Estate Planning and Legislation Related to Digital Assets
by Greg Reese, President & CEO AmeriEstate Legal Plan, Inc.
Traditionally, when we think about the administration of a decedent’s estate, we typically envision a process that focuses on the individual’s tangible personal property and belongings, financial assets, business interests, and real estate.
However, in the Information Age, where almost every aspect of our lives is in some manner affected or controlled by information that is stored in an electronic form, it is not surprising that the impact of “digital assets” has fundamentally and forever changed the nature of estate planning and administration.
It is also not surprising that technological advances often outpace legislation and legal means to manage, access and control such assets.
The definition of “digital asset” includes any type of electronically stored information, including electronic information stored on a user’s computer or any other digital device, content uploaded to the Internet, and rights in digital property. It also includes records that are either the catalogue or the content of an electronic communication.
For example, digital currency such as Bitcoin would be an asset that is itself an electronic record. An Internet domain name would also be considered an asset that is also an electronic record. Commercial loyalty points and awards, such as accrued airline miles and hotel points, as well as purchased, earned or otherwise accumulated assets associated with internet games would be considered digital assets.
In addition, other forms of digital assets that have no extrinsic economic value may have tremendous sentimental value. For example, most photographs are now created by digital cameras and stored in digital form, often within a user’s account with an online provider such as Facebook, Instagram, Flickr, etc..
It may surprise you to learn that surveys of individuals value their digital assets at an average of $55,000.
In the absence of clear legal direction, internet providers who we might call custodians (Facebook, Twitter, Gaming app providers, etc) have often instituted independent policies for access to digital assets. Often these policies are codified into a “terms of service agreement” (TOSA), many of which are subject to contractual restrictions and cannot be transferred to the heirs of a deceased customer.
Starting with the passage of the Stored Communications Act (SCA) in the 1980s, which later became codified into the Fiduciary Access to Digital Assets Act (RUFADAA), Congress began the process of trying to catch up with technology. By 2019 we are a lot closer but still well short of catching up. Although, at this point in time, at least 34 States have ratified RUFADAA, we still do not have strict uniform standards.
In one of the most important senses, probate courts, executors, successor trustees and other entities involved in estate administration are authorized to pursue access to a decedent’s digital assets, however custodians (internet providers) are still given some latitude in whether to cooperate or not in providing access to these assets. In some cases they may resist due to their own “term of service” agreement, in others they require a specific and legally executed statement of intent on the part of the original owner as to whether or not they wish to grant partial or full access of their digital assets to their estate administrator. It’s not necessarily that they don’t want to cooperate, but they often fear potential liability and the burden (cost) of transferring assets to a 3rd party.
It would seem, at this point in time there are three primary ways to allow your estate administrator to deal with your digital assets:
(1) some custodians provide a mechanism whereby you can name a “digital executor” with the custodian to have access to your digital assets either upon your certified incapacity or upon your demise
(2) to specifically state in your durable power of attorney that you grant your agent access to your digital assets in the event of your certified incapacity, or
(3) to assign ownership of your digital assets to a living trust and grant the power and authority of your successor trustee to access, manage and control your digital assets.
Understand that under current law, these strategies do not guarantee access will be granted to your digital assets as a course of routine administration but their implementation is currently the best way to see your wishes carried out.
Since about 2010, owners of an AmeriEstate Living Trust portfolio have documentation that both assigns ownership of their global digital assets to their Trust but also provisions that authorize their agents under their durable power of attorney and successor trustee under their revocable living trust to access, manage and control the disposition of their digital assets.
Legal specialists in this area also recommend that people create a separate letter of instruction to further reinforce their intent with respect to dealing with their digital assets.
Some of the recommended components of such “Digital Asset Letter of Instruction” include:
- Specifically identify each digital asset you own.
- Determine how the custodian of that asset should treat the account of the user upon death or incapacity.
- Indicate whether your fiduciary should maintain or have access to the specific account and whether the account should be maintained, sold (if applicable), transferred to another individual, gifted to one or more charities, or terminated.
- Prepare a written or electronic list of those assets, together with their passwords.
- Consider saving the list of digital assets or instructions to a memory drive, then store that drive in a very secure location, such as safe deposit box. Give your fiduciary instructions on how to access this list OR save the passwords inside of a password manager, and give your fiduciary access to the accounts through your password manager.
- Remember to update the list frequently to reflect new and updated passwords.
- Make sure that all relevant documents, including the will, trusts, powers of attorney, or other estate planning documents, are updated to provide “lawful consent” under the SCA and RUFADAA.