The essence of estate planning is the control over how your property passes at death. This principle remains the tried and true guidepost of estate planning. In today's digital world, an estate plan deals less with the boxes of Kodak memories tucked away in the basement and more with the pictures captured on an iPhone and stored in the cloud. Although the talisman of estate planning remains the same, the increasing prevalence of digital assets requires careful planning to ensure that your memories, emotions, and sentiments are preserved in accordance with your wishes.
The increasing role of the digital estate presents unique challenges for estate planners. Intuitively, digital assets seem rather simple to deal with at death: write down all your passwords and the estate administrator can log-in and access your digital assets. Unfortunately, it is not so simple. The modern problem of preserving the digital love letters sent through email, family pictures of the trip to Europe stored in the cloud, tweets or Facebook posts and blog posts are that your property is stored at a third party’s location. Stated differently, digital assets are the equivalent of your grandfather owning a 1974 Ford Falcon XB that he stored in a desolate warehouse 500 miles away which he forgot to include in his will!
The suggestion that the average American possesses a classic car’s worth of digital information on their iCloud account seems like an overstatement. At first blush, this sentiment makes sense—the cloud is confusing! Looking a bit closer, a 2011 study by McAfee indicates otherwise. McAfee suggests that the average internet user values their digital assets at $37,438 and the average American values their digital assets at $55,000. To place these numbers into perspective, a 1974 Ford Falcon XB costs roughly $35,000. These numbers illuminate the immense value that Americans place on their pictures, love letters, tweets, blogs, vlogs and Facebook posts in defining their familial and personal legacy. Just as much as your grandfather would bequeath a 1974 Ford Falcon XB, so too should modern estate planners plan the bequeath of digital assets to preserve a legacy.
Far too often estate plans fail to account for digital assets. In 2016, the Ohio General Assembly adopted the Uniform Fiduciary Access to Digital Assets Act (“Act”). Here, the Act lays the default rules that govern digital assets at death. These rules apply when a will is silent regarding digital assets. Generally, the Act is designed to reflect the average person’s wishes as to digital property at death. With that being said, the Act’s rules may not be favorable for how you want your digital assets treated in honor of privacy, protecting a legacy or fulfilling an overall estate plan.
The Act grants complete discretion to trustees to control access to your digital assets. Effectively, a trustee maintains complete control over your digitized financial statements, pictures, writings, videos, and the like. The trustee may disclose these files to individuals that you didn’t want to see this private information. Defaulting to the rules of intestacy for digital assets can create problems for your estate beyond an invasion of privacy—it could tarnish the legacy you sought to leave or expose information that you sought to keep private.
As the world digitalizes and most documents are delivered in an electronic format, estate planning must account for your digital property. Gone are the days when most of someone’s property existed within the four walls of their home. Now, we maintain significant amounts of private, personal, financial and familial property on third-party systems. The storage of your digital assets on a third-party’s system creates a risk that the third party, as owner of the account, may close the account and permanently erase the files! As a result, all of your photos, emails and other documents saved in the cloud are irreversibly lost. To prevent this outcome, estate plans should account for digital assets.
Digital assets are not exactly the same as tangible assets. Largely, third party systems are controlled by terms and conditions agreements. Generally, these agreements stipulate that users maintain an ownership interest in the information on the platform, but the user has no property interest in the account. For example, Apple owns your iCloud account, Facebook owns your profile, Dropbox owns your box and Microsoft owns your OneDrive. This is problematic because these accounts will not continue in perpetuity. Notwithstanding this setup, you maintain a property interest in all the information held on the site. However, at death, the companies maintain policies on how long the information is retained on their platform. Estate plans that fail to account for digital assets are at risk of destruction of the digital assets under the policy’s terms.
The ties that bind digital assets in estate planning are the emotional, sentimental and continuation of a legacy after death. As an increasing amount of property is stored on third party platforms, families run risks of losing important pieces of their history. Adequately preparing for the disposition of digital assets after death ensures that your family legacy can be preserved according to your wishes.
Should you have any questions or would like further clarification on this or other estate planning matters, reach out to Mansour Gavin’s Estate Planning & Probate group or contact us today.