Recently, I represented the parents of a young woman who had died suddenly, without a Will. After her parents were appointed as Personal Representatives of her estate, they started the search for her assets. She was a successful website designer, doing well financially, but her parents could find no bank or investment statements or bills. Their daughter had gone “paperless”. Luckily, her parents could access her e-mail account, where they found notices about overdue payments and online statements. But without usernames and passwords, locating, accessing and dealing with her online accounts was difficult. What should have been a simple estate turned into a two year ordeal.
What are digital assets and who owns them? Clearly, the daughter owned the funds in her bank and investment accounts. Schedule B of the daughter’s most recent income tax return and the form 1099’s gave us the names of the banks and investment companies and in some cases, account numbers. Without paper statements, it took almost two years to locate and close all of the accounts. The daughter’s business website, which she had copyrighted, clearly belonged to her. Her business partner was struggling to keep the business going, so her parents assigned the copyright to her, as well as the right to use the LinkedIn and Twitteraccounts set up by their daughter. These were valuable resources because most of the contacts and followers were customers. Facebook gave the parents two options. They could take the site down or they could convert it to a memorial site. They required a death certificate, proof that the parents had been appointed as Personal Representatives of the estate, and several forms of personal identification. They opted to close down the site. With similar documentation, they closed her Itunes and Amazon Kindle accounts, which were linked to the daughter’s credit card. They learned that the content (the music and books) that their daughter had purchased did not belong to her. She only had the limited right to use the content on devices owned by her.
What is the value of digital assets? This became an issue when the appraiser was preparing a valuation of the daughter’s business, needed to prepare the Massachusetts estate tax return. The value of the daughter’s Boston condominium and investments exceeded the Massachusetts estate tax exemption of $1,000,000 (see the Estate & Gift Taxes page.) Her interest in the business, which she had started with her own funds, was part of her taxable estate. Her parents could have insisted that the business partner pay for their daughter’s interest in the business, the assignment of the website copyright, and the right to use the LinkedIn and Twitter accounts, but they didn’t. Without a sales price, the appraiser based his valuation on the past and anticipated future earnings.
How Should I Manage My Digital Assets? Your digital assets have value, like your jewelry or your car. So treat them accordingly. When appropriate, I include language in Powers of Attorney, Wills, and Trusts, to give the “attorney-in-fact”, the Personal Representative of an estate, and the Trustee of a Trust the legal authority to manage your digital assets in the event of incapacity or death. But these provisions have limited value if the individuals you have chosen to manage your assets do not have usernames, passwords, and security questions and answers. One low tech and easy solution to this problem is to keep a written record of all website addresses, usernames, and passwords for your online accounts and sites. Another solution is using an online site that offers a “vault” in which you store this information, as long as you give at least one person the usernames and passwords needed to access the vault. Think carefully about who that person should be. A friend may be a better choice than your parents. Acting as attorney-in-fact, Personal Representative or Trustee is a lot of work. Don’t make it more difficult.