In the age of technology, almost all individuals have significant information and assets downloaded on digital devices. People often lose track of where their digital assets are stored and the inherent value they have.
At death, this can make accessing and passing on these assets to intended heirs complicated. Blindly agreeing to terms of service agreements when creating an account or downloading data is usually the only legal framework established for digital assets, and these agreements can prohibit access to fiduciaries even after death.
Simply giving usernames and passwords to heirs is not enough, as agreements do not give another user legal authority to access the account. This makes proper planning for digital assets a crucial part of the estate planning process.
What Are Digital Assets?
Digital assets are defined as “electronic records of which an individual has a right or interest.” The following items are examples of property that are considered to be digital assets:
• Electronic communications (social media accounts, emails, blogs, etc.)
• Online financial accounts (Venmo, PayPal, online brokerage accounts)
• Online reward programs (credit card points, airline points, hotel points)
• Multimedia (video files, photography files, and music files)
• Cryptocurrency (Bitcoin, Ether, Litecoin)
• Electronic documents (medical records, customer databases, cloud storage)
Revised Uniform Fiduciary Access to Digital Assets Act
The Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA) was published by the Uniform Law Commission in 2015. It was signed into law in Pennsylvania in 2020, and will take effect in January 2021. The Act provides a framework for fiduciaries to have access to digital assets while not violating any federal privacy laws. RUFADAA uses a three-tiered system to create a clear path on how digital assets will be treated.
The first tier refers to “online tools” that are provided by some custodians. Some websites, such as Google and Facebook, allow users to provide instructions through their website on how they want their accounts to be handled in the event of their death. If a website has an online tool, this trumps any terms of service agreement, will, or other legal document under RUFADAA. Online tools are rare right now, but are expected to become more common as regulation on digital assets increases.
If no online tool is provided, the second tier reverts to verbiage in any legal documents such as a will, trust, or power of attorney. If the legal documents do not specify how digital assets should be treated, the terms of service agreement will dictate how the assets will be treated, which is the third tier. Based on the language in these tiers, one can grant fiduciary access only to certain digital assets, if they so please.
Under Pennsylvania law, the power to access electronic communications and digital assets must require a specific grant of authority. A general Power of Attorney does not grant the agent access to digital assets. Individuals should look to update their powers of attorney to ensure this authority is specifically outlined.
One should be aware that RUFADAA does not apply to digital assets purchased on an employer-provided device. These assets would usually be considered property of the employer. They should also be aware that rights granted under RUFADAA to a digital asset do not extend to underlying financial assets at an institution. In addition to Pennsylvania, this act has been adopted in 47 other states thus far.
There are several steps one can take to make sure their digital assets are being handled properly. First, they should check with their attorney to make sure their legal documents address digital assets. Legal documents should state how one wants their fiduciary to deal with their digital assets, as they will be referenced if no online tool is provided by a custodian. Under RUFADAA, legal documents will trump any terms of service agreement, therefore it is important to have the decedent’s intentions formally outlined in the absence of an online tool.
A second step that should be taken is to keep an inventory of digital assets. Maintaining an inventory gives one the ability to keep track of all digital assets they hold in one place, since people often lose track of the many digital assets they have. When they pass, attorneys have to spend time locating and compiling the digital assets. This can increase the cost of administration and make things more complicated for the decedent’s survivors.
There are various services and password managers that store digital asset information in one place. Some of these services even have an online tool that allows the user to specify how they want all of the digital asset information within the inventory to be treated.
Lastly, one should regularly review their digital asset estate plan to ensure it reflects their current intentions. The digital assets that one holds are constantly evolving. Making sure that all digital assets are accounted for, whether in a legal document or in an inventory tool, is extremely important. Digital assets are things that can be forgotten about once they are acquired, so it is important to keep all necessary information up-to-date.
Digital asset estate planning can be complicated and require careful considerations. Please contact your Hefren-Tillotson financial advisor for further information and to review your current situation.