Beyond The Will, Client Compass

To best enjoy this post, please be sure to first read A Family History of the Austens. 

In this day and age, virtually everyone has a digital presence, and we can presume that Jack Austen was no different. We can also presume that Jack, like many clients, failed to properly consider or address his digital assets as part of his estate plan. This is an issue we are seeing more and more these days, with loved ones facing substantial hurdles in trying to access, collect, maintain or close digital accounts after the account holder’s death. How can this be avoided? Please allow my colleagues, Nik Schuttauf and Victoria Calcagno, to offer some insights. If only it wasn’t too late for them to help the Austen family…

Estate Planning for Digital Assets

With so many essential parts of our lives occurring online, going paperless or moving to the cloud – a trend only accelerated by the COVID-19 pandemic – has never been more important to address your digital assets in your estate plan.

What Are Digital Assets?

Digital assets are broadly defined as any “electronic record” in which a person has a right or interest. They are a rapidly growing form of asset which almost every person owns and include:

• Data, communications and intellectual property – spreadsheets, photos, text messages – stored or transmitted on your phones, tablets and computers, or the cloud.
• Online accounts and services, such as email, social media accounts and financial accounts – bank accounts, investment accounts, Venmo, etc. – which you access via your electronic devices.

Digital assets can have financial value, as seen with cryptocurrencies and domain names; allow access to assets with financial value such as Paypal, online bank accounts, or E-Trade; or have sentimental value, like family photos, a personal blog, or email.

Why Should Digital Assets Be Addressed in an Estate Plan?

If a person becomes incapacitated or dies, there are potential roadblocks which can hinder or entirely prevent the person’s fiduciary – that is, the individual who has been appointed in a Power of Attorney, a Will, a Trust or by a Court – from gaining access to the person’s digital assets. Two of the primary obstacles are Terms of Service Agreements and federal privacy laws:

• Terms of Service Agreements: Anyone who has updated the software on their smartphone or created an online account knows there is a long agreement which they must scroll through and have to “accept” before using the product or service. While easy to dismiss at the time, these Agreements may prohibit anyone other than the account user from accessing the account without proper authorization.
• Federal Privacy Laws: While well-intentioned and designed to protect the privacy of a person’s digital information, federal privacy laws can inadvertently prevent a fiduciary from gaining proper access to digital assets.
  • The Computer Fraud and Abuse Act makes unauthorized access to any computer, online service or online account a crime. This means a fiduciary may technically commit a crime when logging into a person’s online account without the person’s express authorization.
  • The Stored Communications Act prohibits “service providers” – such as Google providing Gmail or Facebook providing the Messenger app – from disclosing the contents of communications to anyone other than the account user, with certain narrow exceptions. One exception is known as the “lawful consent” exception, which allows the account user to consent to the release of all content of the account to third parties, such as the person’s fiduciary. The problem with the lawful consent exception is that the account user must proactively consent to the disclosure of stored communications to his or her fiduciary while living and competent. If the account user has not proactively provided this consent, a service provider may refuse to release the contents of the user’s account to the user’s fiduciary.

Planning for Digital Assets

There are several steps a person can take to plan for his or her digital assets:

(1) Create a Digital Assets Inventory: Digital assets, by definition, lack a physical presence. Fiduciaries can’t locate a digital wallet with valuable Bitcoin the same way they could locate a coin collection in a house. Therefore, a digital assets inventory identifies digital assets stored on devices or online for the fiduciary and also provides the necessary information to access them.

At a minimum, the inventory should include information required to access a person’s primary email account and cell phone. A person will likely use their primary email to receive any electronic financial statements and bills. Also, a person is likely to provide his or her primary email to online service providers for purposes of sending password reset emails, which may be useful to a fiduciary trying to access other online accounts. A cell phone stores many digital assets – texts, pictures, apps – and also may be required for two-step authentication to access other online accounts.

(2) Include the Proper Authorizations and Consent in Estate Planning Documents: The Power of Attorney, Will and Trust should include express language which (i) authorizes the fiduciaries named in these documents to access and manage digital assets and (ii) consents to service providers disclosing information and stored communications to these fiduciaries.

If privacy is a concern, it is possible to specify which fiduciaries have access to certain digital assets. If there are certain online accounts a person wishes to keep private, such as dating websites, it is also possible to tailor the scope of the consent in the estate planning documents to restrict or entirely prohibit the service providers for these select accounts from disclosing stored communications to the person’s fiduciary.

(3) Identify what happens to digital assets after death: For digital assets with financial value, a person should address in a Will or Trust the beneficiaries to whom these assets are distributed. The estate plan may also address whether digital assets such as social media accounts – Facebook or Tumblr blogs – should be maintained or closed. If a person owns a business with digital assets such as intellectual property or a domain name, or if the person is an influencer on social media, the estate plan should address how these unique digital assets are to be managed and distributed.