generation to another has always been a primary focus of proper estate planning. The electronic and technological innovations of the twentieth century, society’s reliance on the Internet and electronic commerce (“e-commerce”), and the growth of cloud computing have given rise to a new digital world of assets which may be accessible across the world through a variety of mediums. Due to their importance in our everyday life, financial and sentimental value, and continuing growth, digital assets should be considered as a part of any estate plan. Digital assets and online accounts have the potential to continue indefinitely. As with any asset that can exceed the lifespan of the original owner, estate planning for digital assets is a vital part of the preservation of one’s legacy and property disposition. Many individuals unknowingly leave a significant amount of digital assets unaccounted for after death. For example, by the end of 2012, over 30 million Facebook users have died, leaving no directions as to the handling of their accounts. Failure to consider digital assets as part of the estate planning can result in loss of items that contain sentimental and financial value for the deceased relatives. According to a 2011 McAfee study, the average Internet user places a value of $37,438 on their digital assets,3 while a U.S.-based Internet user values their digital assets near $55,000. The growth and development of the digital world has also changed the manner in which businesses operate, store information, market products, and reach consumers. The U.S. e-commerce industry is valued at nearly $225 billion. Today, businesses often rely on a wide range of digital assets to ensure a strong web presence through online storefronts, e-commerce services, and cloud-based products, as many consumers expect businesses to have both brick-and-mortar locations while offering online access. These digitized assets are crucial to the company’s success and functionality and, at the same time, represent the growing digitalization of business assets. The average business insists that up to 20% of its digitally stored information is critical to operations. This percentage is likely to increase over time as companies continue to rely upon electronically stored information. Accordingly, proper estate planning and business succession plans are needed to protect and manage digitized business assets. Digital assets, without a doubt, add a new wrinkle to the already complex legal practice of estate planning. Digital estate planning can be especially problematic because digital assets are often difficult to locate without proper guidance from the decedent. Without a well-designed digital estate plan, locating and disseminating digital assets is akin to searching for buried treasure with neither a treasure map nor a shovel. Further, accessibility and transferability issues can arise as these digital assets are often spread across various social networks, email accounts, online service providers, and digital devices. Providing access and location information regarding digital assets via wills creates security concerns as their location and passwords may become public.
The expansive nature of digital assets and the aforementioned issues surrounding this novel area of law triggers the need for more precise and well-developed asset management systems. This Essay defines the scope of digital assets, discusses unique challenges digital assets provide for traditional estate planning, and concludes with a viable strategy for the creation of a well-developed and manageable digital estate plan