Stephen S. Wu-- SL: Legal Writer, swu@ckwlaw.com, (650) 917-8045, 166 Main Street, Los Altos, CA 94022

What Happens to Your Virtual Property When You Die?

Virtual property is worth real money. It may include virtual real estate in the Second Life® virtual world like Ansche Chung’s real estate that exceed $1M US in value, or may simply be trade secret source code or business plan that you store in some online backup storage service like Mozy. What happens to your virtual property held in your own name when you die? People will now need to account for their virtual property in their estate plans. It is not on the radar screens of estate planning lawyers, but it should be.
The New York Times recently published an article by Chris Nicholson entitled “Virtual Estates Lead to Real-World Headaches.” It discussed the situation of a man and woman that considered themselves married in Second Life and had virtual real property together. The property was evidently in the man’s name, and when he died, Linden Research deleted his account and the virtual real property. Nicholson’s article makes the point that when you die, no one tears down your real life house or burns you paper letters, but with virtual worlds and online services, the service providers may delete your account and erase your online house and electronic files and mail.

Terms of service govern the status of virtual property (at least for now in the absence of statutory or case law clarification). And many terms of service, including Second Life’s, have no provision for what happens when an account holder dies or becomes incapacitated. Nonetheless, if you have a business or assets in a virtual world, like Ansche Chung’s real estate development business, death and incapacitation are important contingencies for which planning is essential.

This is where estate planning lawyers step in. For a real world real estate development business held as a sole proprietorship, an estate planning lawyer would help the owner name agents who could handle the business following the owner’s incapacity under a durable power of attorney for financial matters. The lawyer would also create trusts and/or wills for such clients to state who should receive the property upon death. Given that people like Ansche Chung have online property worth a lot of money, why isn’t this planning scenario just as important for virtual property?

Where I live, in the Silicon Valley, there may be some online entrepreneurs who are like Ansche Chung, who create real businesses with personal accounts holding those business assets in virtual worlds. But the issue goes beyond virtual worlds to something much more pedestrian, like online storage. There are many services now that store computer files online, whether as a substitute for local storage or as a backup. People could be storing anything online. In the Silicon Valley, source code for a hit software application could lead to the next Google goldmine. The online computer files of some estate planning clients in the Silicon Valley could very well contain source code, or if not source code, the business plan for the next Google, or a myriad of other online assets.

And of course, people in other parts of the country have the same issue. The author writing The Great American Novel, typing on a laptop in a cabin by a Vermont lake, may be storing the electronic version of it online. What if the online service provider deleted The Great American Novel upon the author’s death? Not only would the world have lost this great writing, but the author’s family would lose out on royalties.

My point is to say that the world is changing, and that assets of real value are now online assets, and not simply tangible ones. Estate planning lawyers will need to ask their clients about possible virtual assets and will need to account for those assets. We live in an information age. Information is the engine of economic growth and wealth in our country. We cannot ignore valuable virtual assets in our planning process.

What are some issues concerning estate planning for virtual assets? One issue is whether online accounts and files are really “property” that a person can “own.” For instance, some terms of service state that the user has no ownership in virtual property. This kind of term is most likely one that appears in the terms of service for an online game. What happens when a decedent has valuable in-game items? If there’s not enough value at stake, it may not be worth challenging, but a very valuable game account may someday lead to a challenge to such a term.

California Probate Code Section 62 defines “property” subject to a Probate Court’s jurisdiction in a broad way. It says, “‘Property’ means anything that may be the subject of ownership and includes both real and personal property and any interest therein.” I can foresee a case in which an executor or successor trustee seeks a court order stating that online items are “property” under this Section or its equivalent in another state and ordering the service provider to hand over control of the account to the executor or trustee. Someday, there may also be service providers willing to grant ownership rights, more likely perhaps in the context of a virtual world.

Another issue concerns privacy laws. If an account owner dies, a personal representative may not be able to simply call up the service provider and obtain a password to the decedent’s account. The service provider may have a privacy policy that prohibits turning over account information or content to a third party without a user’s consent. In that case, the service provider may refuse to allow the personal representative access. In that case, the answer may be a petition under Probate Code Section 850(a)(2)(D) for an order that the personal representative is entitled to assets in the possession of the service provider. Under California law, the service provider arguably has an obligation to surrender property of the decedent, but the service provider may want a court order authorizing turn over to protect itself from a claim of a privacy violation. Even if the decedent did not assert a privacy claim, government regulators might. Therefore, requiring a court order would seem to be a prudent course for a service provider.

Finally, planners should consider the effect of cybercrime laws, like the Computer Fraud and Abuse Act, and terms of service. A service provider could take the position that if a personal representative finds the decedent’s password and uses it to access an account after death, the personal representative is gaining unauthorized access to the account in violation of the Computer Fraud and Abuse Act and the service’s terms of service. On the other hand, the personal representative could contend that he or she steps in the shoes of the decedent for purposes of authority to access the account. Nonetheless, the Nichols article suggests to service providers that they make plans for death and disability by allowing users to name a contingent authorized user who has the authority to access the account. In the absence of clear procedures for contingent authorized users to an account, it would be prudent for a personal representative to avoid simply accessing the account following the decedent’s death using the decedent’s password, and to obtain the court’s instructions permitting the access.





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