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July 12, 2012 Newsletter Archive

Online and Password Protected?
Surprising Challenges to your Fiduciaries

There is no question that advances in technology have led to greater connectivity with family, friends, business contacts, online retailers and financial institutions, and has opened many of us to unlimited avenues of knowledge. Conveniences such as online banking, online shopping, automatic bill pay, email and social networking sites allow us to access activities in all areas of our lives with nothing more than a log-in name and a password. For some, this has meant a departure from physical records of any sort. Email contacts and billing software allow small business owners to correspond with clients and maintain records online; families and friends can share photos and messages through email and online networking sites; consumers can pay bills online with automatic monthly prompts that deduct payments directly from a designated account. For many of us technology is great. It's paperless. It's green. It's speedy. It's streamlined. Yet, as with every upside, there may be a few challenges encumbering this otherwise fresh approach.

While there is ongoing debate about whether our increased online presence is good or bad, one thing is clear: our increased reliance on the internet has changed the way we store information and communicate with others. Though not immediately apparent in the context of estate planning, this change can have a major impact on the ability of a fiduciary to fulfill his or her role.

Under a financial power of attorney, Will or trust the role of the fiduciary is vital. One significant fiduciary responsibility is to inventory and manage assets on behalf of the principal or decedent. However, difficulties can arise if bank or brokerage accounts are managed online and only accessible with a user name and password. Although a document such as a financial power of attorney may authorize the agent to act in a capacity that appears to be consistent with access to an online account, user names and passwords can prove to be barriers to access. Because of the lack of paper records, a fiduciary may not even be aware of institutions where the principal had accounts. Though this obstacle may be overcome through direct contact with the banks (once they have been determined), the inability of the agent to engage in transactions and access current statements immediately may have negative consequences.

Increasingly, small business owners operate largely through online communication and cloud computing. Placing orders online to vendors and communicating through email is often faster and more efficient than using the telephone or postal service, and using cloud storage reduces paper use and storage space. Yet, without passwords, a fiduciary may be unable to access contacts or sales accounts, precluding the fiduciary from dealing with pending contracts and other business matters and ultimately jeopardizing the fiduciary's ability to keep the business afloat. Lack of access to contacts may also deny the fiduciary any opportunity to inform clients and business contacts of the situation at hand, resulting in frustrated clients and potential misunderstandings, leading to long-term legal or financial consequences.

Though social networking sites and personal email do not pose the same risk to continued financial health as the above examples, they nevertheless have value. Social networking sites provide a forum for storing and sharing photos, which a decedent's loved ones would likely want to access. And while an unanswered personal email does not carry the same threat that an unanswered business email poses to reputation, personal email can be just as important to maintain communication with loved ones and keep them informed.

Unfortunately, current legislation does not provide a mechanism under which a fiduciary is able to gain access to a principal or decedent's online service or account. In fact, a fiduciary who successfully hacks into a principal's account may be subject to criminal prosecution. Moreover, use of some online services requires that the user agree to terms of service that preclude use by anyone besides the user, so even if the fiduciary has the principal's user name and password, such access is still considered unauthorized and may have legal ramifications.


So what you can do to minimize barriers for your fiduciary? A good starting point is to make a list of your email accounts, online banking and brokerage accounts, social networking sites on which you are active, and other sites that you use for business or personal use. Compile your user names and passwords and determine a secure location for the information. Next, consider who you would like to be able to access this information and under what terms. One possibility is to leave a list in a safe deposit box and give your fiduciary access to the safe deposit box in the event of your death or incapacity.

Another option, though less promising, is to add language to your estate planning documents permitting online sites to release user names and passwords to a fiduciary. Unfortunately, in the absence of legislation authorizing such access, at present even this additional language is unlikely to be successful. Moreover, as stated above, some sites have user agreements that limit access to the user regardless of whether the user has supplied his or her password to an authorized agent, so it is worthwhile to review user agreements and reflect on what content might be inaccessible and how best to deal with that obstacle.

Although current solutions seem fairly primitive and perhaps even unworkable, not to mention potentially illegal, it is clear that our law and policy makers will have to begin to contend with this issue as more of us rely heavily on virtual transactions. At present, it is at the very least important for you to take stock in how you manage your online presence and make some contingent plans to avoid future problems.

We would love to hear from you! If you are interested in guest writing for our newsletter or simply have a comment to share, please let us know.

Melendy Moritz PLLC is a client centered boutique firm. We focus on your unique needs by providing the individualized legal counseling and advising tailored to your specific situation.

We concentrate on the planning that matters to you.
Call us at 603.643.6072 or 802.457.9492


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