Defining Digital Assets
Consider for a moment how much your daily activities have an online component? From banking and bill paying to multiple email accounts – if something were to happen to you tomorrow, would your fiduciary have the necessary access to handle your password-protected and often encrypted digital life?
What exactly does this term “digital assets” entail and how is it relevant to estate planning? As technology has become embedded in most aspects of our daily lives, you may be hard pressed to think of someone who does not have at least some online presence and/or digital property. The term encompasses email, social media and other online accounts; digital photos, downloaded music and other files stored on the cloud. It also entails valuable content stored on personal devices and, maybe even in some cases, blog content and valuable domain names. Essentially, the term “digital assets” refers to intangible assets with sentimental value and perhaps even financial value.
Current & Proposed Law
The disjointed laws around fiduciary access to digital assets further muddy this already cloudy area of estate planning. Understandably, laws in this area have not kept pace with technology and its ever-increasing role in our daily lives. Privacy, copyright and intellectual property laws intersect with federal and state law on the matter resulting in confusion as to legal authority over a decedent’s digital assets. While a handful of states have passed some clarifying laws, the governing law in most cases dates back to 1986 regulations on unauthorized access of computer hardware and stored devices. Certainly these lawmakers could not have imagined how integrated our digital and daily lives would become. Furthermore, procedures for handling decedents’ accounts are often addressed in individual provider Terms of Service agreements and can vary dramatically by provider. As we hurriedly click through and accept new terms of service, do we have any idea what will happen to our email or social media accounts upon our deaths?
To rectify the situation, a national committee of attorneys appointed by the Uniform Law Commission is currently drafting proposed legislation to be known as the Fiduciary Access to Digital Assets Act. The primary purpose of the Act will be to grant fiduciaries (executors, trustees and agents under power of attorney) the power “to access, manage, distribute, copy, or delete digital assets and accounts.” The committee is attempting to work through the inherent difficulties in balancing the effectiveness of the Act from a practical perspective while respecting constitutional privacy laws.
How Does It Impact Me?
In the meantime, what should we do? First, identify your digital assets. Some experts recommend storing this “inventory” in an encrypted file with instructions for accessing the file kept securely with your original estate documents or in a safe box. Second, think about access to these assets after you are gone. Do you want your executor to be able to access your personal accounts? Would having access to your online accounts provide ease of administering your estate? Would your family and close friends find comfort in accessing your online photo archives? Some companies have begun offering digital “afterlife” services such as EstateAssist.com, the Legacy Locker and Data Inheritance. In spite of the possibility of inherent security and viability risks with such providers, they may offer a better alternative to the often out-of-date and unsecured password sheet many keep in their desks. Another alternative, if utilizing a password manager program such as Dashlane for PCs or 1Password for MACs, is to keep log on credentials to your password manager in a safe box. Additionally, many attorneys advise specifically granting your fiduciary the right to manage – access, control and delete – digital assets in estate planning documents. These steps may not be a panacea until the laws evolve; but they’re likely to increase ease of estate administration while also demonstrating testator intent with regard to these assets.
With access, a fiduciary will be able to more effectively distribute, memorialize or eliminate the digital assets as appropriate. In some cases, eliminating accounts can be an important deterrent for identity theft. Sadly, it is not beyond identity thieves to exploit the identities of the deceased.
The importance of planning for digital assets will only continue to grow as our reliance on technology increases. As with most estate planning, the most effective approach is to plan ahead. If you are interested in additional practical information on this topic, we recommend Your Digital Afterlife by Evan Carroll & John Romano.
It is worth noting that even where estate documents grant fiduciary access to electronic and stored communications, the fiduciary may still be in violation of privacy and fraud prevention laws as well as individual terms of service agreements until more current laws are enacted. However, there are no reported cases of the Department of Justice or a state prosecuting a fiduciary for unauthorized access to a deceased or disabled’s digital access. Nonetheless, the threat of criminal penalty does exist and experts predict it’s an issue that may end up in the courts.
- Carter, “Pixar for Estate Planners,” ACTEC Presentation to the Wake County Estate Planning Council, November 2014
- Bissett & Kauffman, “Surf the Evolving Web of Laws Affecting Digital Assets,” 41 Estate Planning Journal 4, April 2014
- Prangley, Haller & Coventry, “Web of Estate Planning Considerations for Digital Assets,” 40 Estate Planning Journal 5, May 2013
Jennifer Jones is a Trust & Estate Advisor at TrueWealth, LLC, a wealth management firm located in Atlanta. She has over 13 years of experience in tax and planning, combined with experience in trust administration. She can be reached at firstname.lastname@example.org or 404.487.0518.
This communication is not intended as accounting, tax or legal advice and is not a substitute for an opinion from your tax and legal advisor on specific issues applicable to you. Please consult with your CPA for specific guidance on your personal planning and an attorney for legal advice. You may elect unilaterally to follow or ignore completely, or in any part, any information, recommendation, or advice given by TrueWealth Management and its affiliates.