By Jeffrey R. Wolfe, Senior Vice President and Manager, Wealth Planning Strategies
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Is there a day that you don’t touch a digital asset? Whether accessed through an app like Snapchat or Netflix, holding something of “value” like Bitcoin or frequent flyer miles, or even texting—digital assets are part of our daily lives. However, have you thought about what happens to your digital assets if something happens to you? Have you planned for how someone may be able to access your accounts if you become incapacitated or if you pass away? Many haven’t, and the law is struggling to catch up to this ever-changing digital asset world, whether you’ve planned ahead or not.
That said, most states are attempting to address this issue. The Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA), or portions of it, has been adopted in 47 states.* RUFADAA governs how you can appoint a fiduciary to act on your behalf to manage various digital assets, what powers you can grant or deny that fiduciary, and what powers that fiduciary cannot exercise unless you specifically grant such powers. With this backdrop, you need to proactively review your estate plan and update the plan as needed to address your digital assets. Here are some steps to consider:
1. Understand the Terms of Service: Digital assets are generally controlled by the Terms of Service (TOS) agreements. The TOS is that long agreement that pops up, we all diligently read, word for word, before pushing the “I Agree” button (yeah right). While every agreement is different, some are far stricter than others. For example, X (formerly known as Twitter), Google and Facebook allow you to name a legacy manager to control certain aspects of those accounts. On the other hand, many are rather strict in that they do not allow you to assign or transfer your content, and most agreements immediately terminate the relationship upon your death. To plan around a particular digital asset, you need to review the TOS and review what you can proactively plan for under your state’s digital assets laws.
2. Identify and Take Inventory: Make a list of your online accounts, memberships and subscriptions as well as relevant user IDs and passwords. It’s important to store this information in a safe and secure place. You may want to create a password-protected spreadsheet or keep a log of some kind. Or, it may seem ironic, but a lockbox or safety deposit box may be necessary for storing such items.
3. Designate a “Digital Fiduciary”: If not already in your estate planning documents, consider specifically identifying your ownership of digital assets and your desire that your selected fiduciary may have control over those assets. For incapacity protection, your power of attorney should name a digital fiduciary and their powers based on the TOS and state law. Upon your death, your will or trust can name an executor/trustee to control those assets. It’s important to note that your “traditional” fiduciary (also known as your designated agent-in-fact/executor/trustee) that you wish to manage your financial affairs does not have to be the same person that you designate to manage your digital assets. If you have a loved one that is more tech-savvy, you could appoint them specifically to this task. While the TOS may limit access by your digital successor, at least you’ve identified your intent for someone to try and manage your digital assets. This is a much better start than having nothing at all in your planning.
4. Be Specific: If you want specific digital assets to pass to certain people, assuming such a transfer is allowable, specifically address and designate such bequests in your estate planning documents, just as you would your grandmother’s ring or your grandfather’s watch. If you have digital assets of significant value like Bitcoin, an online store, active domain names, etc., work with your estate planning attorney to make explicit your intent with such assets.
5. Create Tangible Hard Copies: Backing up cloud pictures and music to a hard drive, CD, etc., may leave your family another way to get access to your digital assets. It may seem like you’re moving backwards in technology, but it is another way to control your digital assets.
The law in this area is ever evolving, so it’s important to take steps to address your current digital assets and be mindful of the fluidity of the situation. As your digital assets grow and change, so too should your digital plan. Create, update or review your estate plan and determine whether your digital assets are appropriately addressed. If not, work with your estate planning professionals, along with your financial advisor, to assure your legacy goals are in place.
*Fiduciary Access to Digital Assets Act, Revised – Uniform Law Commission (uniformlaws.org)
IMPORTANT DISCLOSURES: The information provided is based on internal and external sources that are considered reliable; however, the accuracy of this information is not guaranteed. This piece is intended to provide accurate information regarding the subject matter discussed. It is made available with the understanding that Benjamin F. Edwards is not engaged in rendering legal, accounting or tax preparation services. Specific questions on taxes or legal matters as they relate to your individual situation should be directed to your tax or legal professional.