Simply put, a digital asset is an electronic record. It is electronic content that exists outside the physical world and has personal value to someone. Digital content includes individual files and some online accounts. A few types of digital assets are:
Examples of Items that are not typically considered to be digital assets are music, movies, eBooks, and audio books purchased from Apple iTunes or Amazon because the Terms of Service (TOS) agreements that govern these types of assets make them nontransferable. You do not own this digital content. You only pay for a license to listen, watch, or read it during your lifetime. You cannot transfer the ownership of eBooks or music to your heirs.
Digital hardware, such as laptops or PCs, portable hard drives and flash drives, smartphones, tablets, and digital cameras are also not considered to be digital assets. Instead, these devices are “tangible assets,” covered by your traditional estate plan, most likely in your will or trust. However, because access to these devices is essential to preserving your digital assets, giving your heirs required passwords for each device is imperative for data recovery and collection.
It’s important to understand the Terms of Service (TOS) agreements for all of your digital assets because these agreements govern your ability to transfer these accounts when you die, and the rights your surviving heirs have to access them. Each service, from Facebook to Gmail, Yahoo! to Dropbox, has its own TOS agreement with the intent of protecting the rights of the original owner. Yahoo’s TOS agreement, for example, gives the company full and sole authority to delete an account on the death of the account holder—regardless of the effect that may have on the estate.
Knowing what the TOS agreements are for the digital assets you own—and preparing accordingly—is vitally important for their deletion, preservation, or smooth and easy transition to your heirs. Without advance preparation, your estate’s legal representative (or executor), who has a duty to protect your assets, may also face significant roadblocks when trying to access the online accounts and information governed by different TOS agreements or policies.
For example, if an online account has a policy that does not allow transferability and you agree to this policy when creating or updating your account, your legal representative or executor will not have the authority to overstep these restrictions. To gain access, he or she may have to go through a complicated, time consuming, and costly court process.
Because technology has far outpaced the legal considerations, most states are now actively pursuing national legislation to deal with the issue of fiduciary access to the digital assets and accounts of someone who has died. But, in the interim, each state has its own laws governing the rights of an estate representative, a guardian, or a trust. Please consult with your advisor to ensure that your wishes about your digital assets coincide with your state’s laws.
Besides familiarizing yourself with what your digital assets are—and how TOS agreements and your state’s laws may affect future access to them—there are some relatively simple steps you can take today to protect these assets and make sure they are handled according to your wishes after your death.
Yahoo Terms of Service, https://policies.yahoo.com/us/en/yahoo/terms/utos/
Although it may take some time to plan now for the transfer of your digital assets in the future, taking action today will mean a smoother process later. Be sure to keep your inventory and password manager up to date, with regular reminders to edit pertinent information as technology changes and you add new platforms and services to your digital asset collection. Consult with your trust officer or estate planner to be sure that your estate and trust documents reflect your current wishes about how your digital assets will be managed for and by your heirs.
This article is for informational purposes only and should not be construed as investment or legal advice.
Special thanks to Steve Milt, Certified Information Systems Auditor (CISA)S