+David Shulman

South Florida Estate Planning Law Blog

Insight & Commentary on Estate Planning, Wills, Trusts, Probate & Taxation

Estate Planning for your Digital Life, or, Why Legacy Locker is a Big Fat Lawsuit Waiting to Happen)

Like many people today, I love the Internet. It is a great business, social, and financial tool. I am member of a number of various discussion forums (legal, technological, social, and personal), have a Facebook Account, a twitter account, multiple email addresses for business and personal use, and  now have friends all over the world, many of whom I’ve never met

Additionally, in managing my personal finances, I try to live a paperless life as much as possible. I probably physically write less than 10 cheques a year, and sign up for paperless billing for every account that offers it. I wish that I could produce digital Wills and Trusts for my clients, but the law hasn’t caught up with the technology yet, but that’s a topic for another time.

I’m sure that many of you reading this are nodding your head in agreement because you are just like me. But have you ever thought about what will happen to your online life after you die?  The process of administering your estate or your trust upon your death involves gathering your assets, paying your creditors, and then distributing the assets to the beneficiaries. Generally when someone dies we file a form with the US Post Office so that the decedent’s mail is forwarded to their personal representative, trustee, or to the attorney administering their estate. Most banks, credit card companies, brokerages, etc, send a monthly (or at the very worst quarterly) statement. Thus, it’s not that hard to figure out what the decedent owned (and owed).

More after the Jump

UPDATE: Jeremy Toeman of Legacy Locker responded to this post and his comment and my response are in the comment section below.

But what happens when you elect to have paperless statements and all of your bills go to your email?  That’s a problem  I recently learned from Professor Gerry Beyer, who blogs at the Wills, Trusts, & Estates Prof. Blog, that there are a number of new companies that are the business of handling your "Digital Estate."  I thought that this was a great idea, but then, when I looked into it more, it seems that at least one of them is doing it all wrong. 

 

Legacy Locker, is opening for business in April and plans to charge an annual fee of $29.99 or a "Lifetime" fee of $299.99 (and in this case, it really is a Lifetime fee).  Perusing the site I see that there have been articles written about it in the Wall Street Journal, US News and World Report, TechCrunch, and CNet.  The various articles indicate what the site really wants is to market their services to estate planning attorneys so that they in turn can market it to their clients.  Well, I am an estate planning attorney, and the only thing I’d get in marketing their service to my clients is a lawsuit for legal malpractice. 

According to the site:

Legacy Locker is the safe and secure way to pass your online accounts to your friends and loved ones. It’s like a digital safety deposit box – you can put all your online accounts (emails, photos, social networks, everything online that requires a login) in it. For every account you store, you can assign a beneficiary, someone to whom you want to entrust your digital assets for the future. In the unfortunate event of your death or should you become incapacitated, Legacy Locker securely passes your account information on to your named beneficiaries. No need to wonder or worry about what happens to all your digital assets, they’re now being protected for you. (Emphasis Added)

When I started writing this post, it was going to be a general information post about Legacy Locker and other similar services.  But then I started perusing their site, especially their FAQ and I have some serious issues with the services they are offering and the claims that they are making.  I have to really wonder if an estate planning attorney reviewed it for them before they posted it.  The problem is that they seemed to have mixed up information accounts and actual assets.  And even then, the proposed distribution of the information accounts is problematic.

I am going to copy and paste from their FAQ at length below, because it’s important  All emphasis below is added by me.

From the Legacy Locker FAQ:

6. How do I pick beneficiaries for my digital assets?

You can assign beneficiaries to receive one or multiple digital assets. For each beneficiary you need only enter their email address and relationship, Legacy Locker handles the rest.

7. What Kind of Things are "Assets"

An asset is any website that requires a login, like an email account or photo storage website. Some things you might put in your Legacy Locker includes: Gmail, Flickr, Facebook, Paypal, Yahoo! Mail, Ebay, iTunes, ING, Snapfish, YouTube, AOL, Amazon, Kodak Gallery, WordPress, GoDaddy, Hotmail, Netflix, Blogger, LinkedIn, Photobucket, 12seconds, Box.net, Friendster, TypePad, Party Poker, Mint, Twitter, and any other websites that require an account.

Generally you might want to add any of the following kinds of accounts or assets to your locker: email accounts, photo sites, video sites, social networks, domain registrars, computer logon names and passwords, DMV logon accounts, music accounts, messaging tools like twitter or IM, blog administration accounts, paypal, news subscriptions, notes on how you want your funeral to be handled, notes on where to find those last little personal artifacts of your life and what you want your loved ones to do with them.

10. What is a beneficiary?

Beneficiaries are the people who will receive your digital assets, the login information for all the websites you use.

Beneficiaries are the people who will receive your digital assets, the login information for all the websites you use.

11. Can I have more than one beneficiary?

Yes, if you are on a paid plan, you can specify as many beneficiaries as you choose. Each asset however can only be distributed to one beneficiary.

14. Is Legacy Locker the same as a will or estate? Or an electronic will?

Not at all. An electronic will replaces a standard will and deals with your physical possessions. By contrast, Legacy Locker is a service that guarantees your online information and ASSETS are distributed according to your wishes upon your death. You could use your standard will to do this but it’s not very practical since you would have to continually update it. Legacy Locker is an easy-to-use digital safety deposit box that assigns access for various accounts and digital assets to the beneficiaries you designate.

Do you see the problems here?  Even though they are online accounts, many of these assets have actual financial worth.  There could be a significant amount money in your PayPal Account or your online poker account  For many people their eBay account is an active operating business that earns thousands of dollars a year!  Website domain names are often sold for hundreds, if not thousands of dollars.  Amazon, iTunes and the like are all linked to your credit card.

Now I am only licensed to practice law in Florida, so if I’m wrong about this in another state, I welcome comments telling me so.  You can’t use some online company to "give"  assets to a "beneficiary" after your death without properly executed estate planning documents!  Those assets become the property of your estate and should be subject to probate.

Even the other "accounts" that they mention that do not have measurable monetary value are extremely troubling to me.  They claim that through Legacy Locker "beneficiaries" will "receive" your digital "assets."  Read again what they wrote in #14. " An electronic will replaces a standard will and deals with your physical possessions."  In most (all?) States, "electronic" wills are invalid.  In ALL STATES, a Will does not only deal with your physical tangible property, but with your intangible possessions too.  Unauthorized practice of law, anyone? Again, and even if these intangible accounts have no monetary value, they may have sentimental value to one of your intestate heirs.  I think that even the password to your email account could be subject to challenge also.

What I think would be a great idea, and what I thought Legacy Locker was going to be before I read their site, is to have a secure place where all of your personal and financial account information is stored, so that upon your death it can be given to your personal representative, the trustee of your trust, or to the attorney administering your estate so that they may properly administer your estate. That there is the right way to do it.

I’m not a litigator  I don’t do any litigation at all.  But I would relish the opportunity to represent the surviving spouse of a decedent whose eBay business was "given away" by  Legacy Locker to an online friend in Timbuktu.  I wouldn’t even ask for a retainer.

Sorry Legacy Locker.  I know you’ve gotten a lot of press, but I think you need to go back to the drawing board on this one.  Use my idea above.  You can have it for free.  Still store all of the information, but get out of the business of distributing the asses to beneficiaries.  Leave that to the professionals.

 

About the Author

David ShulmanDavid is a Fort Lauderdale attorney with a law practice focused on estate planning, probate and trust administration, asset protection, guardianships, and tax. Among other things he is a Mac nerd, BBQ lover, and blogger. Follow him on Google or Twitter.View all posts by David Shulman →

  • http://www.legacylocker.com Jeremy Toeman

    David, thanks for taking the time to write about us, I’d like to clarify something that seems to be a big barrier in your view on Legacy Locker. From my reading of your post, it appears that you are analyzing our service as something that would act in place of an estate or trust, whereas we see it as something that works in the complement of one.
    I personally have an estate plan and trust, prepared for me by an estate planner. In that document, all my assets are properly cared for. So using a digital asset as an example scenario, I have an account with GoDaddy, wherein I own many web domains, probably worth tens of thousands of dollars.
    Should something happen to me, my written estate plan does properly move this asset to my wife. However, logistically, there’s no way on earth it would get to her. GoDaddy sends me no written mail, ever. Sooner or later, she’d close our joint credit card account, at which point GoDaddy would be unable to bill me. They would email me, but since my wife doesn’t happen to have my email password available, sooner or later they would close my accounts, and release the domains back to the wild.
    The goal of Legacy Locker is NOT to replace a written estate plan, will, or trust, but to help the logistical flow of transition from an account owner to their next of kin. As it stands today, my computer’s password, my email accounts, my online backup site, etc would all eventually disappear into the ether should anything happen to me. But with Legacy Locker AND a properly executed estate plan, I can know that the important people in my life will get access to all of my electronic goods when needed.
    We have spoken with numerous estate planners to help us build the system, and the points you make in your 3rd-to-last paragraph are actually quite spot-on. We believe most estate planners who we work with will use the site in exactly this manner.
    Also, your example in the 4th-to-last paragraph of point #14 in our FAQ is taken out of context – we explicitly state that we do not consider our service to be anything like an electronic will. We are much more of a facilitator/transport mechanism.
    I hope the above really clarifies our purpose. If not, I’d be happy to talk more at any occasion. I think we are much closer aligned than you may have assumed of us, and I hope you’ll take another look at the site with this in mind!
    Best,
    Jeremy

  • http://www.sofloridaestateplanning.com David Shulman

    Jeremy,
    Thank you for your immediate response. I wish you good luck with you endeavor and maybe I was overly harsh. I think you are almost there.
    That being said, I still think you have problems that are going to get you in trouble in the future. The problems are all based upon the tendency of people to change their mind, and often. Every estate planner will tell you that there are certain clients who will change their will if their son doesn’t call them enough, and then change it back when he does.
    Consider the following factual scenario, which I do not think is far fetched at all. Husband drafts a Will leaving Wife all of their domain names (worth as you said, thousands of dollars), and then goes to Legacy Locker and designates Wife to receive the login information after H’s death.
    H and W get into a fight whereupon H logs onto Legacy Locker’s site and changes the “Beneficiary” of the Domain information to H’s son from a prior marriage. H intends to change his Will also, but changing a Will takes time and money and logging onto an internet site is easy. Additionally H doesn’t tell anyone that he’s changed the Legacy Locker informaiton.
    Before being able to either change his Will to leave his son his domain names or his Legacy Locker information back to W, H dies.
    You are notified, you, per H’s request to you provide the information to H’s Son, who refuses to turn the accounts over to W, even though that’s what H’s will provides.
    You just bought yourself a lawsuit.
    I know you want to work in conjunction with the estate plan, but know that if you have an internet site where people can change the Beneficiary of that information at will (no pun intended), then they are going to do so, and often, and you are going to run into some serious problems in the future.
    Please feel free to respond if you wish, and I promise that I will post any comments you might have in full and unedited.
    David

  • http://www.davisfreeberg.com Davis Freeberg

    Maybe I’m looking at this differently because I don’t have a legal background, but my impression of Legacy locker is that it would be a bit like the executor on a will. Instead of making someone hand out three dozen death certificates to gain access to peoples online accounts, it would let them give one company the proper paperwork and then whoever that person is would be responsible for making sure that the assets go to the right place. It doesn’t seem that hard to allow someone to change who gets access and to change it back if they want although how someone would know that you had a digital locker account in the first place might be problematic if you change your mind a lot. There may be technical details that still need to work out, but I do think that it fills a very big need in the market. There are too many horror stories of widows and heirs not being able to gain access to a Facebook or other type of account. The last thing I’d want my heirs to have to deal with is constant friend requests from people who didn’t know that I had moved on.

  • http://www.sofloridaestateplanning.com David Shulman

    Davis,
    Thank you for reading and for your comment. As I told Jeremy in the above comment, I was probably overly harsh in my criticism and I do think it’s a great idea. They’re almost there.
    I think the general idea of having one place to store all of your digital information to be available to [someone] is fantastic. Where I become greatly concerned as a Trusts and Estates attorney is when they start including accounts that have actual monetary value. It’s one thing to have all the passwords to facebook or have someone be able to post a “Sorry guys, I’m dead” tweet.
    But when accounts like paypal and ebay and domain names are included then you run into serious issues. How is a paypal account any different from a Bank of America Account? How is the intangible asset of a domain name any different from the intangible asset of a 100 shares of Apple Computer?
    Like I said, it’s a great idea, but Legacy Locker, and companies like it, are going to get themselves into serious trouble if they start distributing “assets” to “beneficiaries” without involving the legal process.