Estate Planning for Digital Assets
BACKGROUND AND CURRENT LANDSCAPE
Until fairly recently, access to digital assets by someone other than the owner of those assets was typically governed by a service/website’s terms of service. These could vary significantly. In some cases, once a service or website found out about the death of the owner, the account was closed and access to any related digital assets was lost forever.
Many people handle the transfer of digital assets by providing login and password information to someone they trust. But this is not the same as granting them legal authority when a terms of service agreement doesn’t allow it.
The Uniform Law Commission (Uniform Law Commission – About) is a state-supported organization that seeks to “provide states with non-partisan, well-conceived and well-drafted legislation that brings clarity and stability to critical areas of state statutory law.” In other words, the commission drafts model legislation that states can choose to adopt, or not. After a few iterations, The Uniform Law Commission issued the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA) to address the transfer of digital assets. It was published in July 2015. The RUFADAA has received endorsements from consumer advocate groups such as the AARP and the National Academy of Elder Law Attorneys, as well as from big technology companies such as Facebook and Google.
Since July 2015 nearly 40 states have adopted the RUFADAA and several more have introduced legislation related to it. You can see the status of RUFADAA adoption for your state here.
PLANNING FOR YOUR DIGITAL ASSETS
Your planning for digital assets includes three main steps:
- Creating an inventory of your digital assets
- Deciding what to do with each of your digital assets
- Implementing the plan
Creating your digital assets inventory, and deciding what you want to do with your digital assets, will help you in gathering your thoughts and getting organized related to your digital assets. But before implementing any steps it is critical that you consult with your estate planning attorney, just as you would regarding disposition of any other assets in your estate plan. The attorney may have specific thoughts on how the RUFADAA should be applied in your case, on language to include covering digital assets in your other planning documents, and how to handle any changes your state has made to the model RUFADAA legislation (and what to do if your state has not enacted legislation based on RUFADAA).
Further discussion on the first two bullet points above is provided below.
Create an Inventory of Your Digital Assets
The first step to planning for your digital assets is to figure out what assets you have. The Nerd’s Eye View article provides a graphic with common types of digital assets that you can use as a starting point:
Make a Plan for Each of Your Digital Assets
If your state has adopted RUFADDA, its guidance can help you decide how to approach planning for each of your digital assets. Even if you state has not adopted the model legislation, the structure provided by it can help you figure out the possibilities for each asset.
RUFADAA creates a three-tiered hierarchy of instructions that provides a clear path as to how a person’s digital assets should be treated in the event a fiduciary (such as an executor, trustee, agent appointed under power of attorney, etc.) seeks access from a digital service provider (custodian).
Tier One – Online Tools
Under RUFADAA, any instructions provide by a user in a custodian’s “online tool” for how the account should be handled after death or incapacitation will have priority over any and all other instructions, including, generally, Terms of Service. This is similar to designating a beneficiary for a retirement account. The designation of a beneficiary supersedes any instructions in your will or other estate planning documents.
Right now these online tools are in their infancy, and different providers allow fiduciaries varying powers related to their accounts. Two examples include Google’s Inactive Account Manager and Facebook’s Legacy Contact.
It is therefore important to review the online tools for your digital assets periodically, since more and more custodians are adding online tools. It is also important to know specifically which custodians allow what powers.
Tier Two – Legal Documents
In the event that a custodian does not offer an online tool, or if a user does not opt to use an available tool, then RUFADAA will look to the user’s legal documents. In the past, and still in the case of states that have not adopted RUFADAA, custodians often ignored legal documents, due to the complexity of dealing with them.
Tier Three – Terms of Service Agreements
If a user provides no instructions via an online tool nor via legal documents, then under RUFADAA the custodian’s default Terms of Service will dictate a fiduciary’s access to digital assets. This may or may not be a problem, but it is important to understand what each custodian’s Terms of Service provide for, which means you may really need to read the agreements before scrolling through to find the “Accept” button. If, for example, the terms of service state that all rights to the account terminate upon the account holder’s death, and that particular account receives online bills, account information, etc., it can become difficult for an executor to ensure that his or her duties are carried out.
And non-financial issues can be just as problematic. If a cloud service terminates an account on death, and there is no other backup, a lifetime’s worth of photos, contacts, etc. may be lost.
FINAL THOUGHTS
Because of the relative newness of the information age, planning related to digital assets is constantly evolving. Custodians are adopting tools, states are adopting legislation, and vendors are creating products such as digital password managers and tools to help you keep your estate documents organized so it is easier for a fiduciary to administer your estate.
So, as is the case with your other estate planning, digital estate planning is not a one-time activity, the result of which “sits on a shelf.” It is something that will require periodic review and revision as your needs change and available tools and guidance evolves.