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Blog: Digital Assets: Online Accounts And Digital Assets

July 26, 2014

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When you die, what will happen to your iTunes songs, your Kindle books, your facebook account, your Instagram photos, and your other digital assets and accounts?  The answer varies depending on the asset or account, because the law in most states has not yet addressed this developing issue in a comprehensive manner.

The use of digital assets and online accounts continues to expand, but the value of these assets and accounts are often lost upon the death of the user.  In a study conducted in 2011, the average American estimated the value of their digital assets to be $55,000.  Under current law, owners of these digital assets, including online records, photographs, documents, songs, books, and videos may not be able to transfer them, even at death.  Additionally, most online account providers prohibit or restrict access to a deceased individual’s accounts, even if the user has provided express instructions to allow a designated individual to access the account for a specific purpose.

Online Accounts 

There are currently over 1 billion active users of facebook throughout the world, approximately 160 million of which are located in the United States.  It has been estimated that the average individual has 25 different online accounts, including email, social networking sites, and other online accounts.  These accounts contain emails, videos, pictures, documents, music, and important personal and business information.  Unfortunately, upon the death of the user of the account, in most cases, the account is lost and cannot be accessed for any purpose (even for purposes specifically designated by the user).

At this time there is no uniform law governing access to online accounts by the estate of a decedent.  A few states have adopted laws to cover this issue, but those states do not include Iowa, South Dakota, and Nebraska.  As a result, users are bound by the terms of the agreements they enter into when creating online accounts.  Some websites allow executors/administrators and individuals having power of attorney to have limited access to accounts (e.g. YouTube).  The majority of social networking sites and other digital account providers do not allow access but will close an account or set up a memorial page upon notice of the user’s death (e.g. facebook, Gmail, Yahoo!, Twitter, Instagram).

The Uniform Law Commission is currently working on new laws to address this issue.  A draft of the Fiduciary Access to Digital Assets Act can be found here.  This Act would allow executors and administrators of decedents’ estates to access online accounts pursuant to the express wishes of the decedent.

Digital Assets

In the past decade, sales of digital assets have taken off, with many purchasers not realizing that their ability to transfer these assets is restricted both during life and at death.  The numbers are staggering: 25 billion songs sold on iTunes alone; 50 billion apps downloaded from the iTunes store, millions of ebooks sold by Amazon and Barnes & Noble, and so on.

Physical copies of the copyrighted works of others, such as books, CDs, DVDs, etc., can be transferred by the purchaser pursuant to the “first sale” doctrine.  This means that after the first sale of the work in commerce, the individual copy of the work belongs to the purchaser who can transfer or sell it (although they do not have the right to make copies).  In the context of digital assets, however, a federal court in New York recently ruled in Capitol Records, LLC v. ReDigi, Inc. that digital assets are not subject to the “first sale” doctrine, and therefore cannot be transferred, sold or given away during the purchaser’s life or after their death.  The court reasoned that to do so would require a digital copy to be made.  Litigation in the Capitol Records case is ongoing.  If this outcome stands, sellers of digital copyrighted works, such as Apple and Amazon, can continue to enforce the specific rules in their user agreements that prohibit the transfer of digital assets during life or at death.

In the context of decedents’ estates, it is possible that a state legislature could provide guidance that allows these copyrighted digital assets to be transferred to beneficiaries of the estate.  For the time being, however, these digital assets will continue to be lost upon the death of the purchaser.

Different issues arise with respect to digital assets that are created by the user and stored online, including photos (e.g. Instagram, Flickr, etc.) and videos (e.g. YouTube, Vimeo, etc.), which can be of great value to the user.  Digital assets that were created by the decedent would be treated differently than the copyrighted works of others.  For example, Google now allows individuals to specify what should happen to photos, emails, and documents stored on Google accounts when the user dies, in their “Inactive Account Manager” feature.  Other service providers may have similar mechanisms for dealing with data after the user’s death.

How to Plan for Digital Assets and Online Accounts

Unfortunately, there is not a lot of guidance as to how to best protect the value of digital assets and online accounts after the user dies.  With the law on these developing issues not yet settled, an individual should consider the following steps when planning for their digital estates:

1. Keep a Detailed List of Online Accounts.  This should include accounts, usernames, passwords, and other information that would allow a personal representative or executor to access the account.  This should be kept in a safe and secure place.  There are a number of online password storage services that specialize in this area.  To the extent that websites allow executors to access the decedent’s accounts, this list will be very important.

2. Make an Inventory of Digital Assets.  As more digital assets are stored remotely (in the “cloud”) and fewer are stored on actual hard drives, this becomes more important.   It will allow the executor to locate all of a deceased individual’s personal digital assets (photos, videos, documents), whether stored on a hard drive or at a remote location, and distribute them accordingly.  At present, works that are copyrighted by others cannot be transferred by the purchaser, even at death, but that rule may change.

3. Provide Specific Instructions and Give Authority.  Online user agreements will trump directions given in an individual’s last will and testament or elsewhere, but the last will and testament should nonetheless include directions for the control and disposition of digital assets and accounts, where desired.  If possible, these directions should be tailored to meet the online account providers’ specifications.  Your traditional executor can serve as your “online executor” for purposes of carrying out your wishes with respect to your online accounts and digital assets.

Individuals should seek professional advice on estate planning to ensure that their digital assets and accounts are protected to the greatest extent possible under currently applicable law.

This blog post is authored by Jacob Natwick and meant for informational purposes only.  It is not meant to provide legal advice in any particular circumstance or factual situation.  You should consult with an attorney prior to taking any action regarding the information contained herein.  

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