In this article, we will discuss the importance of including your digital assets in your estate plan and answer the following questions:
- What is considered a digital asset?
- Why should digital assets be separated from other assets in estate planning?
- What laws control access to digital assets?
- What obstacles could a beneficiary face when retrieving a digital asset?
- How do I make my estate plan digital asset friendly?
We order food online, do our banking online, complete most of our work online, sign contracts online, and in the age of Covid-19, we do just about everything else online. As technology becomes more mature, intelligent, integrated into our everyday lives, an increasing percentage of our assets will become completely digital. But are those digital assets protected and planned for in your estate plan? Well, they better be, or your beneficiaries could be in for a legal nightmare come probate.
What Is Considered A Digital Asset?
Think of everything you do or store on your smartphone or computer. Daily, you might interact with five or more digital assets. All of these are password protected and most of them probably required user or terms-of-service agreements. A list of the more common digital assets include:
- Electronic communication, such as emails, social networking sites, and blogs;
- Online reward programs and points, such as credit card points and frequent flyer miles;
- Financial accounts such as Venmo, Paypal, investment accounts brokerage accounts;
- Domain names or website and web services;
- Digital photos, videos, and music collections;
- Content written for the internet such as blog posts, marketing posts, etc;
- Customer databases; and
- Cryptocurrencies
Why Should Digital Assets Be Separated From Other Assets In Estate Planning?
There are two arguments for why you should consider digital assets a separate portion of your estate plan with its own stipulations and provisions: (1) Digital assets are increasingly at risk for cybersecurity attacks, and (2) the laws surrounding digital assets and the access to them are all over the place. What this means is that unlike something like the deed to your home, which is usually an inherently safe document, a digital asset is at risk of being stolen or manipulated by a third party. You should have protection in place for that digital asset and that protection should be included in your estate planning. Also, because the laws regarding digital assets differ from state to state, it’s important to understand how the user and terms-of-service agreements affect third party access and transition. A user agreement that effectively bars a fiduciary from access to a digital finance account can be very problematic in the probate process.
What Laws Control Access To Digital Assets?
The Stored Communications Act and the Computer Fraud And Abuse Act are both federal laws that govern access to digital accounts and assets. These laws mainly function by legally supporting the user and terms-of-service agreements signed by the person who created the account. Nearly all of these prohibit the use of an account or service by anyone other than the creator. Certainly websites and services give the option of adding another user with full access, but if the creator doesn’t do this then a beneficiary or fiduciary who tries to access the account may be doing so illegally. Essentially, it’s not enough to have the login and password, the individual who accesses the account after your death must have the legal authority to do so. This should be done through the service and written into your estate plan.
In Illinois HB 4648, the Revised Uniform Fiduciary Access To Digital Assets Act authorizes a decedent’s personal representative or trustee to access and manage digital assets and electronic communications. Under the above laws, if the decedent gives her written consent for access to her digital assets for the sake of estate administration in probate, it usually supersedes the user agreement.
What Obstacles Could A Beneficiary Face When Retreiving A Digital Asset?
Like most other things in estate planning, digital assets are considered property and can be handed down to designated parties through a will, trust or other estate planning vehicle. However, as mentioned above, digital assets often have extra layers of security that must also be passed to beneficiaries and understood by those recipients. Some of the common obstacles a beneficiary may face when trying to access a decendent’s digital assets include:
- Passwords: While this one might seem obvious, what’s not so obvious is how hard it would be to retrieve a password. Think about what has to happen to get back a password for a site like Facebook, let alone something with financial information like a investment account. Usually, access to the decedent’s email or smartphone is needed to reset the password. Do you have the passwords or pins for those sites?
- Data Privacy Laws: We discussed the two federals acts and the Illinois act that grants some access to digital assets by the decedent’s personal representative or trustee, but these still might require the lawful consent of the creator prior to is or her death. Maybe you just want to delete your deceased parent’s facebook account. While you probably won’t get thrown in jail for doing so, just remember that unless you were given explicit access to that account, modifying or deleting it might be considered a crime. Furthemore, going against a large corporation to get access to a decendent’s account, is probably cost prohibitive as the corporation could face fines from federal or state agencies for allowing you the unlawful access.
- Data Encryption: Okay, so you’ve got the password, but the data is encrypted. If the decedent didn’t list the process for decrypting the data in his estate planning documents you’re pretty much screwed. The good news is that it’s rare for data to have a level of encryption after passcode entry!
How Do I Make My Estate Plan Digital Asset Friendly?
Great question! By planning ahead and working with a knowledgeable estate planning attorney, you can take the correct steps to create an all encompassing estate plan that takes into account all your digital assets. Upon your demise, the fiduciary responsible for administration of your estate can move through the probate process without delay. To ensure a properly structured estate plan that includes a section for your digital assets, consider these actions you can take now:
- Make a list. This is a big one. List all of your digital assets (in both digital and physical form!), including the website URL and/or app name, the username, and the passcode, as well as any other information needed to retrieve a lost password or username. There are many services that can help simplify this process. Make sure you write down the username and password for those as well!
- Create multiple backups of data stored in the cloud and on your hard drive. While this may sound redundant, the more backups you have of any data the easier it will be for your beneficiaries to access it.
- Provide the appropriate consent within the services and your estate planning documents. While we’re not saying you need to comb through all ten-thousand pages of Apple’s user agreements, giving your legal consent to access your accounts and services can help the fiduciary and your beneficiaries avoid any legal trouble during the administration of your estate. You will need to specifically state that a fiduciary and/or beneficiary can access your account, bypass your username and password, and reset your username and password.
If you have any questions about handling digital assets in estate planning or about estate planning in general, please give us a call.
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