Digital pitfalls

It is almost impossible to exist in today's world without owning, relying upon, referring, to or communicating through, some form of digital asset. The internet is increasingly becoming the main storage of our financial and personal lives and there seems to be no stopping this increase in the future.

With each generation leaving a larger digital footprint, it is vital for practitioners to be aware of the issues digital assets can cause for third-party fiduciaries.

What are digital assets?

A digital asset is effectively any asset that is accessed or held online, for instance:

• Financial institutions: banks, credit unions, PayPal.

• Share trading: spread betting, stockbrokers, gambling.

• Social media: Facebook, Twitter.

• Email accounts: Google, Yahoo, Hotmail, AOL.

• Content holders: iTunes, Amazon, eBooks, Dropbox.

• Online auction sites: eBay.

• Online gaming: World of Warcraft.

• Virtual currency: bitcoins.

• Blogs containing intellectual property.

• Domain names and websites.

What are the issues for fiduciaries and their advisers?

In this context, the term fiduciary refers to executors, administrators, trustees, attorneys and deputies.

Identifying a digital asset

With security of digital assets being a paramount feature, most digital assets are protected by passwords or complex log-in details. All correspondence and details are also likely to wholly exist online, usually in a password-protected email account. Frequently there will be no paper trace of a digital asset.

This makes it much harder for a fiduciary to even know about the existence of an asset, let alone access it.

Uncertain status of ownership and control

The apocryphal story of Bruce Willis looking to sue Apple because the end-user agreement prevented him from bequeathing his iTunes collection to his children was well documented. While that story may not have been true, it did create a great deal of interest in digital assets and raises the issue of their ownership.

There is a clear distinction at law between a licence to use and a license of ownership. However, many consumers are completely unaware of this.

The opening comments in the iTunes end-user agreement that so 'enraged' Mr Willis states: "The products transacted through the service are licensed, not sold, to you for use only under the terms of this licence."

Location of assets in a different legal jurisdiction

The jurisdiction of succession can often depend on local laws and may be based on the situs of the asset and/or the domicile of the deceased.

For example, US internet providers will be subject to the Stored Communications Act, which extends fourth amendment protections against unreasonable search and seizure to data stored remotely on computer networks. This has the effect of prohibiting social media companies releasing data, unless there is lawful consent of the original user. On this basis, a US court would need to grant a court order expressly stating that the fiduciary had the user's lawful consent.

Is there any value attributable to
digital assets?

The obvious digital assets with tangible value are online bank accounts, share accounts, betting accounts and PayPal accounts. However, if there is no evidence of an account among the deceased or incapacitated paperwork, then how does a fiduciary know it exists?

Domain names and websites can have considerable value and carry significant investment. These assets may require regular payments to keep ownership and, when the payments stop, the asset ceases to be owned by your client.

Bitcoins and online gaming investment carry a tangible value and solely exist online.

eBay trading accounts, where the business solely exists online, or a YouTube channel that has opted for 'monetisation' which enables eligible videos to earn money, such as "Charlie bit my finger" (which reportedly earns $100,000
per year) have obvious value. This is an income stream that needs to be valued and passed down to the next generation - perhaps to Charlie himself.

To a sole trader or family business, their emails may have a value if they contain customer lists or agreements, which are vital for a business to continue after death.

Monetary value is unlikely to attach itself to photos, emails, blogs, Facebook accounts etc. However, the sentimental value of these accounts is often considered to be far more important by friends and family of the deceased.

These are often high-profile situations such as Eric Rash, whose parents were the driving force behind the US state of Virginia introducing legislation (Virginia Code Section 64.2-110) that grants parents post-mortem access to a minor's Facebook page.

There is a real danger with sentimental digital assets because if an account is dormant or payment is no longer made, it could be deleted and the information lost forever.

Legal, practical and security difficulties with password sharing

Security is the key to people using and investing so much time and money into the online world and digital assets. On this basis, people generally keep their passwords a closely guarded secret and will look to change them on a regular basis. Therefore writing down your passwords and login details is likely to be unwise and potentially out of date very quickly. Even if a fiduciary does have access to an up-to-date set of passwords, what is their legal position if they log in as the deceased or incapacitated?

The answer is, they are likely to be breaking the law. In the UK for example, they could be breaking the Computer Misuse Act 1990 or in the US, the various Computer Fraud and Abuse Acts (CFAAs).

If the fiduciary has the correct legal authority then they may avoid the issues under the various laws; however the terms of service agreements can be enforceable and most will prohibit post-mortem transfer or access altogether. For instance, Yahoo recently refused to accept a co-administrator's authority to access his deceased brother's Yahoo email account, even though the co-administrator had already accessed it but had subsequently forgotten the password.

Google have potentially shown the way by setting up an 'inactive account manager' setting. The user actually has to set this up, but when done, after a predetermined period of inactivity of a Google account, Google will undertake to notify up to ten 'beneficiaries' before they delete the account. The 'beneficiaries' can then get access to the content within the account.

Lack of guidance by the law

As with the digital age it would seem that we are set to take our lead from the US. A number of US states have already enacted specific legislation authorising fiduciaries access to a deceased's digital assets. The Uniform Law Commission's (ULC) in the approved a draft bill in July 2014 looking to deal with the issue of digital assets, called the Fiduciary Access to Digital Assets Act (FADA). The draft Act would grant fiduciaries broad authority to access and control digital assets and accounts.

FADA is intended to clarify who can access a deceased or incapacitated person's online accounts. The proposal would create four categories of fiduciaries who would be able to take over these accounts in the event of a death or loss of mental capacity. However, the Act would still need to be taken up by the US states before it could become law. Currently, there are no plans for a specific digital asset law in Europe and the UK.

Terms of service agreements

Every digital company will have a terms of service agreement that an individual will have to sign up to before they can use the service, but how many can say they actually read the conditions?

These are likely to be standard and it will not be possible to vary or negotiate; each will be different, bringing confusion and inconsistency, they will rarely allow the digital asset to be transferred, and they are commonly terminated and deleted on death.

What should practitioners do now?

Practitioners will usually encounter these issues after someone loses mental capacity or dies. However, it is very important to be aware of digital assets when taking instructions from a client when drafting a will or a lasting power of attorney. So here are a few suggestions:

• inform clients about issues surrounding digital assets;

• encourage your client to draft a digital-asset log;

• suggest your client presses print sometimes to assist location;

• prepare written instructions to executors about what you want done if you were to die or lose capacity - for instance memorialisation or deletion of digital footprint etc;

• review important terms and conditions;

• draft an appropriate will clause;

• advise them to investigate their bank statements, computers, mobile phones, email accounts etc; and,

• liaise with their employer to grant access to their workplace email.

The STEP digital assets taskforce will shortly be publishing their guidance
to practitioners which will offer further assistance.

James Ward TEP is a partner in the private client department of Seddons Solicitors ?