The recent Apple case is an excellent example of a digital asset controversy, and one that will hopefully help bring awareness to this critical aspect of estate planning.

When I submitted Part I of this Blog, the Department of Justice had not yet “cracked” the iPhone’s code.  Even though this particular issue is now moot, the Apple case remains as an excellent illustration of the growing importance of digital assets and how difficult… or impossible… it can be to access valuable information after someone passes.

The Apple case began when Syed Riswan Farook and Tafshee Malik allegedly shot and killed 14 individuals, and injured several others, in San Bernardino, California.  Both were later killed during their retreat from law enforcement.

During the government’s investigation, a dispute arose over Farook’s iPhone, because Apple would not agree to unlock the phone.  The F.B.I. stated that it had reason to believe that the contents of the phone would provide information needed in its investigation and prosecution.  Specifically, the government believed the phone contained, “critical information and data” regarding the crimes, and conversations between Farook and Malik.  The government believed the phone would contain specific communications between Farook and the victims, as well.

A further plot twist is Farook had been issued the phone by his employer.  Typically, when an employer issues its employee a phone, the employer makes it clear to the employee that the phone remains the employer’s property.  In other words, employer issued phones are not the employee’s property.  So, when the F.B.I. obtained a warrant for the phone, it made sure to obtain the employer’s permission.  However, because the iPhone required a passcode to access the device, the government sought Apple’s help in executing its warrant.  Apple refused the government’s request, providing that it required Apple to create and install a new program, that didn’t exist, that would circumvent Apple’s own security features.  Apple suggested that, if this new program were to leak out into the public domain, that it would undermine Apple’s security features and therefore the value of its phones.  The new program, in Apple’s words, would essentially result in a master key which could be used to access any iPhone with this particular operating system.

So, federal prosecutors filed its Motion to Compel (Apple to comply with the Order).  The prosecutors, in their Motion to Compel, noted that Apple’s own “Legal Process Guidelines” provide that Apple will provide assistance with unlocking devices running iOS versions earlier than 8.0.  But, Apple refused to apply its own Guidelines, shedding light on the fact that corporations can change their guidelines, or ignore them.  So, whether you take the side of Apple, protecting what it considered its business value (and perhaps some private property stored on a device that Farook didn’t own), or on the side of the government trying to prosecute criminals who allegedly committed heinous acts, it is critical that you learn something from this case:

that you must consider and plan for your digital assets, to avoid a situation where your fiduciary (ies) cannot follow your instructions and wind up your affairs.

Don’t think for a moment that this issue is isolated! 

  • 30,000,000 Facebook accounts belong to dead people (and rising);
  • The average person has 25 passwords;
  • 72% of U.S. adults use a social networking site.

Don’t assume digital assets have only sentimental value!

  • A 2011 survey found that the average value of a person’s digital assets is $55,000;
  • A blog can generate significant revenue. In 2011, it was reported that the country’s 10 most valuable blogs have a value totaling over $785,000,000;
  • A domain name, and sometimes even a username, can be worth millions: com was sold for $35,000,000 in 2007;
  • People have been offered tens of thousands of dollars for Twitter handles;
  • Lawsuits over email accounts are becoming more prevalent. In Cheng v. Romo, one medical practice partner sued his partner and recovered $450,000 in damages over a misappropriated email password;
  • Email accounts are integral to a business’s going concern (just like phone lists are) and must be considered in succession and estate planning; and
  • Email accounts are often the only way that individuals now receive finance statements. More and more institutions and businesses have done away with paper statements!

Do not discount the sentimental and emotion value of digital assets!

  • Consider online photos, personal blogs, email messages and Twitter feeds;
  • Digital assets can help the surviving family understand more about the decedent, and help find closure especially if the death was untimely.

Please stay tuned for Part III, where we will discuss various Terms of Service Agreements and some of the State Laws that are being ratified to help regulate this important issue.

-Robert R. Pellegrini, Jr.