Handling Digital Assets in your Estate Plan

Handling Digital Assets in your Estate Plan

Written by: Christopher N. McGann, Esq.

A pillar of any effective and comprehensive estate plan has always been deciding who may access bank, credit card or any other type of financial account should incapacity or death occur. The logic is straightforward. Bills must be paid, funds deposited, bequests made – and someone needs to handle those tasks. But what about our digital persona? Whether sitting in front of a computer, scrolling through a tablet or staring intently into the compact screen of a smartphone, much of our lives seems to occur in cyberspace. Estate planning has thus transcended the tangible and consideration must be given to how digitally stored and accessible content can be properly accessed, managed and safeguarded in the event of incapacitation or death. The question then became — how does and should this happen?

For years, the answer was unclear. As web-based services and features continued to proliferate, legislation remained absent and internet custodians and fiduciaries alike were left wondering what can be disclosed, in what depth and to whom. Extremely problematic was the fact that, absent any clear direction, an online custodian’s terms of service might control, which, could be as scant and permanent as “upon a user’s death, the user’s profile and all associated information will be deleted.” Yikes. Just like that, access to a financial account maintained solely in an online capacity could be barred or a photo album stored in the cloud could be deleted, wiping out decades of memories.

Fortunately, in 2015, the Uniform Law Commission passed the Revised Uniform Fiduciary Access to Digital Assets Act (“RUFADAA”), herein referred to as (“Act”). This Act provides a roadmap to both custodians of digital assets and fiduciaries trying to access an asset. Virtually every State has since adopted the provisions of the Act, or a version very similar to it, with New Jersey doing so in 2017, and Pennsylvania finally joining the fold in mid-2020, with the bill becoming effective this month.

The versions of the Act passed in New Jersey and Pennsylvania mirror the uniform version. At the outset, it is important to note that the Act governs the release and disclosure of “digital assets.” A “digital asset” includes an electronic record in which a person has a right or interest – it does not include an underlying asset or liability (i.e., a bank account which can be accessed electronically) unless the asset or liability is itself an electronic record (such as digital currency). Thus, “digital assets” encompass virtually anything stored electronically and include e-mail accounts, photo libraries, music files, social media accounts, domain names etc.  The Act provides a clear hierarchy as to how a digital asset may be accessed and by whom:

  1. first look to whether the custodian has provided, and the user completed, an “online tool”;
  2. if the above is not applicable, refer to the user’s legal documents for direction (i.e., a Will, Trust, or Power of Attorney form);
  3. finally, look to the custodian’s Terms of Service (“TOS”) agreement.

If an “online tool” is offered and completed, it overrides any contrary directive in a legal document or TOS agreement. As time goes on, it is extremely likely more custodians will offer such a tool as doing so is really in everyone’s best interest. The user gets to dictate precisely what is/is not disclosed and the custodian will not have to guess or seek legal authority to act. As a fallback, Power of Attorney forms, Trusts and Wills should all contain clear directives as to how a client would like their digital assets accessed and by whom. An extremely important, and potentially overlooked, provision in the Act concerns the mandatory disclosure of a user’s “catalog” of electronic communications if requested by a fiduciary. This disclosure is automatic, and, unless explicitly prohibited in the person’s user documents would allow a fiduciary to receive a time-stamped listing of every email sent/received from the user and recipient. Although the substance of such communications would not be revealed, and while this may be of no concern to many, such potential invasiveness should at the very least be part of the conversation when discussing access and handling of digital assets.

The dawn of the internet and its never-ending uses adds an additional component to the estate planning process.  Going forward, the Act should be specifically referenced when preparing any estate plan documents. Moreover, as custodians are more than likely aware of this legislation, it is equally prudent to eliminate any possible ambiguity by amending existing estate planning documents to bring them into conformity with the guidance provided in the Act. As a TOS agreement may be outdated, offer minimal instruction or be completely inapposite to a person’s wishes, inquiring into whether an online tool exists, or at least addressing the management and disposition of digital assets in legal documents should be a must in any estate plan. Similar to the treatment of non-digital assets, thought should be given to whether control and management of one asset (such as a Facebook account) should be delegated to one fiduciary while the same responsibility for handling a different type of asset (such as a document or photography collection) delegated to a different individual. Just as a list of bank accounts is typically created, so too should an inventory of digital assets be prepared, updated and kept somewhere known to and accessible by a fiduciary.

If you have questions about this article or any other questions or concerns regarding your estate plan, please contact one of our estate planning attorneys.