Digital property is relatively new, and most lawyers, advisors, and individuals are still unfamiliar with the many challenges and complexities, especially regarding estate planning.
The Intersection of Business, Technology, and Death
Businesses of all sizes and individuals generating revenue and income from their e-commerce and social media accounts have additional pressures. This pressure can be an owner, consultant, or even an employee. The impact of an owner or a tech master’s death can have devastating effects on the business’s operations, communications, IP, and account holder relations. The result can be severe disruption and even complete failure if not handled properly. If it’s possible to get the business back to its previous state, it can be costly, and damage to a new or unwanted reputation is irreparable. This damage can mean liability and accountability for the law firm if not properly planned for or effectively transferred safely and securely.
Terms of Service Agreements (TOSAs)
TOSAs must be “agreed to” by account holders when enrolling in a new site or downloading an app. In most instances, the approval of these terms establishes a binding contract between the individual and content provider, aka custodian. The TOSAs contain privacy language and often establish protocols and processes to follow up on the account holder’s death. The exception is those organizations that offer “enterprise” or “business” subscription options. Enterprise TOSAs differ from individual terms and may allow for immediate and clean transfer upon an individual’s death. Many are surprised that the TOSAs they “agree to” for purchasing a domain name and opening a Twitter account for influencing and storing content in a hosting provider aren’t necessarily designed to preserve the business. This leaves the responsibility to the TOSA signer’s estate plans to ensure succession.
The reality is that TOSAs don’t address assets and IP that are agreed to by an individual, even if they’re an employee or consultant representing the organization. Those individuals may need to assign the account (URL) or provide disposition instructions to the business. Content providers (a.k.a., “custodians”) regard the relationship between themselves and the TOSA signer as sacred. They often don’t recognize the business’s interest in the app or website but are bound by enforcing the TOSA and comply with privacy laws and policies. Therefore, the transfer of the accounts or contents to the successor may be delayed, if at all.
Subscription Renewals/Account Inactivity
More than having the rights to accounts and contents, the concept of time can be critical to a business’s operations. The business doesn’t own domain names, URLs, and other services, and they’re “leased” with clearly stated terms for missed payments, data volume, and account maintenance.
Subscription renewals, account inactivity, and auto-deletion policies can quickly bring on disruption, collapse, and litigation. Failing to renew a service provider’s subscription or missing critical data volume thresholds can result in account cancellation, data deletion, and ripple effects on other providers’ services. Some domain issuers haven’t allowed a business owner to have their own domain name when the person who signed the TOSAs passed away or left the company. Instead, the issuers inform the business’s succeeding owners that they’ll have to wait for the domain’s subscription to expire. Once expired, a domain name can be placed in an auction pool, where prospective buyers can pick it up.
Therefore, the succeeding owners will have to bid for it in the open market, which can be a massive time and money drain. That’s assuming they win the bid. If they lose the bid to another entity and it is willing to sell the domain back to the business, it could come at a very costly sum.
If a business or social media account relies on its site for income and revenue, imagine the implications of losing it to another business. The loved ones, staff, and partners are the ones impacted.
Administrative inactivity is a similar issue. Some sites delete accounts that have been inactive for a specific time, which means the domain name will go up for grabs again, or data will be automatically deleted.
Estate representatives often miss account renewal dates or inactivity windows because they’re uninformed, unaware, or busy carrying out more pressing duties. Whatever the reasons, the results could be the same as they would be if the subscription expired.
If the business and content provider’s relationship is not maintained after the TOSA signer’s death, the business or influencer’s entire ecosystem will collapse. Data maintenance, internal/external communications, payment processing, security and privacy, and more deteriorate or disappear. The damage is vast and almost impossible to recover from. This result can be data exposure or complete erasure. Systems need to be rebuilt, if that’s even possible. Account holder relationships are damaged, often irreparably. The state of these situations can open the door for lawsuits against the business and even possibly against the fiduciaries and planning lawyers.
As just one example, Gerald Cotton, CEO of cryptocurrency exchange Quadriga, passed away unexpectedly while traveling in India in 2018. He had the only passkey to the account holders’ assets. Upon his death, they could no longer access the exchange or the hundreds of millions of dollars in crypto in holdings. You can imagine the furor this problem caused. Predictably, users launched numerous lawsuits to recoup their losses, beleaguering and eventually destroying the company, which had been caught unaware by circumstances for which they were not prepared. The impact went on beyond just the business, but his wife had to return most of the personal holdings.
Lawyers and those working within estate planning need to ask the appropriate questions and actively seek to learn more. More specifically, they need to ask their clients questions about their responsibilities and duties to their business or employer. And they need to create digital property succession plans around those businesses.
With new fiduciary access laws such as the Revised Uniform Access to Digital Assets Act (a.k.a., RUFADAA) firmly in place in 47 states and the District of Columbia, digital property as assets is established and has a path to data/contents/transference access.
At the very least, advisors should ensure that anyone who signed a TOSA assigns the account to the business in their disposition instructions and directives.
Lawyers, financial advisors, and individuals looking for information and a viable solution around digital estate planning are encouraged to contact Directive Communication Systems (DCS). We assist attorneys and their clients in organizing personal accounts and property to facilitate asset transference and account continuance. According to the account holder’s directions, our password-free system keeps accounts and assets transparent and actionable to facilitate a safe, smooth asset transfer and promote peace of mind.