Protecting Your Virtual Estate
What happens to all of your e-mail and other digital assets when you die? Financial pros say not knowing can be costly.
By TANIA KARAS
When Missouri estates and trusts lawyer Robert Kirkland was preparing a will for a client several years ago, it never occurred to him to include any provisions about electronic bank statements or e-file tax services, both of which were then relatively new. The result of that omission became clear only last year, when the client died unexpectedly -- and his wife had no way to access their joint online bank accounts and the other key financial records that were stored digitally. After weeks of trying to guess her late husband's passwords, the widow finally had to call on some IT specialists to hack into his computer. Kirkland still cringes when he thinks about it: "It was a headache on top of a heartache," he says.
As more and more of our lives are put online, estate planners are grappling with how to advise clients to secure and transfer their virtual estates -- the body of nontangible, digital assets people create and store on their computers and the Internet. Thirty-six percent of adults over age 45 now do their banking on the Web, according to the Pew Internet & American Life Project, and millions of people store some financial records online, which are often locked behind myriad user names and passwords. But estate planners say few, if any, of their clients consider digital assets in their wills -- an oversight that can result in real-world losses to beneficiaries. And experts say the estate-planning industry itself has been slow to adopt standards for dealing with the sort of "property" that may exist only in cyberspace.
Digital assets, of course, can range from things with obvious financial value (online bank and brokerage accounts, and Web-based businesses) to less obvious but still valuable properties like domain names, blogs, Twitter accounts and even social media pages. Karin Prangley, an estate-planning lawyer in Chicago, says that merely accounting for these assets after the owner's death is often a challenge -- and can be trickier if the person paid his bills and filed his tax returns online. But without log-in information, access to those Web accounts and services may require hiring a computer-forensics expert or obtaining a court order.
What happens to all of your e-mail and other digital assets when you die? Financial pros say not knowing can be costly. Kelli Grant discusses on digits. Photo: Bank of America.
And the problem isn't limited to assets. Without proper documentation, says Kimberly Foss, founder of Empyrion Wealth Management in Roseville, Calif., executors may have no way of knowing how to cancel the cable service or stop automated bill payments. Complicating matters is that accessing the deceased's online account (even that of a spouse or parent) may run afoul of terms of service agreements -- and federal antihacking laws. When Prangley's own father-in-law suffered a stroke in 2009, leaving him incapacitated, the family was left to sort through the assets of his building-supply company. Trouble was, his client records and invoices were stored digitally -- and the e-mail service provider refused to help. "All that information was trapped in an e-mail account we couldn't access," she says.
While estate-planning pros say the problem is only getting bigger, just a handful of states have passed legislation related to digital-property management after death. That large legislative gap, meanwhile, is leading a growing cadre of estate planners to be digitally vigilant as never before, creating step-by-step instructions for how heirs can access and transfer virtual properties after a client's death. For starters, Foss now asks her clients to take inventory of all their digital accounts and store an updated list of passwords on a flash drive, locked in a safe. Some pros are also looking to websites like Legacylocker.com and AssetLock.net, which enable users to release account information to designated beneficiaries after their death. Taking even a few modest actions now, says New York attorney Bernard Krooks, can keep your assets from getting lost in a cybercemetery. "In a worst-case scenario, the accounts get frozen and your heirs won't have access," Krooks says. "At the end of the day, they could potentially be gone."