Have You Forgotten to Plan for Future Management of Your Digital Assets?
Digital assets are owned by almost everyone. Unfortunately, most of us have not planned for future management of those assets by our family. Digital assets present unique challenges because they are often difficult to find, are protected by a user name and password, and ownership rights to these assets are not clearly defined.
What are Digital Assets?
Digital assets are not physical devices like your computers or iPhone. Digital assets are the information that is stored on your digital devices. Among them are your email accounts, electronic communications, social media accounts (such as Facebook, Twitter and LinkedIn), reward programs (for credit cards, airline and hotel points), electronic medical and other records stored to the cloud, blog postings, digital images, audio files, ecommerce accounts, text messages, calendars, contact lists and newspaper subscriptions. Digital assets also include cryptocurrency and data and documents stored on your hard drives.
Many of these assets have financial value. Others have sentimental value. If not managed, they present a substantial risk for on-line theft. In addition, custodians can refuse to provide access to your family members, as well as your fiduciaries, including attorneys in fact, executors and trustees.
What Steps Should You Take to Manage Your Digital Assets?
1. Inventory all your digital assets, logins and passwords.
Maintaining an inventory on your computer may be a security risk so consider a paper list that you keep in a safe location. Update the information regularly. You can also hire a commercial password manager, who charges a monthly fee to generate and store passwords. These managers commonly allow you to share log on credentials with trusted persons.
2. Decide who would be best to handle your digital assets and share your login information and passwords with that person.
3. Understand the ownership rights of your digital assets, which were set when you signed up with the online service provider.
Most people click “agree” and accept the terms of the Terms of Service Agreements without understanding that most of these agreements prohibit third party access following the user’s death. By taking no action, your attorney in fact, executor or trustee will not be able to access the digital assets.
4. Decide what you want done with those assets.
Of course this will depend on the type of digital asset. For example, you may wish to direct that your airline miles accounts be transferred to a specific individual after your death. Review your ownership rights agreements to determine if there are restrictions on the transfer of your accounts.
5. Find out how to appoint another person to access your accounts.
Don’t assume that your spouse and children can just log on to your accounts. This could subject them to civil or criminal penalties. Recognizing this problem, 46 states have recently enacted legislation to give executors, trustees and attorneys in fact access to digital assets. New York, New Jersey, Delaware, Maryland, Minnesota, Florida and Illinois are among them. Pennsylvania and the District of Columbia are not, but legislation in those states has been introduced.
The new state laws are based upon the Uniform Fiduciary Access to Digital Assets Act, which provides that if estate planning documents (i.e. your durable power of attorney, will, trust) explicitly grant an individual the power to access a digital asset, the Terms of Service restrictions in online service provider agreements will not apply and your appointed fiduciary will be granted access. Essentially, your estate planning documents, if properly drafted with explicit powers, will override Terms of Service Agreements.
You can also designate an individual in an online tool provided by the custodian. This designation may have priority over your estate planning documents. However, if you don’t use an online tool, your power of attorney, will and trust provisions control, provided that specific directions to grant access to digital assets are necessary. As a consequence, many clients will need to add new provisions to existing documents.
Though the digital world is complicated, by taking a few steps, you can give your family the tools to access your digital assets. This will protect them from liability and might also avoid a legal battle with your online providers going forward.