The practice of protecting assets is reaching into the digital domain, with many estate-planning lawyers helping clients make plans for their online property.
Although many of these assets, such as online businesses, could be valuable, others, such as a trove of family photographs, may have only sentimental value.
“Like any other assets, digital assets should be planned ahead for because you have to know where to find them and what to do with them,” said James Lamm, an estate-planning attorney at Gray Plant Moody.
When someone dies, usually the heirs or the executor go to a house to look through paper records and watch the mail for bills and account statements. But the only way to find digital assets may be by going through password-protected digital correspondence, such as e-mail, or websites that are encrypted.
The standards of practice for estate planning don't offer formal and widely accepted guidelines for digital assets, but over the next 10 to 15 years, that is likely to change as litigation increases, experts said.
Five states — Connecticut, Idaho, Nebraska, Oklahoma and Rhode Island — already have laws in place regarding beneficiaries and digital assets. For example, Connecticut requires electronic-mail service providers to give an executor or administrator of an estate access to the contents of a deceased person's e-mail, or copies of the e-mails, if that person lived in the state at the time of their death.
THREE TASKS
For now, estate-planning lawyers focus on helping clients with three major tasks: taking inventory of their digital property, determining what they would like to happen with these assets and crafting documents to give an executor access to the accounts so that the assets land in the right hands.
“It's easy for your digital assets to be forgotten, and things of real value can potentially be lost,” said Evan Carroll, an information technology specialist and co-author of “Your Digital Afterlife: When Facebook, Flickr and Twitter are Your Estate, What's Your Legacy?” (New Riders, 2010).
Items that might be stored on a computer or online storage site include unpublished novels, poems, photographs or music that may have value as intellectual property. Online income sources may include advertising revenue from a website, revenue from selling things through Etsy or eBay, or a royalty stream from a digital work of art.
In addition to digital property with monetary value, passing down digital items such as photographs or blog writings that carry sentimental value can be just as important to people when preparing estate plans.
PERSONAL ITEMS
“Personal photographs and memories aren't sitting in a shoebox in your closet anymore,” Mr. Carroll said. “Now many are stored online anywhere and everywhere.”
To ensure that their wishes are carried out, individuals have a responsibility to make it as easy as possible for their heirs to locate their assets, he said.
In a digital-asset-planning success story, blogger Derek Miller arranged to have his 10-year-old blog archived after he was diagnosed with cancer. Tens of thousands of people have now read his “Last Post” on penmachine.com since his death May 3, 2011, and his years of writings are a permanent online legacy for his wife and two daughters.
Firms that store writings, e-mail or photographs online, as well as social-media sites such as Facebook, LinkedIn and Twitter, all have their own procedures for what they allow to be passed on to others when an account holder dies.
For instance, Facebook allows an account to be deleted or memorialized, while Yahoo won't divulge information to anyone, and it has been taken to court over the issue.
There are firms offering software that can help people keep track of the accounts and passwords, such as Entrustet, Legacy Locker Inc. and SecureSafe by DSwiss Ltd.
It's easier for heirs to gain access to digital assets if the deceased person has set up a power of attorney for digital assets, or what some call a digital executor, said independent estate attorney and financial planner Scott R. Zucker.
Incorporating digital assets into an estate plan usually isn't expensive, because it typically requires just a few extra clauses as part of traditional planning, he said.
Younger clients, who are especially technologically savvy and depend more on online storage accounts, are especially interested in planning for their digital remains. Getting people to think about their digital assets as property worth protecting may be the greatest challenge.
A survey released last month of 2,009 North Americans over 45 found that most people think that it is important to plan for their personal and financial digital assets, yet 57% haven't set up the provisions in their estate plans. Half of those who haven't included digital assets in their estate plan didn't think to do it, while 37% said that they don't think it is necessary, according to the survey, conducted by BMO Financial Group.
EMERGING TRENDS
“When we think of estate planning, it's often focused around the more traditional aspects, such as leaving money for the children or to charities,” said Tina Di Vito, director of retirement strategies for BMO Financial.
“We need to start incorporating emerging trends, such as advancements in technology,” in order to keep the burden on loved ones to a minimum, she said.
