Few people are able to monetize the time they spend cultivating photos on their Pinterest accounts, but commercial pilot Dan Ashbach knew he was sitting on a gold mine when he attracted more than 1 million web followers and marketing companies approached him with deals.
It started as a creative outlet for Mr. Ashbach, 62, who always took his camera on his work travels. After developing a heart condition, he was grounded from flying two years ago. To help keep him busy, his wife suggested that Mr. Ashbach post his photos on Pinterest, a site where users can collect photos and organize them by theme. A collection of images Mr. Ashbach compiled called “In the Garden” helped him accumulate an enormous following.
“My garden board was all photos of blossoms, and I noticed that when I varied off that theme, occasionally what I put up there went extremely well,” Mr. Ashbach said, which led him to start incorporating topics such as gardening and cooking.
Things changed when companies began approaching him with pitches to post images on his Pinterest that would link users to their or their customers' websites.
Mr. Ashbach, who has accumulated about 1.6 million followers on Pinterest, receives as much as $10,000 a month for driving traffic to other sites through his posts.
That success let Mr. Ashbach and his lawyer Peter Lennington know that they had to build an estate plan for what's considered a digital asset — the latest wrinkle in estate planning.
“We recognize that it's an asset, and the continuation of the asset is problematic if something happened to me,” Mr. Ashbach said of his websites and social media accounts such as the one with Pinterest, which have since been registered to a company owned by his wife and son.
As clients' lives become more data-driven, more of them wind up owning assets that “live” on the web. These could be photos that are stored on a website, social media profiles, PDF documents, e-mails and other types of intellectual property. Web-centric businesses — for example, an eBay storefront or a PayPal account — also carry monetary value.
“We have a lot of clients where, at first blush, you wouldn't think that the notion of digital assets would be applicable to the typical retiree who comes in for estate planning,” said Mr. Lennington, an estate planning lawyer.
Many of those items are password-protected, with the owner having exclusive access. They may also be subject to the terms of service set forth by the company giving the client account access in the first place.
As more clients acquire digital assets with real value, estate planners are beginning to see what happens when there are no contingency plans for those possessions after the owner dies.
For instance, lawyer Anna Byrne had a client in his 40s who died unexpectedly in his sleep.
“Nothing was on paper, and literally everything was on his password-protected computer,” Ms. Byrne said.
Nobody knew the password.
In order to resolve the matter, the client's parents had to be appointed personal representatives of the estate and then bring the computer into a tech service so that it could be unlocked. It took eight weeks for the parents to obtain the legal authority to do so.
“It makes for a complicated situation in a time you're grieving for a loved one,” Ms. Byrne said. “It would've been better if he had created an estate plan and included his digital legacy, whether it was access to the computer or where the information is located and how to access it.”
Planning for digital assets begins with creating an inventory of all the relevant files and accounts and their related passwords, and listing them on a consolidated document that is also password-protected. It also can be a paper document stored in a safe deposit box, estate planners said.
The information is treated like any other part of the estate plan. “It needs to be updated and shared only with the most trusted person, be it your spouse or your agent under power of attorney,” said Matt McClintock, vice president of education with Wealth Counsel.
Trust documents also need to be revisited to let a trustee take control of the digital assets. Clients have been adding language to their documents to give fiduciaries or the agent under power of attorney specific authorization to access and receive information on the owner's behalf.
There's also the digital asset trust, which can be created for a range of such assets, from web accounts to online business ventures, and assigns the responsibility of overseeing those assets to another individual after the owner dies.
Estate planners also can use a will to spell out the disposition of personal property.
The advantage of using a trust is the fact that wills are public, while trusts provide privacy, according to Lisa Featherngill, managing director of planning at Abbot Downing. As mentioned, clients should create a secure list of online accounts and passwords and refer to it in their will.
Another advantage of the trust over the will: If the owner dies and has only a will as the primary document over the digital assets, the beneficiary will need a court order to obtain the authorization to gather the digital assets, Mr. McClintock said.
The spelled-out language granting authorization to a third party is especially important because the Stored Communications Act of 1986 bars Internet service providers from disclosing personal records to individuals unless the owner of those records grants authorization. The companies cannot be compelled to share that information, either.
Anyone who breaks into the digital accounts of the deceased could face felony charges, Mr. McClintock said.
Clients need to be aware of the “terms of service” they agreed to when signing up for an online service or account. Most people avoid the reams of fine print legalese and click “I agree,” but often the details of the account's ownership is spelled out in those agreements. For instance, if your client has a massive collection of digital media like music or movies, the provider of the media — such as Apple, Amazon or Google Play — could restrict sharing and transferring of downloads.
Advisers and clients need to consider “whether this is a personal license to the asset, or is it something that is owned and that can be assigned and passed down,” Mr. Lennington said.
As for digital assets that are really online business enterprises, clients need to have a qualified appraiser value the business for estate tax purposes, Ms. Byrne said.