Digital assets after death
By Cynthia M. Pedersen, J.D., LL.M.
Many individuals do not realize the value and extent of their digital records and the potential for financial or sentimental loss if these assets are lost or inaccessible. A well-drafted estate plan should address the management and distribution of digital assets to mitigate additional administrative burdens on fiduciaries.
Although what is considered a "digital asset" is always evolving to include new and innovative asset classes, currently, digital assets include (1) electronic communications, such as emails, social networking sites, and blogs; (2) online reward programs; (3) financial accounts; (4) digital collections, such as music files, photographs, and videos; (5) business accounts, such as customer databases including personal and sometimes confidential information; and (6) cryptocurrencies.
The rights to access these assets are scattered through a web of user agreements and federal and state laws, marking a fine line between a fiduciary's right to access and the decedent's privacy.
TERMS-OF-SERVICE AGREEMENTS AND THE LAW
Almost all digital service providers require individuals to enter into a "terms-of-service agreement" before they may create their digital asset. Many users fail to fully understand these agreements before accepting the terms. Often, users may not realize that they have agreed to prohibit third-party access, including by fiduciaries, to their digital asset upon their death or incapacity. This generally causes issues for fiduciaries when they are trying to account for a decedent's assets.
Federal laws governing the unauthorized access of digital assets often limit a fiduciary's ability to properly access a decedent's digital assets. Generally, these laws are focused on protecting privacy and combating hacking; therefore, violations of these laws are considered criminal acts. These laws generally provide broad protections through enforcement of terms-of-service agreements. Therefore, even if a fiduciary is able to access the account (i.e., has the username and password on file), he or she may not have the legal authority to do so and does not want to run afoul of these criminal statutes.
In addition, as of this writing, 41 states have enacted the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA), and four additional states and Washington, D.C., have introduced the legislation.
The RUFADAA allows fiduciaries to access, copy, and manage certain digital assets. Pursuant to this act, the original creator of the digital asset may give affirmative consent to disclosure of his or her electronic communications, either online or in a paper record. This consent is deemed to override certain terms-of-service agreements that would otherwise prohibit a fiduciary's access. It is important to note that absent affirmative written consent, a fiduciary may not be granted access under the RUFADAA. Therefore, even in the states that attempt to be fiduciary-friendly, appropriate planning is still required.
MAKE A PLAN
Getting to know a client's digital assets begins with creating an inventory. Clients should determine what digital assets they currently hold and how they want their fiduciary to manage those assets in the event of death or disability.
Once a list of assets is created, the fiduciary should determine under state law what planning options are available. This includes instructions within a will, trust, or power of attorney to allow a fiduciary to either access or destroy certain digital assets. Terms-of-service agreements should also be considered. Certain user accounts may have a set of requirements to ensure fiduciary access.
The adage that "failing to plan is planning to fail" takes on new meaning in the digital age. Failing to consider a client's digital footprint in estate planning is the equivalent of planning to sacrifice financial or sentimental value.