Generally, anything that a person has in his or her possession at the time of death becomes part of his or her estate and can legally be passed to his or her heirs or beneficiaries. However, as more and more property is digitally purchased, accessed, and stored, questions are now being raised as to whether these “assets” are able to pass to others after death.
How do assets typically pass upon death?
There are three ways that assets can pass to loved ones after a person’s death:
- Beneficiary Designation – Assets such as a 401K plan or life insurance allows a person to name a recipient of the death benefit on a specific form provided by the plan or company.
- Operation of Law – For example, if property is jointly owned with rights of survivorship, the surviving owner receives the property.
- Legal Document – Will or Trust created by the deceased person (the decedent).
A Will allows a decedent to designate who receives certain property after death. However, Pennsylvania has limits on what an individual can bequeath in their Will, depending on the type of assets in the estate and whether they are actually “owned” by the decedent. In many circumstances, it is easy to determine what assets a decedent owns upon their death, e.g. cars, homes, money in bank accounts, and other tangible personal property. However, when it comes to digital assets such as an iTunes library, the question becomes whether the decedent actually owns the asset.
What are digital assets?
Digital assets are an individual’s electronic possessions that are accumulated during his or her lifetime. Digital assets can take many forms, from digital images taken by cameras to music downloaded from the internet. There is no exact definition of what digital assets include, so long as there is no tangible medium, such as a CD, DVD, book, etc.
The most common digital asset that many people are concerned with is a digital music library, typically in the form of .mp3s and/or through iTunes. Consumers in the U.S. spend a substantial amount of money each year on digital music files that can be played on their home computers, iPods, media devices, and even home theaters. These digital files can be legally purchased by the song, album, or artist and through software and hardware from companies such as Apple and Amazon.
Do people own their digital assets?
Many believe that when they click “buy” in a digital store such as iTunes or Amazon, they own what is downloaded. This is not the case. When “purchasing” digital music, a person typically is purchasing a non-transferable license to play that specific song, album, artist, etc. This license is only being granted to that individual and, based on most Terms of Service agreements of Apple, Amazon, or similar companies, is often not transferable and expires upon death, along with the purchased content. The reason for this restriction is to protect the original artist from purchasers making multiple copies or essentially digitally distributing their work and only paying for it once.
What is a Terms of Service Agreement?
What media can be passed upon death?
The restrictive conditions which are placed on digital music also apply to many CDs, DVDs, Blu-Ray Discs, and other physical formats of media, however, a legally produced and distributed physical medium of media (such as a CD) contains both the license to listen to the music and the music itself. They are one and the same. Therefore, when such mediums are legally purchased, buyers are given greater rights to sell, give, or gift this media under the “first-sale doctrine” ofSection 109 of the US Copyright Act. This doctrine also allows for such media to pass legally through a person’s Will. For example, someone who owned 10,000 vinyl records could legally pass them to named beneficiaries through a Will.
Downloaded digital music, however, is comprised of two separate parts: a digital license to listen to the music and the actual digital music file. As discussed above, the digital license is only given to the buyer and cannot be transferred to another, as it is separate and unique from the actual downloaded music.
The technical differences in ownership and transferability rights between physical and digital media has led to recent confusion on the subject of leaving digital music upon death. Many individuals now want to leave specific songs, albums, or entire digital music collections in their Will, thinking that it is similar to leaving a physical copy. This may not only be impermissible, but may also be a direct breach of the Terms of Service contract and, for instance, may subject an iTunes account to immediate termination, prosecution, and/or damages.
The digital music marketplace is a rapidly growing industry and while it may be clear in many Terms of Service agreements that these digital assets cannot pass after death, many people remain unaware of this restriction. The best way to protect your assets and avoid any unanticipated issues regarding your estate plan is to consult a Pennsylvania attorney with specific experience in estate and probate law. A skilled PA probate lawyer can work with you and your family to develop a comprehensive and effective estate plan, which can help to streamline the estate administration process and to spare your loved ones from unforeseen complications in the future. Call The Martin Law Firm at 215-646-3980 to contact an experienced PA probate lawyer.