By Ethan Van Vorst, Law Clerk, Pierro, Connor & Strauss
Identifying the digital property you own and managing it is more necessary than ever. From smart home devices to online investments and bank accounts, we’ve gone way beyond using the internet to email family and connect with friends on social media.
In a recent survey by Bryn Mawr Trust, Americans said they value their digital assets at an average of $119,516. Despite this, more than three-quarters of respondents said they had little to no knowledge about digital asset planning.
Today, understanding which digital information and accounts you can legally leave to your loved ones is crucial to protecting your assets, especially as laws governing these online assets continue to change. However, legally gaining access to these digital assets and encoded financial data can present challenges for anyone other than the original owner.
Our attorneys at Pierro, Connor & Strauss frequently encounter families who are hitting roadblocks because they lack the login information to banking, investments, and even social media accounts after a loved one’s death. As a result, the administration of an estate can be in limbo, on top of the grief a family may be processing.
Four main obstacles will hinder access to a family member’s vital personal data and digital assets:
- Passwords
Without knowing your passwords, personal representatives and family members may be unable to access your data, property stored on a computer, smartphone, in the cloud, or online accounts. While experts can easily bypass some passwords, others – like for cryptocurrency wallets – can be practically impossible to recover. - Encryption
Your digitally stored data often undergoes encryption for an additional layer of protection. Encryption can occur at many levels, from a single file on your device to large amounts of information stored in the cloud. In particular, smartphone technology may be difficult to decrypt, so if you have not transferred your data to an external hard drive or USB and shared it with other family members, the digital information may not be accessible. - Privacy laws
In general, federal data privacy laws, such as the Stored Communications Act (SCA), prohibit online account service providers from turning over electronic communications unless you are the owner or have the owner’s legal consent. Therefore, social media sites and digital storage companies may lock down content without legal documentation sharing the circumstances under which trusted friends or family members can access it. Taking a digital service provider to court to retrieve treasured data is generally cost-prohibitive and time consuming, so lawful consent from the owner can prove critical. - Criminal laws
State and federal laws do not allow unauthorized access to computer systems and private data. These laws protect consumers against identity theft and fraud, but they also can create enormous obstacles for loved ones who need to gain access to a decedent’s digital information and assets. If you do not give express permission to your fiduciaries, representatives, or family members in your estate plan, they may never be able to access it.
Proactive Planning: Ways to Access Digital Assets After a Death
Make a list of your digital assets and include important online accounts (social media, banking, bill pay), passwords, and digital property, including cryptocurrency, money transfer apps, and domain names. Store this list in a secure place and maintain its accuracy. On your social media accounts and smartphone, you should also consider setting up legacy contacts.
Many digital assets you think you own, you may not. For example, we tend to carelessly accept end-user license agreements (EULAs) without understanding that a “purchased” item is a nontransferable license to use, but not own, the asset. If you use software of virtually any sort, from PayPal and Instagram, to Google apps, Netflix, Kindle and beyond, your loved ones will not automatically have a right to those accounts after your death.
If you store data in the cloud, it is wise to back it up in another location. Secure online safe deposit boxes or digital vaults tied to your banking institution store identification, legal documents, business contracts, finance, tax, and insurance information. By adding emergency contacts, you can generally make it easier for those individuals to access your documents after your death.
You may also want to scan electronic copies of paper records to store on an external hard drive and in a secure location to keep items updated and permit fiduciary, representative, and family access with fewer obstacles. Relying only on the cloud for backup can create future problems.
Consult With Your Estate Planning Attorney
As you create your estate plan, consider it essential to account for your digital property. Our online lives have become pervasive, and laws regarding our digital properties and their inheritable promise continue to evolve.
You may have more digital assets than you think. Aside from social media, banking, and other common types of digital assets, remember to include any:
- Digital videos and photos
- Digital rights to theatrical works, motion pictures, musical, and literary compositions
- Blog content
- Income-producing websites and their domain names
- Virtual currency, including cryptocurrency like Bitcoin or loyalty points you may have earned through different retailers, airlines, or hotels
- Non-fungible tokens (NFTs)
- Online video channels that monetize content and produce advertising revenue
- Online gaming avatars offering services on goods online that may be worth actual money
The estate planning attorneys at Pierro, Connor & Strauss can help you understand which online assets need to be part of your plan. They also can develop the necessary legal documents that will give consent for online providers to divulge your electronic communication content to legally named individuals, including your fiduciaries, representatives, and loved ones. You may want to tailor which people have access to chosen online information rather than a blanket approval.
Consider PALMS
An online management system can be a game-changer for digital and traditional assets. Our Professional Advisors Lifetime Management System uses Inheralink technology to organize your assets – including digital ones – in a secure storage platform. You can invite whomever you wish, such as, an executor, trustee, or financial advisors, to have access to all your estate planning in one place; in essence creating a seamless management system for you in lifetime and after death – for your heirs.
Additionally, consider the advantages of using an LLC (Limited Liability Company) in your estate planning. An LLC can provide an extra layer of protection for your digital assets, allowing for smoother transitions and management of these assets after your passing. As set forth by the New York Limited Liability Company Law (NY LLCL), when any legally transferable assets are transferred to an LLC, including digital assets, the LLC becomes the legal owner. These assets can then be distributed according to the LLC’s operating agreement, which can specify who will take ownership upon the original owner’s death. It can also help in minimizing estate taxes and protecting your assets from creditors.
Of course, keep in mind that estate planning includes other important documents, such as a financial power of attorney, a health care proxy, a last will and testament, and, in some cases, a trust. Contact Pierro, Connor & Strauss at this link to begin executing a comprehensive plan that best suits your unique circumstances, including a path toward organizing your digital assets to prevent a legal mess for your heirs.
