Increasingly, Americans conduct their lives online. Bank, brokerage, credit card, and utilities statements arrive by email. Recurring expenses are paid automatically without any human action required; we pay other bills with a few clicks and keystrokes. Family photos gather in virtual albums on smartphones and photo sharing websites. We file our tax returns electronically; we may not even keep hard copies. The more tech-savvy folks may even have e-commerce businesses, own the rights to domain names, and write blogs. Whether an individual’s online activities have independent financial value or are merely the means of accessing hard assets of financial value, this phenomenon has far-reaching implications for estate planning and administration, and as technology advances, the number of individuals affected by this dilemma can only increase.
When someone dies, an administrative process starts into motion. Information must be gathered: Was there a will? Were there any outstanding debts? What kind of assets did the decedent own, where are they, and what are they worth? Are there ongoing costs associated with maintaining the assets? Where can the beneficiaries be reached? Will there be any tax due? The traditional approach for handling an estate administration involved sorting through paper files in the decedent’s home and office and waiting for the postman to bring the mail. The bills and bank statements would arrive in due course and, eventually, bring answers to many of these questions.
In today’s world, this traditional approach is simply no longer adequate; snail-mail will not suffice to alert fiduciaries as to where the decedent kept accounts or what outstanding bills there may be. In addition, fiduciaries have to act quickly to identify and shut down automatic payments of recurring expenses; otherwise they risk personal liability for paying creditors out of order (as well as risking an account to be overdrawn) if the estate turns out to be insolvent.
What about online photo albums, social networking accounts, email accounts, and blogs? Even if personal representatives know where to look, they cannot gain access without usernames and passwords, and many online service providers will not release passwords to anyone but the principal, even after his death. The family may lose forever a decedent’s email accounts, photos, and other digital media. If he owned a small business, he may have kept important customer, product, or payment information stored electronically, and it may be impossible to access this vital information. The business may suffer tremendous losses when pending orders go unfilled.
Online storage accounts may help: service providers will store digital data and release it according to the owner’s instructions. In this case, the fiduciary would merely need to know that the principal is a participant in the service (no passwords required). These sites usually offer state-of-the-art security, but many are hosted by start-up companies with little capital; the company may no longer be in business when you need it (www.lastwishes.com has already folded). However, Google has now caught on; it recently rolled out the “Inactive Account Manager,” which allows users to plan in advance for what should be done with their Google accounts when they become inactive (as a result of death or otherwise).
Another alternative is to keep an updated, encrypted electronic file with a list of all passwords. The complex password needed to unlock the encrypted file should be stored separately, in safe keeping. This approach creates a treasure map that will lead the fiduciaries to digital assets.
At a minimum, estate planners should be including language in documents that specifically authorize fiduciaries to access digital assets (perhaps appointing a special “online executor” to take responsibility to shut down a decedent’s email accounts, social media profiles, and blogs, or otherwise manage the decedent’s online identity); and discussing these issues with their clients so that they can plan ahead.
When someone dies who did not plan ahead for digital assets, sleuthing is necessary. Having access to the email account may provide a key to access other digital data (“lost password” tools allow for resetting passwords via email), and as a last (expensive) resort, the fiduciary can hire a data forensics expert to help. However, before accessing someone else’s digital assets, it is important to consider who has the right to view and access that data. Having the means to access information (i.e., username and password) is not the same as having the legal right to do so.
Several states recently enacted laws granting fiduciaries a right of access to digital data, and the Uniform Law Commission is working on a model act that will do the same. However, federal anti-hacking laws have a broad reach. State law can go only so far to protect fiduciaries, who at present must balance their fiduciary obligations against the risk of federal criminal sanctions.
Anne W. Coventry is a principal with the law firm of Pasternak & Fidis, P.C., in Bethesda. She practices estate planning.