By Barbara Lawrence and Katy Donlan
From social media and email to online banking and investment accounts, most of us manage our most sensitive personal and financial information digitally. But unlike real estate or personal property, these digital assets are not easily accessible to third parties in cases of disability or death, a fact which can interfere with proper estate management. However, a uniform law that has been adopted in many states, and is being considered in others, will make it easier for people to control access to their digital footprint.
The new law establishes default rules regarding third-party access by distinguishing between a catalogue of electronic communications and their actual content. Under these default rules, executors, trustees and agents under a power of attorney are generally entitled to an account catalogue that identifies certain information regarding electronic communications in the account, such as the sender, recipient, date and time. However, they are not afforded access to the actual content of digital files and communications unless they have a court order.
These default rules can be changed in any of the following three ways:
- Via the account provider. An account provider may offer account settings options which address future access by third parties. For example, Google and Facebook both provide an option that permits an account holder to direct that their account be deleted upon death, or designates an individual to have access to the account at such time (and specify the extent of such access). While helpful, these settings have important limitations. They may only permit an account holder to designate named individuals — rather than whoever is acting in a fiduciary role — and may require the designated individual to have their own account with the account provider.
- Under a will, trust agreement or power of attorney. If an account holder has not planned for third-party access via the account provider, the account holder can set their own rules in a will, trust or power of attorney. However, note that in the event of both a designation via an online setting and a contradicting provision of a will, trust, power of attorney or other instrument, the online setting designation will control.
- By the terms of a service agreement. If an account holder does not address the issue of third-party account access, the account provider’s terms of service agreement will control. Such terms of service agreements allow account providers to determine the extent of account disclosure that will be provided, and require a court order to make any such disclosure. When signing up for a new online account or service, many account holders agree to an account provider’s terms of service without reading them, let alone considering or understanding their impact. As a result, it’s likely that the terms of service will not reflect an account holder’s wishes regarding third-party account access.
It may seem like the simplest option would be to keep a list of login information and passwords somewhere. However, this does not replace the need for a plan. One reason is that few people regularly take the time to update such a list. In addition, keeping a list on paper poses a security risk and, as a legal matter, using a third party's login credentials to access their account without proper legal authorization may violate federal and state law.
In light of the new legislation, it is easier than ever for account holders to provide for appropriate management and succession of their digital accounts. Here are two steps you can take:
- Create and maintain a list of all online accounts that your client manages and would like a third party to be able to access in the event of your incapacity or death. Pay particular attention to those that require management, such as bank, investment and bill paying accounts; or those that contain information that the client would like to pass on to others, such as digital photos, video, records or correspondence. This list should include the names of the accounts, but not login information or passwords.
- Your client should include provisions for digital assets in his estate plan. His power of attorney, will and certain types of trusts should be updated to include directions regarding third-party access to and control of these assets.
Planning in advance of death or disability may be uncomfortable, but encouraging clients to take these simple proactive steps now will ensure their digital files are safely protected and managed once they’re unable to look after them.
Barbara Lawrence is a Partner and Chair of the Trusts & Estates Department at Herrick Feinstein. She assists high net worth individuals and families in developing customized estate plans to transfer and protect wealth for future generations and achieve their charitable objectives.
Katy Donlan is a Counsel at Herrick Feinstein. She advisies high net worth individuals and families on structuring their wealth to minimize income, estate, gift and generation-skipping transfer taxes.