I’m shutting down now

  • Author : Julia Abrey
  • Date : November 2012
ABOUT THE AUTHORS: Julia Abrey  TEP (with welcome help from Kenny Mullen, Partner, Technology and IP), Withers LLP, and Tom Abrey

It’s amazing where we keep important things. A client of Julia’s keeps the family safe under the floor of the bathroom, where it is unlikely to be found as one would need to know not only to move the linen basket but also to lift the carpet.

As our lives have become more virtual, the record of who we are and what we have done is now increasingly likely to take a digital form. Broadly, our digital lives fall into three categories: personal and sentimental items, financial information, and items that may already have a value or could acquire value in the future.

Into the first category fall things that, in an earlier age, we would have kept in a more solid form. Our photographs, diaries, scrap books and videos have now been replaced by their virtual equivalents – not just photographs and emails, but also our modern diaries and letters as communicated to others on Facebook, MySpace and other social networking sites. As far as these sentimental items are concerned, what we probably want to do with them is what we have always wanted to do: pass them on to our descendants. The second group of assets are, again, ones that, in the past, were held in another form: our bank statements, share dealings and even our tax affairs, which are now principally dealt with online. The third aspect of our digital life, however, is one where the law is still catching up: digital assets that, of themselves, may have a value that does not exist in any non-virtual way. These may include our accounts and characters in online games such as World of Warcraft, our YouTube videos and our domain names that may be valuable in connection with our business activities. What are these assets? Chattels? Intellectual property (IP)? How do we value them, and can we pass them on when we die?

We have been thinking about these questions in the past few months from very different perspectives. Julia (lawyer, 50) still uses cheques, whereas her son Tom (IT nerd, 14) hardly has a piece of financial (or indeed any other kind) paper. His whole life is stored on his PC and iPad. Tom, and millions like him, are the testators of the future.

Access and records

One of the simplest ways to start preparing a digital legacy is to keep a record of your digital life so that your executors and beneficiaries at least know what there is and where it is held.

There are various ways of doing this: leaving details of passwords, access codes etc in a will or in a note left with the will. There are some problems with this. Things change, and this may be more than starting an account with a new online store; it may be a change of bank, etc. Not keeping records of passwords up to date may be worse than not having any records in the first place.

One way round this may be to use an online digital inheritance arrangement. This avoids detailed consideration of nasty legal words such as conflict of laws, privacy and access, and should be a simple solution: you just leave your executors and beneficiaries the access code to the online storage facility. A range of providers offer this service: Legacy Locker, AssetLock, Deathswitch, Entrustet, ifidie.org and SecureSafe. The idea is tempting, and some services make executors and families’ lives easier by offering a posthumous email service that is triggered if the account holder fails to reply to emails sent by the storage company. There are, however, concerns about using this kind of service. What happens if the company goes into liquidation? Can you then access your own data to move it somewhere else, or is it lost or frozen by the administrators? Security concerns may also be significant – not only from external hackers, but also from the staff members at the companies concerned. The question of updating still arises: some of the services do offer an annual reminder to update your details but, of course, you need to make sure you do so.

“One of the problems with digital service providers is that there is no uniform set of rules that they use when access to the data they look after is needed”
Email and social media

One of the problems with digital service providers (DSPs) is that there is no uniform set of rules that they use when access to the data they look after is needed in the case of the death or incapacity of the account holder. Generally, DSPs take a functional attitude to their role. It is their job to provide the online service and they do not feel inclined to help where there is a problem in relation to an individual account holder. Our research, below, shows the different ways the principal online favourites act when told that an account holder has died. Many of the legal requirements referred to relate to the US rather than the UK, as many of the largest DSPs are based in the US.

Facebook

Facebook has a policy that it introduced after a review of its terms and conditions in 2009. This was sorely needed. An article in The Times of 13 October 2011 estimated that 1.78 million Facebook users would die in 2011, 200,000 of them over the age of 55. Facebook’s policy is to ‘memorialise’ the profile when told of the death. That means that you cannot log in or add a friend and your personal information is removed. Your wall, however, remains active, so your friends and family can post memorial messages. Julia had a difficulty with a client two years ago, however, where some of the messages posted on the memorial wall were offensive and distressing to the family. The family (it was an intestacy) found it very difficult to contact Facebook to arrange for the account to be closed down altogether.

Flickr

Flickr (owned by Yahoo!) had 5 billion images stored on it in 2011 – 3,000 more are added each minute. It has a limited free service but requires a regular subscription to access all photographs held on an account. Unless the subscription continues to be paid after death there is a danger that Flickr will close the account simply because it has ceased to be maintained. Account holders should arrange for their executors to keep paying, at least until they have time to deal with the Flickr assets. Alternatively, the account holder should back up their photographs on a hard disk or in another format.

Yahoo!

Yahoo! has so far adopted a policy of refusing access to email accounts when an account holder dies, but says it will delete an account once proof of death has been given. This is, however, of little help to executors or beneficiaries who wish to keep the contents of the account concerned. The US journal Legislation and Public Policy, Vol 10.28, p281, discussed the case of John and Justin Ellsworth. Justin Ellsworth, a US marine, was killed in Fallujah in November 2004 by a roadside bomb. His father, John, wanted to collect the emails that Justin had written and received while he was in Iraq to create a memorial in Justin’s honour. Justin’s email service provider, Yahoo!, initially refused John’s request, but complied with it after receiving an order from the relevant probate court. Yahoo! stated that, without a court order, disclosure of emails to a third party, even when the account holder had died, would violate its privacy policy. Yahoo! was not, however, required to grant unfettered access to the account itself – it only released a CD of all the incoming email messages in Justin’s email account, which was in compliance with the court order. Other DSPs in the US seem to have followed this approach, or some variation of it, as a way for family members and heirs to gain access to the deceased’s email or other online assets.

Many problems for family and executors stem from the terms of service of the deceased’s account. Yahoo!, which is used by 39 million email account holders, requires users to agree and consent to the Yahoo! terms of service and privacy policy during the sign-up process. The terms of service indicate that survivors have no right to access the email accounts of the deceased and, in a section entitled ‘no right of survivorship and non-transferability’, account holders must agree that ‘contents within [their] account[s] terminate upon death’. The Ellsworth case was nearly ten years ago, but there are still few statutes or decisions providing guidance on the matter. The one exception in the US is Connecticut, which in 2006 statutorily provided for access by executors to the email of those who have died.

Is it all worth anything?

The valuation of some of our online life is well understood – they may clearly be personal chattels, probably of sentimental value only. Alternatively, our manuscript novels, film scripts and music held in digital form rather than as physical documents could be part of our IP.

Online games

There are, however, some assets that exist only in digital form and which we might assume – possibly incorrectly – are worth nothing at all. Massive multiplayer online role-playing games are a good example. Games such as as World of Warcraft and RuneScape are now played by millions. In the games, characters accumulate skills, weapons and money (which can be used to buy further skills, etc) by spending time online carrying out repetitive and boring tasks to gain experience or money – a process known as ‘grinding’. A long period of grinding may result in an experienced and wealthy character that has taken time to create; it is now possible to sell such characters online. In 2009, a RuneScape account sold on eBay for GBP46,000, and the website www.armorybids.com, which runs auctions of virtual gaming goods, has a large group of characters for sale. The biggest collection is of characters in World of Warcraft, at a range of prices. You (or more likely your teenage child) might, therefore, simply by sitting in front of your laptop, create an asset at minimal cost. What on earth would this be worth for inheritance tax purposes? To make matters worse, there is a risk that the sale may not be accepted by the creator of the game, rendering it valueless.

YouTube

Uploading your own video to your YouTube channel can also create a valuable asset. If you own the copyright you can opt-in your video for monetisation, a partner arrangement with a YouTube advertising company, which enables eligible videos to earn money from placing relevant adverts alongside advertiser-friendly content. If your video has a large number of views, earnings could be significant. The parents whose sons feature in ‘Charlie Bit My Finger – Again!’ (which had had 387 million views by November 2011) reportedly earned GBP100,000 by introducing adverts onto the clip. A popular video may remain popular for a long time; valuing this kind of asset for inheritance tax purposes may well be akin to royalty rights.

Licences, iTunes and other problems

Accounts with providers like iTunes may not be the asset they appear. Buying music downloads from iTunes is not ownership; it is simply a perpetual licence to play the music. The licence is personal and therefore not transmissible on death or by gift. So you can give your CDs or vinyl collection to someone under your will, but you may not be able to do the same where you have downloaded the same music to your MP3 player. The title to the music stays with the original copyright owner; you are effectively just renting it. The terms and conditions of the Kindle, for example, prevent a purchaser from passing on a downloaded ebook’s contents; even giving the passwords to online accounts can be a breach of terms and conditions. The beneficiary of your MP3 player who tries to access the account to update its content or buy more could lose everything on the device. The actor Bruce Willis is considering taking action against Apple because he wants to bequeath his huge digital music collection.

“What on earth would a character in an online game be worth for inheritance tax purposes?”
Domain names

An online article by US law firm Lummis, Lloyd and Barkley LLC, of Wisconsin, points this out as an area of particular difficulty1. It gives the example of an individual who owns a handful of domain names through the domain registry GoDaddy.com. GoDaddy.com sends all communications to an email account only. When the individual dies, the family or executors might therefore find it difficult even to identify that the individual owned any domain names. This may have unintended consequences if non-renewal of a domain name that is important to a business, website or blog leads to it being lost, as the name is then freely available for purchase by another.

What to do about wills?

There are really two questions about wills. The first is whether their provisions, as drafted, cover digital assets. The second is what information they should contain about digital assets. Digital assets are not usually specifically bequeathed, and this may not be required. As explained above, many digital assets are normal assets that happen to be held in digital form – photographs or an online bank account. By contrast, other assets may only exist virtually. A general chattels legacy may not be wide enough to cover the devolution of a World of Warcraft character.

What about leaving passwords in the will? The 2011 Times report mentioned above quoted a study by Goldsmiths College and the webhosting company Rackspace that said that 11 per cent of British adults have left, or are considering leaving, their usernames or passwords in their will. Although it may be tempting to leave digital information in a will (which is usually safely stored), if passwords and usernames change, a codicil will be required. Out-of-date information may be worse than useless, as it will waste time in misleading executors and beneficiaries. Second, leaving usernames and passwords in the will means that anyone can see them after the testator has died and the will becomes a public document.

Future issues

One thing that would make matters easier would be if DSPs and ISPs created and followed a uniform approach to their terms and conditions so that it is clear what they will do when an account holder dies. The US is already forging ahead in this area. The Uniform Law Commission – the National Conference of Commissioners on Uniform State Law – set up a committee in July 2012 to draft either a free-standing act or amendments to the Uniform Law Commission’s existing acts (such as the Uniform Probate Code) that will vest fiduciaries with, at least, the authority to manage, distribute, copy, delete and access digital assets. The Committee has just started its work and it is unlikely that we will see the results of their drafting for some time. It may, however, result in the same kind of consistent approach being adopted elsewhere, which would make matters significantly easier for all of us with an online life.

E-legacy: Estate planning for digital assets’, on www.lummislloydbarkleyllp.com

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