When you die in Delaware, your digital assets become part of your estate

By Michael Carney , written on August 20, 2014

From The News Desk

Delaware may be the legal home to most of this country’s corporations, but it’s never been known as a progressive or particularly innovative state. So it comes as somewhat of a shock that Delaware would be the first US state to pass legislation around what happens to a person’s digital assets when they die. But Gov. Jack Markell signed such a bill into law earlier this week.

Under Delaware House of Representatives Bill 345, the Fiduciary Access to Digital Assets and Digital Accounts Act, heirs and executors gain the same level of authority over digital accounts as they do over physical assets. The bill reads, in part:

A fiduciary with authority over digital assets or digital accounts of an account holder under this chapter shall have the same access as the account holder, and is deemed to (i) have the lawful consent of the account holder and (ii) be an authorized user under all applicable state and federal law and regulations and any end user license agreement.
There are plenty of scenarios under which this has been an issue in the past. The most basic issue is around whether loved ones can get access to the deceased’s social media accounts, either to alert friends and family, create a living memorial, or shut them down. Each social platform has its own rules, regulations, and procedures for handling such scenarios, but the new Delaware law makes it more clear than ever who has rights to what and under what circumstances.

Currently, Facebook's terms of service appear to prevent this kind of ownership transfer, reading:

You will not share your password (or in the case of developers, your secret key), let anyone else access your account, or do anything else that might jeopardize the security of your account.

You will not transfer your account (including any Page or application you administer) to anyone without first getting our written permission. The company does however allow relatives of deceased users to request that Facebook assist in memorializing the account, deleting the account, or downloading its contents and then deleting the account.

Not surprisingly, not everyone is in favor of the law. In a statement to Ars Technica, DLA Piper attorney Jim Halpert, speaking on behalf of the State Privacy and Security Coalition which includes Google, Facebook, and Yahoo among other Web companies, says;

This law takes no account of minimizing intrusions into the privacy of third parties who communicated with the deceased. This would include highly confidential communications to decedents from third parties who are still alive— patients of deceased doctors, psychiatrists, and clergy, for example — who would be very surprised that an executor is reviewing the communications. The law may well create a lot of confusion and false expectations because, as the law itself acknowledges, federal law may prohibit disclosing contents of communications.
The bill was sponsored by Dover Representative Darryl Scott (D) who said in a statement, “This problem is an example of something we see all the time in our high-tech age – our laws simply haven’t kept up with advancements in technology. By signing this bill into law, we’re helping to protect the rights and interests of the average person in the face of a rapidly evolving digital world.”

With more and more value being translated online, there are new and more complicated questions around estate planning that go well beyond control over social media profiles. For example, if a professional photographer or writer stores their works online using a third-party cloud hosting service, those digital assets could be worth meaningful sums of money. The same is true of the growing cryptocurrency economy, where it’s not unheard of for users to store up to tens or hundreds of thousands of dollars in wealth online – although its ill-advised.

According to the governor’s office, the Act pertains to “digital assets such as email, cloud storage, social media accounts, health records, content licenses, databases, and more,” deeming them a part of a person’s estate upon death or incapacitation. In these cases, companies must now treat the executor of a decedent's estate the same as they would the account owner, including by providing usernames, passwords, and other according information. Wisely, the bill does make an allowance for situations in which the user specifies in life that the account should not be accessible in the event of death or incapacitation.

This bill should be sufficient in most circumstances, but may still fall short in cases where strong encryption is involved. Whether it’s encrypted email or a private crypto-currency wallet, most service providers require that the users maintain a private key to be used in decrypting their account data. If the user doesn’t convey this information to their estate prior to death, it may be impossible for the company to decrypt this data. Then again, if companies can do so for the NSA, the same back doors may one day be available to estate executors.

Delaware is a pioneer in treating digital assets like physical ones, but it seems like the rest of the states, and the federal government, will need to fast follow in this regard. Because although companies like Facebook and Twitter are incorporated in the state, this newly-passed law only applies to Delaware residents. The final affairs of anyone residing outside Delaware will be governed by the laws of their home state, none of which include provisions for the handling of digital assets.

As in most cases when new legal ground is being broken, this Delaware bill is a good first step in creating guidelines around digital asset transfer, but it will likely require real world application of the law to learn where the state got things right and where it may need to rethink things. Ultimately, it is inevitable that laws will need to evolve to accommodate the digital world. Delaware deserves credit for taking the first big step in this regard.

[Image via FunnyJunk]