Law Tips: Estate Planning Does Not Include Just Grandma’s Cameo Brooch Anymore

Digital assets are working their way into everyone’s life…and afterlife…like it or not! Our estate law faculty member, Professor Gerry Beyer, advises that: “Estate planning attorneys need to comprehend fully that this is not a trivial consideration and that it is a developing area of law.” Gerry Beyer, Professor of Law at Texas Tech University School of Law, has timely information for Law Tips readers on the digital assets that are probably already in your clients’ possession:

For hundreds of years, we have viewed personal property as falling into two major categories – tangible (items you can see or hold) and intangible (items that lack physicality). Recently, a new subdivision of personal property has emerged that many label as “digital assets.” There is no real consensus about the property category in which digital assets belong. Some experts say they are intellectual property, some say they are intangible property, and others say they can easily be transformed from one form of personal property to another with the click of a “print” button. See Scott Zucker, Digital Assets: Estate Planning for Online Accounts Becoming Essential (Part II), The Zucker Law Firm PLLC (Dec. 16, 2010). In actuality, some accounts that we consider “assets” are simply licenses to use a website’s service that generally expire upon death. See Steven Maimes, Understand and Manage Digital Property, The Trust Advisor Blog (Nov. 20, 2009).

Digital assets may represent a sizable portion of a client’s estate. A survey conducted by McAfee, Inc. revealed that the average perceived value of digital assets for a person living in the United States is $54,722. McAfee Reveals Average Internet User Has More Than $37.000 in Underprotected ‘Digital Assets’, McAfee.com, (Sept. 27, 2011) (the $37,000 figure is the global average).

While estate planners have perfected techniques used to transfer types of property that have been around for a long time, most estate planners have not figured out how to address the disposition of digital assets. It is important to understand digital assets and to incorporate the disposition of them into clients’ estate plans.

What are digital assets:

The term “digital asset” does not have a well established definition as the pace of technology is faster than the law can adapt. One of the best definitions is found in a proposed Oregon statute:

“Digital assets” means text, images, multimedia information, or personal property stored in a digital format, whether stored on a server, computer, or other electronic device which currently exists or may exist as technology develops, and regardless of the ownership of the physical device upon which the digital asset is stored. Digital assets include, without limitation, any words, characters, codes, or contractual rights necessary to access the digital assets.

Digital Assets Legislative Proposal, OREGON STATE BAR (May 9, 2012).

Digital assets can be classified in numerous different ways, and the types of property and accounts are constantly changing. People may accumulate different categories of digital assets: personal, social media, financial, and business. The individual may also have a license or property ownership interest in the asset. See Laura Hoexter and Alexandra Gerson, Who Inherits My Facebook? Estate Planning or Digital Assets (June 25, 2012). Although there is some overlap, of course, clients may need to make different plans for each.

Personal

The first category includes personal assets stored on a computer or smart phone, or uploaded onto a web site such as Flickr or Shutterfly. These can include treasured photographs or videos, e-mails, or even play lists. Photo albums can be stored on an individual’s hard drive or created through an on-line system. (They also can be created through social media, as discussed below.) People can store medical records and tax documents for themselves or family members. The list of what a client’s computers can hold is, almost literally, infinite. Each of these assets requires different means of access – separate passwords.

Social Media

Social media assets involve interactions with other people on websites, Facebook, MySpace, Linkedln, and Twitter, as well as e-mail accounts. These sites are used not only for messaging and social interaction, but they also can serve as storage for photos, videos, and other electronic files.

Financial Accounts

Though some bank and investment accounts have no connection to brick-and-mortar buildings, most retain some connection to a physical space. They are, however, increasingly designed to be accessed via the Internet with few paper records or monthly statements. For example, an individual can maintain an Amazon.com account, be registered with PayPal, Bitcoin, or other financial sites, have an e-Bay account, and subscribe to magazines and other media providers. Many people make extensive arrangements to pay bills online such as income taxes, mortgages, car loans, credit cards, cell phone and trash disposal.

Business Accounts

An individual engaged in any type of commercial practice is likely to store some information on computers. Businesses collect data such as customer orders and preferences, home and shipping addresses, credit card data, bank account numbers, and even personal information such as birth dates and the names of family members and friends. Physicians store patient information. eBay sellers have an established presence and reputation. Lawyers might store client files or use a Dropbox.com-type service that allows a legal team spread across the United States to access litigation documents through shared folders.

Domain Names or Blogs

A domain name or blog can be valuable, yet access and renewal may only be possible through a password or e-mail.

Loyalty Program Benefits

In today’s highly competitive business environment, there are numerous options for customers to make the most of their travel and spending habits. Airlines have created programs in which frequent flyers accumulate “miles” or “points” they may use towards free or discounted trips. Some credit card companies offer users an opportunity to earn “cash back” on their purchases or accumulate “points” which the cardholder may then use for discounted merchandise, travel, or services. Retail stores often allow shoppers to accumulate benefits including discounts and credit vouchers. Some members of these programs accumulate a staggering amount of points or miles and then die without having “spent” them. For example, there are reports that “members of frequent-flyer programs are holding at least 3.5 trillion in unused miles.” Managing Your Frequent-Flyer Miles (last visited Oct. 21, 20 12). See also Becky Yerak, Online Accounts After Death: Remember Digital Property When Listing Assets, CHICAGO TRIB., Aug. 26, 2012.

The rules of the loyalty program to which the client belongs plays the key role in determining whether the accrued points may be transferred.

Other Digital Assets

Your client may own or control virtually endless other types of digital assets. For example, your client may own valuable “money,” avatars, or virtual property in online games such as World of Warcraft or Second Life.

Yes, complications surround planning for digital assets, but all clients need to understand the ramifications of failing to do so. Cases will arise regarding terms of service agreements, rights of beneficiaries, and the success of online afterlife management companies. Until the courts and legislatures clarify the law, estate planners need to be especially mindful in planning for these frequently overlooked assets.

I thank Professor Beyer for providing this overview of the developing world of digital assets and their importance in estate planning.

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About our Law Tips faculty participant:
Prof. Gerry W. Beyer is the Governor Preston E. Smith Regents Professor of Law at Texas Tech University School of Law, Lubbock, TX. He joined the faculty at Texas Tech in June 2005. Previously, Prof. Beyer taught at St. Mary’s University and has served as a visiting professor at several other law schools. He was also the recipient of the 2012-2013 Outstanding Researcher Award from the Texas Tech School of Law. As a state and nationally recognized expert in estate planning, Prof. Beyer is a highly sought after lecturer. He has authored and co-authored numerous books and articles focusing on various aspects of estate planning, including a two volume treatise on Texas wills law, an estate planning casebook, and the Wills, Trusts, and Estates volume of the Examples & Explanationsseries. Professor Beyer received his J.D. from the Ohio State University and his LL.M. and J.S.D. degrees from the University of Illinois.

About our Law Tips blogger:
Nancy Hurley has long-standing connections with Indiana lawyers. She was formerly a member of the ISBA and IBF staffs for over 30 years. Nancy’s latest lifestyle venture is with ICLEF. We are utilizing her exceptional writing and interviewing skills while exploring how her Indiana-lawyer background fits with ICLEF’s needs. When she isn’t ferreting out new topics for Law Tips, her work can be found in our Speaker Spotlight blogs, postings on the ICLEF Facebook and Twitter pages, and other places her legal experience lends itself.

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