Estate Planning With Digital Assets – part 1
Advances in digital technology have made parts of our lives easier and more convenient (Instacart, anyone?). The other side of that coin, though, is the complication that digital technology can bring when it comes to estate planning. To a certain extent, you can leave a far messier tangle of information, if it can even be recovered, if you haven’t properly addressed your digital assets in your estate plan.
How will your loved ones locate and access your digital assets following your incapacity or death, assuming doing so doesn’t violate privacy laws or the terms of service governing those accounts? And let’s be honest, you may not even want some of those digital assets to be inherited by your loved ones, or ever see the light of day (no judgment here).
So it follows that there are several special considerations you should be aware of when including digital assets in your estate plan. In this article, we’ll cover the most common types of digital assets, the current laws governing them, and how to ensure your digital property is properly accounted for, managed, and passed on in the event of your incapacity or death.
What Are Digital Assets?
Digital assets cover just about any files and records stored in the cloud, on mobile devices, on your computer, external hard drives, flash drives, CDs . . . you get the picture. Now let’s narrow it down to a couple of classifications for Estate Planning purposes: 1) those with financial value, and 2) those with sentimental value.
Digital assets with financial value include cryptocurrency like Bitcoin or Ethereum, online payment accounts like PayPal or Venmo, loyalty program benefits like frequent flyer miles or credit card reward points, domain names, websites and blogs generating revenue, as well as other intellectual property like photos, videos, music, and writing that generate royalties. Such assets have real financial worth for your loved ones, not only in the immediate aftermath of your death or incapacity, but potentially for years to come.
Digital assets with sentimental value include email accounts, photos, video, music, publications, social media accounts, apps, and websites or blogs with no revenue potential. This type of property typically won’t be of any monetary value, but it can offer real sentimental value and comfort for your family following your death and inform future generations in ways you may not have considered.
Do You Own Or License The Asset?
Although you might not know it, you don’t own many of your digital assets at all. For example, you do own assets like cryptocurrency and PayPal accounts, so you can transfer ownership of these items in a will or trust. But when you purchase some digital property, such as Kindle e-books and iTunes music files, all you really own is a non-transferable license to use those assets.
Whether or not you can transfer this licensed property depends almost entirely on the account’s Terms of Service Agreements (TOSA) to which you agreed (or more likely, simply clicked a box without reading) upon opening the account. While many TOSA restrict access to accounts only to the original user, some allow access by heirs or executors in certain situations, while others say nothing at all about transferability.
If it’s something you consider valuable for one reason or another, it is a good idea to review the TOSA of your online accounts to see whether you own the asset itself or just a license to use it. If the TOSA states the asset is licensed, not owned, and offers no method for transferring your license, you’ll likely have no way to pass the asset to anyone else, even if it’s included in your estate plan.
Taking it one step further, even if your loved ones have access to your digital assets if you’ve provided them with your account login and passwords, doing so may violate the TOSA and/or privacy laws. To legally access such accounts, your heirs will have to prove they have the legal authority to access them, a process which up until recently was a huge legal grey area.
So, Does Anyone Know What’s Going On
Until recently, there were no laws governing who could access your digital assets in the event of your incapacity or death. As a result, if you died without leaving your loved ones your usernames or passwords, the tech companies who controlled the platforms housing the assets would often delete the accounts or leave them sitting in a state of online limbo, inaccessible to your family and friends.
This gaping hole in the legal landscape caused considerable heartbreak for families looking to collect their loved one’s digital history, and it caused major frustration for the executors and trustees charged with cleaning up the estate—it also led to the loss of an untold amount of both tangible and intangible wealth. The federal government finally stepped in to find a solution for this problem starting in 2012, and by 2014, the Uniform Law Commission passed the Uniform Fiduciary Access to Digital Access Act (UFADAA).
A revised version of this law, the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA) was passed in 2015, with California enacting it in 2016. Under RUFADAA, specific guidelines are laid out for fiduciaries, such as executors and trustees, to access your digital assets. More specifically, the Act allows you to grant a fiduciary access to your digital accounts upon your death or incapacity, either by opting them in with an online tool furnished by the service provider or through your estate plan.
The Act offers three-tiers for prioritizing access. The first tier gives priority to the online provider’s access-authorization tool for handling accounts of a decedent. For example, Google’s “inactive account manager” tool lets you choose who can access and manage your account after you pass away. Facebook has a similar tool that allows you to designate someone as a “Legacy Contact” to manage your personal profile.
If an online tool is not available or if the decedent did not use it, the law’s second tier gives priority to directions given by the decedent in a will, trust, power of attorney, or other means. If no such instructions are provided, then the third tier stipulates the provider’s TOSA will govern access.
The bottom line: If you use the provider’s online tool—if one is available—and/or include instructions in your estate plan, your digital assets should be accessible per your wishes in most every state under this law. However, it’s critical that you leave your fiduciary detailed instructions about how to access your accounts, including usernames and passwords, because without such information, your executor or trustee won’t be able to even access, much less manage, your digital assets if something happens to you.
Make a Plan for Your Digital Assets
Given that leaving detailed instructions is the best way to ensure your digital assets are managed in exactly the way you want when you die or if you become incapacitated, in the second part of this series, we’ll offer practical steps for properly including your digital assets in your estate plan. Meanwhile, contact us, as your Personal Family Lawyer®, if you have any questions about your digital property or how to include it in your estate plan.
Next week, we’ll continue with part two in this series, discussing the best ways to protect and preserve your digital assets using your estate plan.
Given that leaving detailed instructions is the best way to ensure your digital assets are managed in exactly the way you want when you die or if you become incapacitated, in the second part of this series, we’ll offer practical steps for properly including your digital assets in your estate plan. Meanwhile, contact us today, if you have any questions about your digital property or how to include it in your estate plan.
This article is a service of the Law Office of Aisha M. Williams, APC, serving San Diego, Carlsbad, Escondido, and all of California. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a one-hour Life and Legacy Planning Session, during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. You can begin by calling our office or clicking the scheduling link on this site to schedule your Life and Legacy Planning Session and mention this article to find out how to get this $350 session at no charge.