Estate Planning and Digital Assets

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The internet influences every aspect of our lives, from banking to buying a home to storing family photographs to personal communication. The online content and property that we own are referred to as digital assets. It is important to plan for the access to and treatment of these digital assets prior to death to avoid loss, confusion, or unauthorized distribution of your property and private content.

James Ferraro, Vice President and Legal Counsel for Argent Trust Company, asks the question “What happens to your digital assets when you die?” and notes five reasons that everyone should have an estate plan that addresses digital assets:

· Some social media companies automatically mark a dead user’s profile as memorialized, inadvertently flagging the death for identity thieves, and the only way to close the account is with either a user profile setting or a will that gives your representative the express authority to manage, access, or delete the account.;

· Cryptocurrencies, pictures, web content, and other digital content may have monetary or emotional value that may be lost without a transfer plan;

· Some user agreements give only non-transferable usage rights to digital content such as movies and music;

· Non-fungible tokens, a blockchain digital lockbox for an owned file, such as a piece of crypto art, require a password or key to gain access and the content will be lost if the decedent’s representative does not have the password or key;

· Access to customer records and funds in online businesses such as PayPal or Amazon may be delayed or denied if the representative does not have express authorization to access the accounts.

Liz Weston, a Certified Financial Planner who writes for NerdWallet, notes, “Google and Facebook are among the few online providers that allow you to appoint someone to manage your accounts if you become incapacitated or die. Apple recently announced plans to add a similar feature. The vast majority of online providers don’t have this option, however. Complicating matters further, almost all providers prohibit sharing passwords.” Nonetheless, Weston notes that many estate planners recommend leaving a password list and an express authorization of access and transfer for your representative in your will. She suggests using Society of Trust and Estate Practitioner’s Inventory for Digital Assets and Digital Devices to create a complete catalog of digital assets and passwords. An alternative is to give your representative your password to an online password manager. An inventory should be kept with your will or trust documents but not incorporated into the documents in order to prevent the information from having to be included in the probate records.

In Digital Assets, 48 Estate Planning 28 (January 2021), Texas Tech Law Professor Gerry Beyer gives basic advice to estate planners about digital assets:

Practitioners should address digital assets from two perspectives. First, ascertain if the client owns any digital assets that are transferable upon death. If so, determine whom the client wants to receive them just as with any other type of property. If the client does not make a specific gift of digital assets, they will pass under the residuary clause.

Second, find out the client’s desires regarding the executor reading the substance of email messages, texts, and private social media postings. If the client wants the executor to have this access, express language granting access must be included in the will. Clients may wish to provide access to some accounts but not others. For example, the client may agree to provide content access for the e-mail account the client uses for normal family and household business but not for the account the client uses to communicate with the person with whom the client is engaging in an extra-marital affair.

He expands this advice with his co-author Kerri Nipp in this in-depth article available on SSRN.

In the past, personal representatives faced potential criminal and civil liability for accessing a decedent’s digital assets. Bogert’s The Law of Trusts and Trustees explains:

[A] fiduciary could incur liability either by acting or failing to act under the conflicting (and sometimes silent) federal and states laws as they existed in 2012. Either a fiduciary might incur civil or criminal liability for failing to administer the estate properly or criminal liability for violating a state or federal law designed to prevent access.

In response to this problem, the Uniform Law Commission drafted the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA) in 2015 to resolve some of the conflicts. The ULC expressed their purpose in two parts. First, the RUFADAA gives ‘fiduciaries the legal authority to manage digital assets and electronic communications in the same way they manage tangible assets and financial accounts.’ Second, the RUFADAA gives custodians authority to work with fiduciaries without violating privacy laws and other barriers. The RUFADAA leaves existing federal and state privacy statutes and case law intact but creates an exception to the legal barriers for fiduciaries to access digital assets under a specific framework of rules. Bogert § 568 (2020)

Almost all of the states have adopted RUFADDA with Washington enacting it in 2016 and codifying the law at RCW 11.120. You can read more about estate planning for digital assets in the Washington State Bar Association deskbook Estate Planning, Probate, and Trust Administration in Washington, available in our collection. (RM)

* This blog post is intended for informational purposes only, and not for the purpose of providing legal advice.