Add to Cart: Digital Assets in Your Estate Plan (Part 1)
My husband is not the best with passwords, and that’s putting it lightly. (Sorry Dave!). When Netflix logs us out, we go through an intense operation of a password reset which not only requires us to impatiently work a remote control using only arrows and an enter button, but also requires the additional belaborment of both an email and text verification. All this so my kids can watch a repeat episode of the Amazing Race. (Seriously Netflix, if a hacker wants to see what’s in my “continue watching” list, have at it.) But I don’t blame Netflix. I blame Dave (again, sorry Dave) for not storing the password somewhere.
We live in a digital age. Everyone and everything are online. We shop, pay bills, play games, listen to music, order groceries, and so on, all from our online accounts. It’s a valuable sphere and, consequentially, people like Dave are resistant to store passwords for fear that their password storage app will get hacked (and in turn aggravate their spouses). But think for a minute of the opposite scenario. What if someone needed to access your account but couldn’t? What if you needed to, but couldn’t, turn off that bill pay or shut down your Facebook account? Likely, another would have to go to Court (spending time and money) to obtain proper authorization for access to the specific account.
If you’ve created an estate plan, it likely includes traditional wealth and assets like finances, real estate, personal property, and family heirlooms. But unless your plan also includes your digital assets, there’s a good chance this online property will be lost forever following your death or incapacity.
What’s more, even if these assets are included in your plan, unless your executor and/or trustee knows the accounts exist and how to access them, you risk burdening your family and friends with the often lengthy and expensive process of locating and accessing them. And depending on the terms of service governing your online accounts, your heirs may not be able to inherit some types of digital assets at all.
Types of digital assets
Digital assets generally fall into two categories: those with financial value and those with sentimental value.
Those with financial value typically include cryptocurrency like Bitcoin, online payment accounts like PayPal, domain names, websites and blogs generating revenue, as well as other works like photos, videos, music, and writing that generate royalties. Such assets have real financial worth for your heirs, not only in the immediate aftermath of your death or incapacity, but potentially for years to come.
Digital assets with sentimental value include email accounts, photos, video, music, publications, social media accounts, apps, and websites or blogs with no revenue potential. While this type of property typically won’t be of any monetary value, it can offer incredible sentimental value and comfort for your family when you’re no longer around.
Owned vs licensed
Though you might not know it, you don’t actually own many of your digital assets at all. For example, you do own certain assets like cryptocurrency and PayPal accounts, so you can transfer ownership of these in a will or trust. But when you purchase some digital property, such as Kindle e-books and iTunes music files, all you really own is a license to use it. And in many cases, that license is for your personal use only and is non-transferable.
Whether or not you can transfer such licensed property depends almost entirely on the account’s Terms of Service Agreements (TOSA) to which you agreed (or more likely, simply clicked a box without reading) upon opening the account. While many TOSA restrict access to accounts only to the original user, some allow access by heirs or executors in certain situations, while others say nothing about transferability.
Carefully review the TOSA of your online accounts to see whether you own the asset itself or just a license to use it. If the TOSA states the asset is licensed, not owned, and offers no method for transferring your license, you’ll likely have no way to pass the asset to anyone else, even if it’s included in your estate plan.
To make matters more complicated, though you heirs may be able to access your digital assets if you’ve provided them with your account login and passwords, doing so may actually violate the TOSA and/or privacy laws. In order to legally access such accounts, your heirs will have to prove they have the right to access it, a process which up until recently was a major legal grey area.
Fortunately, a growing number of states are adopting a law that helps clarify how your digital assets can be accessed in the event if your death or incapacity.
The Revised Uniform Fiduciary Access to Digital Assets Act
The Revised Uniform Fiduciary Access to Digital Assets Act, which has been adopted in most states so far, lays out guidelines under which fiduciaries, such as executors and trustees, can access these digital accounts. The Act allows you to grant a fiduciary access to your digital accounts upon your death or incapacity, either by opting them in with an online tool furnished by the service provider or through your estate plan.
The Act offers three-tiers for prioritizing access. The first tier gives priority to the online provider’s access-authorization tool for handling accounts of a decedent. For example, Google’s “inactive account manager” tool lets you choose who can access and manage your account after you pass away. Facebook has a similar tool that allows you to designate someone as a “legacy contact” to manage your personal profile.
If an online tool is not available or if the decedent did not use it, the law’s second tier gives priority to directions given by the decedent in a will, trust, power of attorney, or other means. If no such instructions are provided, then the third tier stipulates the provider’s TOSA will govern access.
As long as you use the provider’s online tool—if one is available—and/or include instructions in your estate plan, your digital assets should be accessible per your wishes in states that have adopted the law. While Massachusetts has not yet adopted the RUFADAA, a bill has been introduced and is awaiting full approval. The pending legislation list January, 2020 as it’s effective date.
LOOK TO US FOR GUIDANCE
In the second part of this series, we’ll offer practical steps for preserving and passing on your digital assets in your estate plan. Meanwhile, contact us if you have any questions about your online property or how to include it in your estate plan.
Next week, we’ll continue with part two in this series, discussing the best ways to protect and preserve your digital assets through estate planning.
This article is a service of 20West Legal, LLC, Personal Family Lawyer®. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That's why we offer a Family Wealth Planning Session, ™ during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. You can begin by calling our office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $750 session at no charge.