Addressing Digital Assets in Your Estate Plan
As you think about your estate plan, whether creating it or updating it, it is likely that you view your personal property as either tangible property (that which can be physically touched or seen) or intangible property (that which has value but isn’t physical in nature). In recent years, however, another category of personal property has emerged and is referred to as digital assets. Planning for these digital assets, how they will be located, accessed, and disposed of, is an important component of a comprehensive estate plan.
What is a digital asset? According to the Uniform Fiduciary Access to Digital Assets Act (UFADAA), a digital asset is defined as a record that is electronic. The Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA), which has been adopted by most states, defines it as an electronic record in which an individual has a right or interest. A digital asset is anything that is created and stored digitally, is identifiable and either has or provides value. Today, it is commonplace for people to live more of their lives online, to conduct financial transactions electronically and to store information in the cloud.
The more commonly known and recognized digital assets include:
- Personal Assets – those stored on a smart phone, a tablet or a computer, such as photos and videos, documents, domain names, emails and email accounts, texts, music playlists, personal blogs, gaming accounts and digital books.
- Social Media – this includes the interactions you have with others who have accounts with providers such as Facebook, Instagram and Twitter. These interactions include messaging others but the social media sites can also store photos, videos and documents. According to the Pew Research Center’s December 2022 report, over 70% of Americans use social media, and that number rises to over 80% with American young adults.
- Loyalty program benefits – consumers today often take advantage of their spending habits and travel by converting this activity into points, especially if they are loyal to particular providers. Some of these loyalty program providers allow accrued points to be transferred upon death while others do not. In some cases, knowing the login information of the member allows another to redeem or transfer the member’s remaining benefits.
- Financial Accounts – examples include online bill payment, an Amazon.com account, online media and magazine subscriptions, and online statements.
Newer digital assets, often those using blockchain technology, include non-fungible tokens (NFTs), bitcoin and other cryptocurrencies.
As is true with any type of property or asset that you own, you should plan how your digital assets will be managed and/or disposed of in the event of your disability or your death. If your estate plan doesn’t account for your digital assets, your representative, agent, trustee and/or heirs may be unable to gain access to them.
How should you plan for the use, management and disposition of your digital assets in the event of your disability or death? From a legal perspective, digital assets are like other types of assets that can be passed on to other designated parties in your estate plan. But more unique to digital assets, the laws regarding digital property are still evolving, and gaining access to that property can present significant challenges for anyone other than the original owner. In addition, the laws governing digital assets and access to digital assets vary from state to state.
The starting point of understanding access to your digital assets can be found in the Terms of Service Agreement (TOSA) you agreed to and entered into with the service or account provider, for example, Google or Yahoo. The TOSA is a contract between you and the service provider which governs the relationship between you and your digital assets held by the provider. It is likely that the TOSA has rules regarding who can access your digital assets and the sharing of passwords. Understanding the terms in the TOSA will help you understand your rights in and to your digital assets and the extent to which you can control and transfer them.
Family members of someone who has recently died or become incapacitated are often faced with obstacles in accessing digital assets, which can include challenges with passwords, data encryption and data privacy. If your agent or family member doesn’t know your password(s), they may be unable to access information or property that is digitally stored. And the digitally stored information may be encrypted, which adds another layer of protection. Encryption scrambles your data and can make it practically impossible for someone without the correct passcode or password to unscramble it. Lastly, federal data privacy laws prohibit online account service providers from allowing persons other than the owner access to your electronic content without your consent, and without this consent, your content may be inaccessible and leave your agents or heirs unable to gain access to your emails, photos and other information stored in the cloud.
By planning ahead, however, and addressing digital assets in your estate plan, you can avoid these obstacles. But how do you create a digital estate plan? This involves preparing a list of your digital property, deciding how you want it to be handled and putting a plan in place to make it happen. It is important to be proactive and to make your wishes known.
- Create an Inventory of your Digital Assets
We recommend that you create a comprehensive list of your digital assets which should include how and where these assets are held, as well as necessary information to access the assets, such as usernames and passwords, PINs and answers to secret questions. In that list, you should also include what you would like to happen to each asset in the event of your disability or death. Once created, it is just as important to keep it up-to-date as you change passwords and open or close accounts. Careful storage of this inventory is essential – store this list in a secure location and let your agents and family members know how to access it.
- Back-up the Digital Assets
We recommend you back up any data and digital assets stored in the cloud on to tangible media such as a flash drive, CD or portable hard drive so that your agents or family members can access them with fewer obstacles. This tangible media can then be stored in a safe place and can be left to beneficiaries in your Will or Trust.
- Authorize Agent(s) to Access Digital Assets
Your power of attorney documents should provide your agent with power not only over the digital assets, but specifically over the content of electronic communications. Your document must reference access to electronic communications if you wish to authorize your agent to access digital assets and their contents. Sample language could include “my Fiduciary has the authority to access, modify, control, archive, transfer, and delete my digital assets”. If you do not want your agent to have access to digital assets, we recommend this be specifically stated in your documents.
- Address Digital Assets in Your Will or Trust
Ownership of your digital asset upon death is governed by the TOSA. Some digital assets we think we own are not transferrable upon death because we simply have a license to use the digital asset during life. Other digital assets are transferrable, so it is important that your wishes regarding disposition of them known. If you have substantial digital assets, you may also consider appointing a separate Fiduciary with special skills to handle just the digital assets.
There are other things you can address in your Will or your Trust. You can specifically reference that there is a digital asset inventory which includes user names and passwords and provides your desires for each account.
Prudent planning requires that you develop a plan for your digital assets. Digital assets are now a part of everyday life and planning for your digital assets is an integral part of developing a comprehensive estate plan. Your goal is to ensure that you have an estate plan in place that addresses your tangible assets, your intangible assets and your digital assets.
Renee Q. Boyd is an Associate Attorney with Elville and Associates and a key member of the firm’s busy Estate Planning Department. She partners with clients to educate them and provide them a perfect client experience through the entire estate planning process – along with future maintenance and updating of their planning as changes occur in the laws and their lives. Her client-centered approach reflects the time, effort and care she puts into each interaction. Renee may be reached at renee@elvilleassociates.com, or by phone at 443-393-7696 x111.
