Don’t Make Dying More Complicated for Your Family: Plan for Digital Assets
The migration of our lives to the online world has made our lives much easier, but it has made our deaths more complex. Increasingly, our most significant assets are taking on digital form. Almost everyone owns some type of digital asset. Photographs, letters, bank statements, even currency itself—these are just a few of the things that were known to us primarily as physical objects less than a generation ago, but which many of us now store digitally. The “digital assets” that people own today include social media accounts and so many services available only via an app on your smart phone.
If such assets were held in the physical possession of a deceased person—on a computer, flash drive, or other device—they could be distributed in much the same manner as tangible property. Frequently, however, a decedent’s digital assets are maintained on the servers of a third party such as Facebook, Google, or an online bank. Until recently, this situation placed estate administrators in a real bind. On the one hand, they have an obligation to gather and manage all of a decedent’s assets. On the other, they face serious obstacles to identify and access digital assets, including knowing account user IDs, passwords, restrictive terms-of-service agreements and federal anti-hacking statutes.
Fiduciary Access to Digital Accounts
Pennsylvania’s version of the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA) became effective on January 19, 2021. This Act gives agents under powers of attorney and estate administrators some important tools to solve some of the problems presented by the increasing number of digital assets that we own. However, you must give agents and administrators the ability to use these tools.
Under RUFADAA, the extent to which a fiduciary can access the digital assets of a decedent is dictated by one of several sets of terms, in descending order of authority.
Online Tool:
Under RUFADAA, custodians can create an “online tool,” separate from their terms of service, through which users can determine the extent to which their digital assets are revealed to third parties, including fiduciaries. (On Facebook, the online tool is known as Facebook Legacy Contact.) If a user has provided direction through the online tool, it will supersede conflicting directives, including those in a will.
Drawback: The average person has 80 apps or online accounts. It would be very time consuming to interact with each and every app creator or online account to provide instructions for your fiduciary.
Will, Trust, or Power of Attorney:
The user can authorize access to their assets after death through a will or trust and, during their lifetime, through a power of attorney.
Caution: This is the best way to plan for access and distribution of your digital assets. You’ll get blanket coverage for all of your accounts. However, in many instances, it would not be appropriate or helpful to include instructions for all of your digital assets in a Will or trust. We recommend using a combination of these traditional estate planning tools along with memoranda or a Digital Asset Instruction Letter to provide access and instructions for your digital assets.
Terms of Service:
If the user has not provided direction, the custodian’s terms of service apply.
Drawback: This is the same as doing nothing. You’d be “outsourcing” your digital estate plan to a collection of app companies. That’s not going to be helpful in any way to your family.
RUFADAA Default Rules:
If the terms of service do not cover the issue, RUFADAA’s default rules apply. Those default rules recognize multiple types of digital assets. For certain digital assets, like virtual currency, RUFADAA gives fiduciaries unrestricted access. For electronic communications, however, the statute does not provide fiduciaries access; instead, it allows them to access a “catalog” of communications consisting of metadata such as the addresses of the sender and recipient, as well as the date and the time the message was received.
Caution: Do not be lulled into thinking that this law solves the problem of access to your digital accounts. If have not created an inventory of your digital assets, having access to unknown accounts is useless. It’s also clear that you must give your agent or fiduciary certain powers or they will not have them. The law also does not provide instructions on what you wish to be done with your digital assets. In short, this law did not solve the need for you to do some planning for your digital assets.
Best Practices
As this new Act becomes effective on January 19, 2021, you should consider updating you will, trusts and powers of attorney to ensure that this new law is properly incorporated into all of your estate planning documents.
In conjunction with this estate planning, you should maintain an updated inventory of your digital assets, including accounts and passwords. Be careful about revealing that inventory to third parties, however, as it presents a potential for fraud or identity theft.
If you have questions about digital assets or estate planning. or would like additional information, please contact one of our experienced estate planning attorneys.