Digital Assets Often Forgotten During Estate Planning

Digital assetsAs Lake Forest, Ill., economist Mike Moebs planned for his marriage last year, his lawyer pressed him for a complete list of assets.

Initially, the frequent-flier miles detailed in his online travel records didn?t even cross Moebs? mind until his family law attorney recognized the value of an asset Moebs largely manages online.

?We gave a lot of thought to the things that I own,? said the chief executive of Moebs Services. ?I?ve flown, just on American Airlines, more than 3 million miles, and I have a half a million miles I haven?t used.?

To prepare for the worst, Moebs also has created an inventory of user names, passwords and answers to security questions for more than 50 accounts, including online bank and investment records, and billing setups for credit cards and phone bills. His family and close business colleagues can access them if he dies prematurely or is incapacitated.

Indeed, family heirlooms and records aren?t what they used to be. Nowadays everything from photos and music to financial statements and tax documents are increasingly likely to be created, stored or accessed via computers, mobile phones or other devices. ?I?m revamping my personal and business trusts to include all digital assets and what I want done with them,? Moebs said.

He appears to be far ahead of the curve. Estate planners, lawyers and surveys indicate that few people have begun revising their family and estate plans to keep pace with the new reality of digital assets and online accounts.

In a recent survey by BMO Retirement Institute, more than half of survey respondents age 45 and older with digital property believe it?s very or somewhat important to put plans in place for their personal and financial online assets, yet 57 percent of them haven?t made such provisions.

When asked why they?ve failed to do so, the two most common answers, overwhelmingly, were ?didn?t think of it? and ?I don?t think it?s necessary.?

Chicago lawyer Richard Magnone suggests a reason: ?People don?t think of digital assets in the same way as tangible assets.?

Yet in an increasingly paperless world, not accounting for passwords and other online records could leave already grieving loved ones or business associates unable to access accounts promptly, keep finances current or continue to run a business.

And unless such provisions are made, some email providers might deny family members access to the deceased?s accounts, often a doorway to other online assets.

Take Yahoo?s terms of service, found under a link on its home page. At nearly the end of its eight pages, there?s a reference to ?no right of survivorship and non-transferability.?

Digital asset case law is scant, but in one of the earliest court fights over such property, a Michigan court ordered Yahoo to turn over the contents of Justin Ellsworth?s account in 2005 after the Marine was killed in action and his family sought to get access to his emails.

Several states have passed laws addressing various digital concerns, but the legislation varies greatly. As a result, the Uniform Law Commission, also known as the National Conference of Commissioners on Uniform State Laws, has a committee that is drafting recommendations for state legislatures to enact concerning the rights of a fiduciary to manage and distribute digital assets, copy or delete digital assets and access digital assets.

A fiduciary who is administering an estate or the affairs of an incapacitated individual needs to be able to find, access, value, protect and transfer the individual?s online accounts and digital property, the commission said. Because of the need to protect against fraud and identity theft, in recent years it has become increasingly difficult for fiduciaries to get access to digital information promptly and efficiently, the commission said.

In 2007, Indiana declared that electronic documents are to be considered estate property. The law requires a person who electronically stores documents or information of another person who is deceased to give the personal representative of that estate access to or copies of the stored documents or information.

?It?s time we realized so many important documents in a person?s life are now stored electronically,? one Indiana state senator said at the time. ?The old-fashioned paper trail has given way to computer files, the rights of which must be protected just the same as you would seek to protect personal property.?

The Indiana law prohibits a custodian from destroying or disposing of the documents or information of a deceased person for two years after the custodian receives either a request for access to the electronically stored documents or information from the personal representative, or a court order.

Gerry Beyer, a Texas Tech University law professor who writes about estate-planning issues, said even if a person gives a power of attorney to an agent to access their digital assets, that doesn?t mean that the bank, social media site or email service will accept that authority. It might take a court-appointed guardian to get access to the records, he said. One reason: The agent?s authority typically ends when the person whose records are being sought dies, he said.

Moebs, whose name is pronounced ?Mebz,? traces his move to go digital to 2003. That year, the Lake Forest home that he was living in sustained major flood damage, and century-old family photographs were destroyed.

?This is never going to happen again,? Moebs said he promised himself.

In recent years, he has digitized many of his photographs and an album collection that includes a 78 RPM by Enrico Caruso that he inherited from his father, a 78 RPM ?Invitation to the Dance: Strauss Waltzes? by Al Goodman & His Orchestra, Pete Fountain & Al Hirt?s ?New Orleans Jazz,? Janis Joplin?s ?Pearl? and Mario Lanza?s ?Student Prince.?

His Outlook has about 100,000 emails, including thousands of ?love emails? that he and his wife, Valerie, sent to each over the past eight years. They were married last year.

He said that his wife and key colleagues at his 10-employee business know how to get access to his Outlook account in case of an emergency.

His two ?right hand? employees and his wife have the information they need to access digital assets, pay suppliers and contact customers.

?The three of them need each other, if something should happen to me,? he said. ?Valerie would own the digital assets of the business, and my two employees would be able to use the information off the digitized assets, mainly the data? needed to continue running the business.

But Moebs said there are inherent risks in converting to the latest technology.

?You need to stay on top of it and make sure the latest technology can read it,? he said.

For example, he and his former business partner had collected 60,000 names of people who had attended more than 2,000 seminars and speeches.

?That?s invaluable,? he said.

?We had it on 5 1/4 (inch) floppy disks,? Moebs said. His former business partner assured him that it had been transferred to the latest technology; it wasn?t. ?We?ve tried to retrieve it from the 5 1/4 and we can?t. You can get people to do it, but they?re expensive.?


BMO Retirement Institute recently named the accumulation of intangible, digital property as an emerging estate planning issue. Lack of planning could mean that next of kin or business partners can end up frustrated and scrambling to access online records.

Cyberspace assets that people might want to consider in their family and estate planning include online bank and investment accounts; online bill payment for credit cards, phones and utilities; online store accounts; email; such loyalty programs as frequent-flier miles and grocery store points; Facebook, Twitter and other social media accounts; iTunes and other entertainment accounts; personal or work websites or blogs; spreadsheets; and address books and calendars.

For people wanting to make more formal estate plans for their online assets and accounts, including passwords, a trust is a more desirable document than a will, which can become public in the probate process, Gerry Beyer, a Texas Tech University law professor, wrote in a recent American Bar Association article.

Source: MCT Information Services