updated 2/1/2006 12:54:05 PM ET 2006-02-01T17:54:05

The death of a loved one is never easy, but death in the digital age can create knotty problems that add to the anguish.

Just ask Roger van Oosten.

"My father had a niche Internet business," he says. "When he died last year at 71, he left no provision for the business. I couldn't access his accounts or pay suppliers, and I couldn't shut the business down. People run their lives through Outlook, but I couldn’t access that either, so I couldn’t reach his customers to inform them that he'd died."

Technology has outpaced laws written to assure the orderly disposition of tangible assets such as real estate, antiques, cars, cash or investments following the owner's death. Such laws were drafted before the Internet and as a result are often murky when dealing with digital assets, say Holly Towle and Scott David, attorneys at Preston, Gates & Ellis in Seattle.

"We have ample law covering the world of goods," says Towle. "But we now live in an information economy where the value is information, and a whole lot of law pretends information is like a widget."

The widespread use of personal computers and new technologies has fundamentally changed the way we do business and therefore will affect estate planning.

"With real estate, you have a survey and know exactly where the property is located," says David. "With personal property, you have possession. Software and music are protected by intellectual property laws. But with e-mail or data, there is no traditional notion of property interest — in general, rights are established by agreements, and the law hasn't caught up yet."

Basic differences between digital and traditional assets include:

  • Digital assets can be created and defined by contract.
  • Some digital assets are subject to intellectual property law.
  • Many digital assets can be endlessly duplicated.
  • Digital assets may be stored in a tangible asset such as a computer and therefore may affect the value of the machine.
  • In general, digital assets are licensed, not sold, and rights usually aren't transferable.

Digital assets can be created in ways that few think about. For a small business, e-mail, including attachments, may be valuable. Even personal e-mail accounts, family Web sites or a part-time business conducted online may create value. Many people store snapshots in their computer. Historical shots or the work of a professional photographer may have value. Information that was once kept in a safe deposit box may now be digitized and stored in a computer or a hand-held device. Many people trade their stock holdings through E*Trade Financial or Ameritrade and have online bank accounts.

Ask yourself a basic question: After your death, how will the information be located?

Laws to handle digital assets are still emerging, but lawmakers and the courts will lag behind technology for the foreseeable future, creating confusion and unnecessary expense for those trying to sort things out. In the meantime, Towle and David offer these tips to protect your digital assets:

Separate personal and business e-mail accounts, even if this means opening up several Yahoo! Mail, Microsoft Hotmail or Google Gmail accounts. Make the addresses and passwords known to your executor or anyone who will need the information after your death. If a file contains sensitive information you wish to keep confidential, make arrangements to have your executor delete it after your death.

Make plans in advance for joint access to vital e-mail accounts and information stored online or protected by a password in a computer. Leave a list of the locations of such information with your executor. This can be as simple as writing things down, sealing it in an envelope and marking it "To Be Opened Upon My Death."

Save all contracts covering the handling of your digital assets. This will help your lawyer sort things out if things get sticky.

In financial matters, balance personal security with the needs of your heirs. Protect your encrypted information, but make sure a trusted person can locate it and handle it as you wished after your death.

Make provisions to renew key URLs after your death because you don't want to lose simply because a family member didn't know it was time to re-up. It's unclear that a URL is property that a secured creditor can seize, but in the meantime be sure all fees are paid after your death.

Van Oosten's effort to sort things out after his father's death was time-consuming, frustrating and unnecessarily expensive.

"My father didn't factor his online business into his life plan," he says. "The business, Beyond Batik, kept right on rolling when he died, and I got lots of angry notes. I couldn't get to the finances. Now, I'm fighting to shut down the bank account, and I've gotten stuck with overdraft charges. All these problems could have been avoided if my father had made provisions for them in his will."

© 2012


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