Managing your clients’ digital assets

There is no legal definition of the term “digital assets.” In fact, much of the legislation relating to a person’s digital life still is nascent. However, most estate planners define digital assets as any digital content – including emails, online financial statements, social-media accounts, information held on vendor sites (such as credit card information) and copyrighted materials (such as purchased music, movies and ebooks).

Making sure these assets will be dealt with properly in the case of disability or death is important. Failure to do so could result in unpaid bills and identity theft – not to mention the awkward or painful scenarios that occur when a social-media network prompts a client to wish a happy birthday to a deceased family member.

Digital assets should be a part of your client’s overall estate plan, but these digital assets do come with their own set of considerations and challenges. Below are tips to ensure a client’s digital assets are properly taken care of in the event of disability or death:

– start the conversation

You shouldn’t hesitate to raise the topic of digital assets with your clients, says Marla Shragge, lawyer and wealth planning consultant in Winnipeg with CI Private Counsel LP, a subsidiary of CI Financial Corp.

“The first step for financial advisors,” Shragge says, “is to help their clients become aware of just how much they’re actually doing online.”

For example, you might ask: “How much banking do you conduct online? Do you use PayPal or have an online business?”

Make the conversation routine by including it in your discovery meetings with clients. When gathering information on clients, ask if they would like to discuss planning for their digital assets after death.

Of course, not all clients will want to worry about the virtual world. In some cases, older clients who use the Internet less frequently will not be interested in such a conversation.

“I ask the question in interviews with the clients,” Junkin says. “And, more often than not, the client’s eyes glaze over.”

However, some clients may not be aware that their online accounts require planning. Depending upon the age and habits of the client, you need to make a judgement call as to whether the topic is worth probing into a little more.

– Identify assets and secure passwords

The first step in dealing with those digital assets is identifying exactly what they are and where they are held. Clients need to list all their accounts, account IDs, passwords and security questions.

This step raises the question of where to keep the passwords once you have a list. For example, one option is to write the passwords down on paper and keep that paper locked in a safety deposit box. But that solution would make the list difficult to update.

Another solution is to use one of the many password-management applications designed to keep passwords up to date, secure and in one location. The risk with these services is that if they are hacked, all your clients’ passwords may be at risk. As well, Junkin warns, because password management is a rapidly growing industry, there is a chance that some of the companies in this field may not be around at the time of a client’s death.

Wherever those lists of passwords and accounts are kept, your clients need to ensure their executors know how to access that information. According to Mike George, director of tax and estate planning with Richardson GMP Ltd. in Winnipeg, a common mistake that clients make is that they keep their passwords listed on an Excel spreadsheet on their laptop but then forget to tell the executor the password to unlock that computer.

Just don’t include any specific details about passwords or accounts in a client’s will, because the will becomes a public document after death. The will should inform executors and lawyers that such assets exist, George says, but the details should be kept in a separate document, such as a codicil.

– Leave instructions

As with any asset, executors need a clear indication of what testators want done with their digital property.

For example, does your client want his or her Facebook account shut down after death, or does he or she want it to act as a memorial? Does your client want vendor accounts, such as Amazon, to be shut down because of credit card information that may be on file?

When giving instructions, it’s important to be aware that each website has its own terms and conditions and may not allow for certain actions.

Furthermore, simply telling a spouse the password to the account could be problematic; if the spouse uses the password after death, he or she could be guilty of impersonating a deceased person – a criminal offence.

Says Junkin: “[It’s] possible that [the spouse] could really get into hot water.”

– Grant authority

Advise your clients who have a significant online presence to name an executor specifically for their digital estate – preferably someone who is familiar with social media and other online accounts.

Clients may have to appoint more than one executor, depending upon the skills required.

For example, clients might appoint one executor for the business affairs, a second for their finances and a third, tech-savvy individual to handle digital content, says Alan Wainer, partner, audit and advisory group, with Crowe Soberman LLP in Toronto. “It gets more cumbersome if you have three executors,” Wainer says. “But it may come to that for some people because of the makeup of their assets.”

That an executor will have access to digital assets is not always a given, however. “We haven’t seen a lot of properly drafted wills to address this area right now,” George says. So, consulting a lawyer and getting the language right will help to ensure an executor is not blocked from accessing a client’s online account.

Junkin and his team often include the following phrase in a will: “I give authority to deal with my digital assets to [this person].”

Such a simple phrase works for clients who are average users of various online sites and services, Junkin says. But a client who runs an online business, for example, or who is an artist receiving income from digital assets will need to seek out specialized legal advice.

– Don’t forget power of attorney

It’s not just after death that digital assets need to be dealt with. Individuals who are designated to hold power of attorney (POA) may need access to digital content if a client is unable to do so because of a disability.

In such cases, electronic bills might go unpaid if the person granted the POA is unaware of such digital assets or is unable to access them.

“The person acting under the [POA],” Shragge says, “would need similar authority to what an executor would need in order to ensure that [the holder of the POA]can do what they need to do.”

© 2014 Investment Executive. All rights reserved.