Journal of Financial Planning: September 2014 Jamie P. Hopkins, J.D., RICP ® , is an associate professor of taxation at The American College and the associate director of the New York Life Center for Retirement Income. Email author HERE . Ilya Lipin, J.D., LL.M., is an attorney in Philadelphia. […]
It is critical to assess the value of digital records and assets, and to make sure they are integrated into succession plans.
By Sarah Z. Collins
We now live a big part of our lives online. In the digital world, people meet, shop, interact, bank and save. The cloud is also where many of us store the visual and written memories of our lives.
It is important to see all this rich digital footprint as part of our legacy and to integrate it into our succession plans. Especially now, with the perspective and time gained during the COVID-19 crisis, we have the perfect opportunity to assess the value of our digital records and assets, and the potential for financial or sentimental loss if these digital assets become inaccessible.
What is a “digital asset”?
Digital assets include any online account or service protected by log-in security, such as identification and password. This includes services and tools you might use every day, like your phone and computer, email, social media, photos and videos, music playlists and various subscriptions.
But there are also other assets you might not think about until you need them, such as medical records, files stored on “cloud accounts,” any web domains you own, and online payment systems such as PayPal, Venmo and QuickPay. Online financial accounts are, of course, digital assets.
Does this scenario sounds familiar? You saw an ad sometime ago for an online high-yield savings account that offered a sign-up bonus. Your savings account paid very little interest, so you opened the new account online and transferred the money from the old one. Account statements and transactions for the new digital account were only accessible online. Forgetting about it was easy. You might not even have mentioned it to anyone in your family.
The question is—if something happened to you, who would know about this account? How would your beneficiaries access the funds deposited there?
What should you be doing? Here, we offer four simple steps to clean up your digital closet and keep it in order:
1) Take an inventory
Make a list of all your digital assets mentioned above and any others you can think of. In one secure place, keep a record of the names of each account, digital location and the information needed to gain access to them, such as usernames and passwords.
Let at least one trusted person know how to access your inventory. It could be your accountant, lawyer, or spouse. One effective way of providing access and keeping your accounts organized is by using and sharing a reputable online password manager that uses encryption and stores all your passwords in one place.
With financial accounts, review each by its title and make sure that beneficiaries are named. Most digital accounts, just like traditional financial accounts, allow you to name one or more beneficiaries. Joint accounts typically pass automatically to the survivor under local law.
Two useful account designations to apply are “Transfer on Death” (TOD) and “Payable on Death” (POD). These terms may ease the transition of assets and save inconvenience and unnecessary cost to your beneficiaries. Instead of using an account designation, you might also discuss with your lawyer whether you would like to put the digital account in the name of your trust or personal holding company.
For any online accounts outside your home country, it is especially important to consider your country’s local laws and any potential conflict of law. Knowing how accounts should be titled and what may happen to your assets when you can no longer manage them is an important topic to discuss with your tax advisor or lawyer.
2) Name your trusted contact person
Consider naming a trusted contact person for every one of your online financial accounts. Most online financial accounts allow you to name a trusted contact person (TCP), someone you authorize your bank or brokerage firm to contact if they believe your account may be exposed to possible financial exploitation or fraud, or if they cannot get in touch with you. Naming a TCP when you set up or review your accounts can help protect your digital assets down the road.
3) Make sure your legal documents address your digital assets and give your executor proper access
If you do not account for your digital assets in your succession plan, your heirs may not be granted access or they might have to incur inconvenience and costs to gain that access.
Lack of proper legal planning for online financial assets also could create liabilities for estate or inheritance taxes. Online financial accounts may generate income or losses that need to be woven into your overall wealth plan.
Consult your lawyer about the language that should be included in your testament or trust.
4) Always be planning
In the digital age, we are constantly creating new accounts and changing the passwords on existing ones.
Be sure to keep an ongoing record of your online presence and stay in touch with your lawyer and your J.P. Morgan advisor when you open new accounts that could affect not only your current financial status, but also your family’s future.
selling goods or services, or keeping in touch with family members and sharing memories, the majority of this happens on the internet. When it comes to succession planning, these virtual accounts and online property are just as important as the physical items we can see and touch, such as houses and jewellery.
Succession planning is where people lay the foundations for what is to be done with their belongings when they pass away. Almost everything that a person could own can be accounted for: the family home, antiques, photographs, family keepsakes and even pets. Items that an individual accumulates over the course of a lifetime are normally organised and included in a will, and distributed among their surviving family members and friends.
However, thanks to advances in technology, many of the things that people use in daily life are online. Bank account details, social media passwords, email information, and even music downloaded via the internet can be owned by a person. Strange as it may seem, all of these are incredibly important but are often overlooked when people start to plan for what is to happen with their property when they die.
What Will This Guide Cover?
- An introduction to digital legacies and what is meant by digital assets
- The importance of planning what is to be done with digital assets after death
- An overview of the different areas of law that may apply to a digital legacy
- The terms and conditions that commonly apply to a deceased’s online account
- The inclusion of digital assets in a will and protecting account details
What Questions Does This Guide Answer?
- What are digital assets?
- What are the risks of not making a digital legacy?
- Which laws are relevant to digital assets and legacies?
- Can an online account be easily passed on or deactivated?
- What are the terms and conditions of commonly used online organisations?
- How should a digital legacy be created?
What Are Digital Assets?
- Digital assets are things that most people deal with almost every day. For example:
- If a person downloads music from iTunes and stores it on their computer, this music is a digital asset.
- If someone uploads pictures to Facebook or Instagram, these are digital assets.
- If a person uses online banking facilities to organise their finances, these details are a digital asset.
- If someone uses social media, the account(s) that they operate are digital assets.
For many years, digital assets were largely ignored when it came to planning for what is to be done with a deceased’s property.
There are different reasons for this, such as people simply did not attach much value to online information or they forgot that this information was still someone’s property that had to be organised.
Increasingly, people are being encouraged to make plans for what is to be done with their digital assets on their death. This is for two main reasons: this data is still deemed in law to be property which needs to be dealt with; and much of this data can contain personal and, at times, sensitive information which should be handled carefully.
What Are the Risks of Not Making a Digital Legacy?
- There are potential risks if a person does not plan for what is to happen to their digital assets:
- People often operate multiple email accounts: email accounts for work; accounts for personal use; email accounts for high street discount advertisements; email accounts for financial details. As a result, multiple usernames are often used, which are attached to different corresponding passwords. If these details are not logged and accounted for when someone passes away then it can be very difficult to gain access to these accounts.
- Individuals may have ongoing financial arrangements linked to their bank accounts, for example, magazine subscriptions or gym memberships. If the details of these accounts are not available then it will be difficult to cancel or close them down. The accounts will continue to be billed, and the funds, which could have been used elsewhere, could be drained. Charges may also accumulate if there is no money to pay the bills.
- Data that is stored online will ultimately remain there unless someone removes it. It may not be important to some people, but finding a picture online of a loved one that has passed away can be a very painful reminder of their loss. Details of social media accounts should be included in succession plans to ensure that pictures and information can be withdrawn from the internet or ‘memorialised’ in some form.
- With the ever present risk of hackers to online accounts, leaving a Twitter or Facebook account left unattended for a length of time can pose problems. A social media profile can be used by hackers to spread spam messages, generate spurious content and, in some instances, even commit crimes, for example, discriminatory statements. This can result in the memory of the deceased being tarnished because of a hacker’s actions.
Which Laws Are Relevant to Digital Assets and Legacies?
The best way of thinking about social media profiles and electronic media or music libraries is to consider them as a kind of intellectual property. No one can physically touch a profile that has been created on Facebook or Twitter, as it can only be accessed via the internet.
The same too can be said about electronic media files. They do not exist in the sense that you cannot reach out and touch them and move them from one place to another, other than through use of a computer. When someone creates these profiles or collections they tend to be specific to an individual.
Electronic media files and music downloads fall squarely into the area of intellectual property (IP). Usually, when music files are purchased online via iTunes or a similar program, it is not the song itself that is being sold, but rather a right to download, store and use the song. This will vary according to the organisation in question, but licenses are very much a part of IP law. Therefore, as with most aspects of IP law, licenses are specific to an individual. Problems arise when the person who they relate or belong to passes away. This is why a plan should be put in place which details what should happen to those licenses.
Online bank accounts are slightly different. Although they cannot be physically touched and can only be accessed online from the use of passwords and usernames, they are normally only made available to customers of a bank as part of a contract. This is why they fall under contract law not IP law. In practice, it makes little difference how bank accounts are viewed, as they are particular to an individual. A plan should be made detailing what is to happen to these accounts when the person who uses them passes away.
Can an Online Account Be Easily Passed on or Deactivated?
Having a digital profile of any kind (for example, Twitter, Facebook, Instagram or Flickr) is a bit like buying a product or service. In signing up to use the resource, individuals are agreeing to terms and conditions. The difficulty is that many companies have very strict terms and conditions when it comes to passing on usernames and passwords. Most organisations will not provide anyone but the owner of the account with passwords and usernames, even those who have genuine concerns regarding a deceased’s online account. This is why it is incredibly important that this information is documented and kept in a safe place.
What Are the Terms and Conditions of Commonly Used Online Organisations?
Listed below are the practices of some of the most commonly used organisations when dealing with an account belonging to someone who has passed away.
Unlike Facebook, which is a free service, music which is purchased and stored on Apple’s iTunes is a service which is paid for. Generally speaking, this kind of data or digital asset can be passed on to a successor or heir, but different organisations have different rules. Apple will technically only licence the right to use music to an individual that has purchased a song via iTunes. However, Apple operates a service where this licence can be transferred upon receipt of proof of death and entitlement to the deceased’s assets.
Instagram makes very clear in its terms and conditions, specifically its privacy statement, how it deals with accounts of people who have passed away. It asks that relatives of the deceased get in contact with the company via email to request that the account is deactivated. Similar to Facebook, all of the communication will likely take place via email. Instagram will need proof of death, for example, a death certificate, before it deactivates the account.
Twitter has a very similar practice to that of Apple when it comes to dealing with users’ accounts. As a matter of company policy, Twitter will not share details that will allow access to a user’s account – regardless of whether it is a close family member or not. However, it will accept requests to terminate the account. It will require proof of death along with other information specific to the account. This is listed on its website and includes:
- The username of the deceased account holder
- A statement detailing the relationship between the deceased and the person seeking the account’s deactivation
- Details that identify an account as being that of the deceased
- A copy of the deceased’s obituary
Google operates a policy where relatives or friends of a deceased account holder can contact them with details of the deceased and evidence of their death, and request to access an account to delete or alter it. However, Google does not guarantee that every request will be honoured but does stress that every request will be carefully reviewed.
Google has taken a very pragmatic approach to dealing with user accounts: it encourages users to engage in forward planning. In April 2013 it launched an ‘inactive account manager’ which allows users to tell Google what is to be done with their account after it has been left inactive for a period of time.
Yahoo does not accept requests to access users’ accounts. Yahoo operates a policy where those wanting to terminate a deceased person’s account must provide the deceased’s unique Yahoo ID. They must also have evidence that they have been authorised to act as the representative of the deceased. This should be accompanied by a death certificate.
PayPal, like Google, has also taken a fairly pragmatic approach to dealing with accounts of people who have passed away. If someone wants to cancel a PayPal account of the deceased, it is the executor or administrator of a person’s estate who needs to organise this – not family or friends of the deceased.
To close an account, PayPal requires the executor to provide the following:
- Details of the deceased and a request from the executor for the account to be closed.
- A copy of the death certificate.
- Legal evidence (for example, the will) that proves the executor is who they claim to be.
- A photograph of the executor.
How Should a Digital Legacy Be Created?
When planning for the future and what is to be done with a person’s assets, it is best to speak to a solicitor to decide how the digital assets should be organised. Planning for what is to happen when someone passes on is not new. However, including digital assets in a will is something that many people are, understandably, still getting used to. When making a will, it is best to include the details of all assets – physical and digital – to ensure they are accounted for.
As mentioned earlier, many digital assets require usernames and passwords before they can be accessed. It is not advisable to include these details in a will. This is because a will is a legal and public document that should not contain sensitive details like how to log in to a bank account or social media profile. This information should also not be stored on a computer or left in a family member’s home as it will be vulnerable to hacking and theft, which could cause a great deal of distress for the deceased’s family.
It would, however, be useful if these details could be given to someone who can be trusted, for example, the solicitor who is preparing the will. A database could then be attached to the will, which details the services used and the relevant information related to them. This information will only be divulged on death. This will ensure the relative safety of important information, and make it is easily accessible when needed.
It is always advisable to mention email accounts, bank accounts, social media profiles or even music libraries in a will, regardless of how trivial they may be. The account can then either be deactivated or passed on to the relevant person when the account holder dies.
- A digital legacy is the online information and assets we leave behind when we die
- Examples of digital assets and data include legally downloaded music, pictures uploaded to social media and online banking facilities
- It is possible to decide how virtual accounts and online property will be accessed, managed or distributed when we die by providing for them in a will
- Digital legacies can cover many different areas of law, in particular, succession, intellectual property and contract
- When music files are purchased online, it is not usually the song itself that is being sold but a license to download, store and use it
- Online organisations have different procedures for allowing another person to access or delete a deceased’s online profile or assets
Your digital content is an extension of both your life and your personality. Whether it’s your emails, your music playlists, stream account, online cooking or fitness blogs, podcasts, Facebook wall, Instagram feed.
Separately, perhaps, these appear too trivial to bother detailing in your succession plan. Together however, these digital fragments constitute more of people’s estates than you may think. Although not many people have considered their digital Estate, there are several reasons to begin considering what will become of, and who will deal with, your digital Estate.
The sentiment of passing down photographs or keepsakes has not been lost, but merely converted in this digital era. Nowadays, people’s computers, smartphones and tablet devices are more than just a gateway to the Internet – now they are a storage facility for your digital and online content – memories of your life. Photos, videos, blog and online journal posts, email messages, cloud storage, tweets, podcasts: all forming part of your cyber footprint.
Although these aren’t just worth considering for purely sentimental reasons – digital assets such as your PayPal or eBay accounts, perhaps your online businesses, your website, as well as some social media pages that generate income – all these form part of your financial portfolio, and a lot of the time these are accompanied by intellectual property such as Registered Trademarks.
Even purely from a privacy standpoint, it is increasingly important to consider how to manage and preserve your digital assets, due to the rapid evolvement of technological changes within the digital world: it is easier now than ever to have an account hacked and misused, which adds only to the stress and grief of dealing with an Estate.
This situation of digital estates requires proactive steps to leave your digital legacy in capable hands – to erase sensitive information and deactivate accounts, to ensure the safety of your accounts, and to deal with assets like online businesses, as well as having the clarity of who is entitled to your digital content.
We encourage you to take some practical initial steps – identify your digital assets. Have your usernames and passwords written down, and in a secure location (keep passwords and usernames separate, if concerned for privacy), have the details for your online banking account kept in a secure location. Choose someone you trust to act as a “digital executor”, and let others know who that is. Think about how things should be handled – do you want someone to memorialise your Facebook page, allowing comments and photos, or would you prefer to deactivate it? Who gets your playlists? What would you like to happen to your blog? What will become of your Ebay store? These may seem like silly questions, but as our online and digital presence grows, so should our awareness of our digital property, and how it fits with our Estates.
I was recently at a cocktail reception when a young couple asked me about their “iPhone will”. The couple had recently taken their first trip out of the province without their young child and had intended to prepare a will in advance. However, life got in the way, and it was only when they were sitting in the airport that they remembered they had forgotten to prepare a will. Worried about their lack of succession planning, they pulled out their iPhone and drafted a basic document setting out their desires for their estate should anything happen on their trip.
Unfortunately for this young couple, this attempt at drafting a will was likely ineffective. The formalities of a valid will are set out in the Succession Law Reform Act, R.S.O. 1990 c. S.26. For a formal will to be valid, it must be in writing (s.3). Additionally, a will is not valid unless: (i) it is signed by the testator at the end of the document (or their representative); (ii) it is signed in the presence of two witnesses and (iii) the witnesses sign the will in the presence of the testator (s.4(1)).
Certain of these formalities are not necessary where a testator makes a “holograph will”. A holograph will is valid if it is made wholly by the testator’s handwriting and signature without formality and without the presence or signature of a witness (s.6). However, in this case the couple was unable to sign the will (even digitally) due to the limitations of the phone’s program.
We are not aware of any cases that have considered whether a digital signature can satisfy the signature requirements of the Succession Law Reform Act or whether digital “handwriting” can satisfy the holograph will requirements. It will be interesting to see what a Court will decide in a situation where a testator attempts to sign a will digitally.
In conclusion, while it would have been effective for this couple to quickly write (and sign) a holographic will on a napkin, their attempts were foiled by the limitations of their iPhone. While it will be necessary for the Courts of Canada to adapt to technological advancements, for now this is an area where pen and paper remains the safe choice.