CHAPTER 5

11:45 – 12:15pm

Digital and Electronic Assets

Alexandra D. Gerson Helsell Fetterman LLP

PowerPoint distributed at the program and also available for download in electronic format: 1. Estate Planning for Digital Assets Electronic format only: 1. Questionnaire – Digital Assets Electronic versions of these documents are available on the KCBA website:

https://www.kcba.org/cle/EventDetails.aspx?Event=51013

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Estate Planning for Digital AssetsEstate Planning for Digital Assets

XanXan GersonGerson, J.D., J.D.

What are digital assets?What are digital assets?

Technically, digital assets are intangible personal assets formatted into a binary source. This includes all files and

information stored in any online accounts, such as email accounts, social networking sites, blogs, photo and video sharing sites,

online music, online video games, online storage accounts such as “cloud” storage, and online sales accounts. It also includes domain names and any intellectual property rights (such as

copyrights, patents, trademarks and trade secrets) associated with your digital property.

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How prevalent are digital assets?How prevalent are digital assets?

According to 2011 estimates, every 60 seconds:

• over 168,000,000 emails are sent; • over 695,000 Facebook status updates are written; • over 6,600 digital photos are added to Flickr; • about 600 digital videos are added to YouTube; • about 320 new Twitter accounts are created; • over 100 new LinkedIn accounts are created; • about 70 new Internet domain names are registered; and • over 60 new blogs are created.

Do I own my digital assets?Do I own my digital assets?

• Online accounts are governed by the Terms of Service Agreement.

• Most accounts have a license component and a property right component.– You have a license to access a social networking siteYou have a license to access a social networking site.

– You have a property right in the underlying content (emails, photos, etc.).

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Terms of Service AgreementTerms of Service Agreement

For most online accounts, the Terms of Service Agreement will state:

(1) whether the user’s account is transferable or whether it terminates at death;

(2) whether the user may allow others to access the user’s account;

(3) the consequences of breaching the terms of service agreement;(3) the consequences of breaching the terms of service agreement; and

(4) which state law governs the agreement.

Note: Terms of Service Agreements vary from company to company and change frequently, sometimes without notice.

Restrictions to AccessRestrictions to Access

• Under the Terms of Service Agreement, most (and some of the largest) online services prohibit the user from allowing anyone else to access his/her account.

• Most online services will not reveal or reset an i di id l’ d tindividual s username or password to anyone –not even a court-authorized fiduciary.

• Examples: Gmail, Facebook, Yahoo, Hotmail, Flickr, Twitter

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Restrictions on TransferRestrictions on Transfer

• Some Terms of Service Agreements explicitly state what happens to a user’s account at death…

• Yahoo says your account terminates at death and upon receipt of a death certificate will permanently delete all of the deceased-user’s content

• …while others are completely silent.

A l ’ T f S i h i i i l• Apple’s Terms of Service has a provision covering nuclear weapons, (“You also agree that you will not use these products for any purposes prohibited by United States law, including, without limitation, the development, design, manufacture, or production of nuclear, missile, or chemical or biological weapons”), but nothing specifically about the transfer of media on death. It appears that legally, for now, there is no way to transfer iTunes media at death.

Google Update!Google Update!

• Google recently rolled out new settings called “Inactive Account Manager.”

• Allows users to direct Google to send your messages and other Google data (ie: docs on Google Drive) to a specified person or delete all data after your Google account “times-out” due to inactivity (3, 6, 9 or 12 months).

• Settings transfers data in account, not account itself – still Google policy not to transfer accounts to other users.

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Can a trust own digital assets?Can a trust own digital assets?

• Whether a digital asset can be owned by a legal entity other than an individual will be governed by the Terms of Service.

• Most licenses are not assignable – meaningMost licenses are not assignable meaning you cannot assign the license to your trust after you have set up the account.

Can I set up a new account in the Can I set up a new account in the name of my trust?name of my trust?

• Most digital assets are specific to the user and (most likely) are not intended to be held in the name of an entity.

• Some services allow corporate accounts which have different access restrictions (ie: Gmail, Facebook).

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What about an LLC?What about an LLC?

• Again, this will be governed by the Terms of Service.

• Domain names are frequently held in LLCs.

What about state laws?What about state laws?

To date, only 5 states have laws that address digital assets:

– Connecticut (2005) and Rhode Island (2007) require email service providers to grant a Personal Representative access to a decedent’s email account (only), upon a written request and substantiating documents.

– Indiana (2007) grants to the Personal Representative access to or copies of any documents or information of the deceased person stored electronically.

– Oklahoma (2010) and Idaho (2011) have taken a much broader stance and passed laws giving a Personal Representative of an estate “the power, where otherwise

h i d k l f d i i fauthorized, to take control of, conduct, continue or terminate any accounts of a deceased person on any social networking website, any microblogging or short message service website, or any email service websites.”

– States with proposed legislation in 2012: Oregon and Nebraska

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Why is the identification of digital Why is the identification of digital assets important for estate planning assets important for estate planning

attorneys?attorneys?

IncapacityIncapacity DeathDeath• Continue to pay bills that arrive in paperless form

•Maintain/protect assets (ie: domain names)

•Communicate with friends & family

•Inventory of assets

•Identify creditors

•Preserve sentimental assets

•Value of assets for estate tax purposesValue of assets for estate tax purposes

•Cancel/close accounts

Inventory Digital AssetsInventory Digital Assets

*Disclaimer: Helsell Fetterman LLP is not in affiliated with any of these companies and none of these companies have endorsed or sponsored the services of Helsell Fetterman LLP.

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Digital Assets with Economic ValueDigital Assets with Economic Value

•Seller Accounts (identify potential sources of•Seller Accounts (identify potential sources of income & debts owed)

•Buyer Accounts (identify potential creditors)

•Online only bank accounts (ie: PayPal)

•Domain Names

•Online Subscriptions (identify accounts to cancel)

•Specialty Professions

•Writers: blogs with advertising revenue; unpublished manuscripts

•Photographers

Digital Assets & Intellectual PropertyDigital Assets & Intellectual Property

• Intellectual property rights may be associated with photos, music, art, computer code, domain names, webpages, and manuscripts

• Digital Assets with IP rights may have significant valuevalue

• A fiduciary will need to not only identify the digital assets with intellectual property rights, but may need to monitor and enforce such rights

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Digital Assets with Sentimental ValueDigital Assets with Sentimental Value

Ph & Vid•Photos & Videos

•Email

•Blogs / Microblogs•Blogs / Microblogs

•Social Networking

Don’t Forget the Clouds!Don’t Forget the Clouds!

As cloud-computing becomes faster and more affordable, more users will opt in to cloud-based storage for their digital assets.

This means fiduciaries will need to identify which cloud computing provider the decedent

d b i (if ibl ) i duses and obtain access (if possible) in order to locate the decedent’s digital assets.

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Planning for Digital AssetsPlanning for Digital Assets

1. Identify & inventory all your digital assets

2. Identify the person best-suited to take control of your digital assets following death or incapacity

3. Provide access information to devices and online accounts (if permitted)online accounts (if permitted)

4. Provide instructions

5. Update your estate plan (be specific!)

Planning for Digital Assets Planning for Digital Assets

• Be wary of companies which purport to assign beneficiaries and “legally transfer” digital accounts upon death.

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Advice for FiduciariesAdvice for Fiduciaries

• Important distinction: Access vs. Content.– In the case of almost every major online service,

allowing an individual to log in to someone else’s account is a violation of the Terms of Service Agreement.

• Fiduciaries should request the contents of an t f i id if thaccount from a service provider, even if they

have the username/password. In some cases, this may require a court order.

• When necessary, hire a professional to back-up and/or retrieve digital assets.

Advice for PractitionersAdvice for Practitioners

• Include language in estate planning documents specifically authorizing fiduciary to access accounts

My Personal Representative shall have the power and authorization to access, take control of, conduct, continue, or terminate my accounts on any website including but not limited to any socialaccounts on any website, including but not limited to any social networking site, photo sharing site, micro blogging or short message service website or any email service website. All such websites may release my log-on credentials, including my username and password, to my Personal Representative and the website shall be indemnified and held harmless by my estate for any damages, causes of action or claims that may result from this disclosure.

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Advice for PractitionersAdvice for Practitioners

• Add specific bequest of digital assets

Bequest of Digital Assets. I give all of my interest in any transferable digital assets to my daughter, JANE DOE, if she is then living, or if not to JOHN DOE. It is my wish that such person copy and distribute any digital assets which have sentimental value and no economic value (such as photos) to my family in the shares and manner as such person, in his or her sole discretion, deems appropriate. All reasonable expenses incurred for the copying, storage, and delivery of any digital assets in order to satisfy this bequest shall be paid from the estate as an administrative expense.

• Add definition

Digital Assets. The term “digital assets” shall refer, without limitation, to the files and information stored and used on smartphones, computers, external hard drives, flash drives; online accounts (such as email, social networking, blogs, photo and video sharing accounts, music accounts, online video games, online storage accounts, and online sales accounts); domain names; and any intellectual property rights associated with the foregoing, such as copyrights, patents, trademarks, and trade secrets, to the extent such assets are transferable.

QUESTIONS?QUESTIONS?

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DigitalAudit:Passwords&DigitalProperty

Voicemail&HomeSecuritySystems

Name:Telephone#:Voicemail#&Password:SecurityCompany&Phone#:SecuritySystemPassword:VacationHomeAddress:Telephone#:Voicemail#&Password:SecurityCompany&Phone#:SecuritySystemPassword:BusinessAddress:Telephone#:Voicemail#&Password:PersonalCellPhone#&Password:Voicemail#&Password:BusinessCellPhone#&Password:Voicemail#&Password:Safe/lockboxlocation&combination:Safe/lockboxlocation&combination:Other:

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ComputerPasswords

Homecomputer#1description:Username&Password:Username&Password:Username&Password:Username&Password:Homecomputer#2description:Username&Password:Username&Password:Username&Password:Username&Password:Homecomputer#3description:Username&Password:Username&Password:Username&Password:Username&Password:Officecomputer#1description:Username&Password:Officecomputer#2description:Username&Password:Other:

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EmailAccounts

EmailProvider EmailAddress Password

HomeEmail:WorkEmail:Hotmail:Yahoo:GoogleGmail:Other:

SocialNetworkingAccountsService Username Password

Facebook:LinkedIn:Google :MySpace:Twitter:Other:

InstantMessaging,Chat,VideoconferenceAccounts

Service Username Password

Skype:AOLInstantMessenger:Microsoft Windows LiveMessenger:Yahoo!Messenger:ICQ:GoogleTalk:Jabber:Other:

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FinancialAccounts

IntuitQuicken SoftwarePassword:MicrosoftMoneySoftwarePassword:Mint.comUsername&Password:Bundle.comUsername&Password:TaxPreparationSoftwarePassword:Bank#1Name&WebAddress:Username&Password:ATM/DebitCardPIN:ATM/DebitCardPIN:Bank#2Name&WebAddress:Username&Password:ATM/DebitCardPIN:ATM/DebitCardPIN:Brokerage#1Name&WebAddress:Username&Password:ATM/DebitCardPIN:ATM/DebitCardPIN:Brokerage#2Name&WebAddress:Username&Password:ATM/DebitCardPIN:ATM/DebitCardPIN:CreditCard#1Name&WebAddress:Username&Password:PIN:CreditCard#2Name&WebAddress:Username&Password:PIN:

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CreditCard#3Name&WebAddress:Username&Password:PIN:CreditCard#4Name&WebAddress:Username&Password:PIN:Other:

DomainNames,WebPages,Blogs

DomainName/Registrar/Host Username Password

OnlineStorageAccounts

Website Username Password

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OnlineShopping/AuctionAccounts

Website Username PasswordAmazon:Barnes&Noble:Craigslist:Ebay:PayPal:WesternUnion:Other:

Videogames&VirtualWorlds

Website Username Password

IntellectualProperty

Website/Location Username Password

Flickr:Photobucket:SmugMug:YouTube:Vimeo:Other:

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OtherOnlineAccounts

Website Username Password