What does your estate look like? Presumably, it includes tangible items that have monetary and possibly sentimental value—real estate, cash, a home library, artwork or the box of photographs under your bed. 

But does the estate also include items that would be impossible to stash under the bed?

By this, I mean electronic assets. Nowadays, bank records may be entirely electronic. Indeed, with the emergence of Bitcoin, currency itself sometimes exists solely in electronic form. Most correspondence is conducted through e-mail, and photographs are shared through digital albums on Facebook and Instagram, among other social networking sites. 

Our reliance on technology continues to transform our lifestyles, so our concept of what constitutes an estate must adjust with it. The modern estate almost certainly includes digital assets, such as those mentioned above, but although planning for digital assets has become a hot topic in the trusts and estates world, no truly satisfactory solution for handling such assets in an efficient and uniform manner has emerged.

One of the issues has to do with access.

Unlike a book collection or a photo album, virtually all digital assets are hidden behind user names and passwords. Many people do not save passwords. If they do keep an updated list, the information is sometimes not recorded in a way that’s readily accessible to a fiduciary when the need to access a client’s assets arises. How can a fiduciary gain access to password-protected assets? Will he or she have to rummage through a sock drawer in hopes of finding password lists? More fundamentally, will a fiduciary even be entitled to access a client’s assets when a client has either passed away or is unable to give the fiduciary authorization?

Providing Access

In looking at what will happen to clients’ digital assets after their death, it is important to distinguish between accounts such as Facebook and Instagram, which hold personal content, and accounts such as iTunes and Kindle, which hold content that, technically speaking, does not belong to the client.

Some service providers already allow users to arrange posthumous access to their accounts. Google, for example, allows users to select digital heirs or “inactive account managers” for its cloud services, including its popular e-mail service. On the Google account settings page, users can specify what should happen to their Gmail messages and data from several other Google services if their account becomes inactive for any reason. They can choose to have data deleted after three, six, nine or 12 months of inactivity, or you can select trusted contacts to receive data from Google services.

Similarly, Facebook allows users to designate a “legacy contact” to manage an account posthumously. The legacy contacts cannot log in as the account holder or view their private messages, but they can make a post on the account holder’s Facebook page, respond to friend requests, update the cover photo and profile information and archive posts. The legacy contact is also permitted to have the page deleted entirely.

Twitter will remove a deceased person’s account, but will not provide account access to the executor or any other person. 

Accounts that house e-book collections, game purchases and music and video libraries are also considered digital assets, although these are controlled by the original service provider’s end user license agreement (EULA). Under these agreements, when people click “buy” in the Kindle or Apple store, they are not purchasing content, but are instead licensing it for personal use only. Most, if not all, EULAs stipulate that any rights buyers have to the digital products may not be transferred or assigned to third parties without authorization. The end result is that, as long as heirs have access to an account, they can continue to enjoy the account holder’s content. However, there is no way for a client to legally transfer ownership of those assets to someone else.

In contrast, Bitcoins and other digital currencies are considered property and are disposable in a will or estate planning trust. The IRS says Bitcoins should not be treated as currency for tax purposes, so they will get a step-up or step-down in basis at death to the then-current market value. As with other digital assets, fiduciaries should be made aware by clients that they hold Bitcoins and be given the ability to gain access if the need arises—otherwise the currency will die with the clients. 

Legal Ambiguities

While digital services continue to grapple with posthumous access policies, there is almost no legal guidance or authority to assist executors in identifying, collecting or distributing digital assets. The laws governing access to digital assets are a jumble of federal and state laws, including privacy laws and intellectual property and copyright laws. While several states have laws that authorize fiduciary access to digital assets under certain circumstances, they are limited to specific types of assets, such as the e-mail or online accounts of deceased minors.