Estate Planning for the Virtual World

Joel Schoenmeyer publishes “Death and Taxes – The Blog“, and recently posted on an interesting article in Wired Magazine titled “Managing Your Digital Remains”.

To be sure, all entrepreneurs solve problems, but only the really excellent entrepreneurs can grow profitable companies by solving problems you, the potential customer, didn’t realize you had.  In this instance, several start-ups with nifty names such as AssetLock.net, Legacy Locker, and Deathswitch.com are out to solve emerging probate-type problems in the distinctly non-probate virtual world. (By the way, “Deathswitch.com” is a little over the top, don’t you think?)

These companies will:

…keep customers’ passwords, usernames, final messages, and so on in a virtual safe-deposit box. After you’re gone, these companies carry out last wishes, alert friends, give account access to various designated beneficiaries, and generally parse out and pass on your online assets. Digital remains that are not bequeathed to an inheritor are incinerated, closing the book on PayPal accounts, profiles, even alternate identities (especially alternate identities: You don’t want your mother knowing about, or worse, playing, the wife-swapping giant badger you became in Second Life).

Fees for the services range from “$10 to $30 per year, or $60 to $300 for a lifetime”.

Is this a workable business model?  Time will tell.  Will customers trust a “lifetime” protection guarantee offered by a start-up, Internet-based company?  Would that be like a lifetime warranty from Chrysler?  How useful will the services be when the client does pass away?  Readers know that passwords change frequently, and new password uses appear continually, while other accounts go dormant.  A client who is organized enough to keep “Deathswitch” or its ilk fully up to date so that they can do their job effectively is probably the same client who gets tax information to their accountant before January 10 of every tax season. One would expect such a client could certainly keep an up to date list of passwords on paper in their safety deposit box, and save the annual or lifetime fees.

Also, consider – are these companies operating for deceased customers in the virtual world acting as executors?  We know they can’t be acting as attorneys-in-fact, because powers of attorney lapse upon the principal’s death.  That means they are either acting as executors, or acting extrajudicially, correct?

In most instances, no one would deny that an executor stepping into the decedent’s shoes for legal, contractual, and financial matters would have the power to call a website and say “give me the password” or “close the account”, correct? So, if “Deathswitch” et al. act as promised, are they just acting in a gray area, as a virtual “pseudo-executor”?

If these companies are venture-funded, the VCs would have been well advised to consult T&E counsel before the funding round closed.  It’s not clear to KYEstate$ that the business model is legal, let alone sustainable.

Then again, perhaps within a few years it will be routine to seek appointment of an “ancillary virtual executor” for a new type of ancillary administration in the virtual world.  If so, these companies are likely to grab commanding market share. We’ll see, won’t we?

Readers, leave a comment or participate in the KYEstate$ polls to let us know what you think.  Law students: if you’re reading this post and seeking an interesting subject for a law review note, look no further….

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