What are Digital Assets?
Technology is changing all aspects of our lives. We are leaving behind a paperless trail of “electronic records” instead of physical records. Do you get paper bank statements, or are they sent electronically by email? Do you pay any bills online? Do you shoot photos on film and save physical albums, or are most of your photos taken with your camera phone and stored on your phone and computer or in a cloud storage program like Dropbox or iCloud? Do you send paper letters and notes to friends, or do you use email and interact on social media sites like Facebook, Instagram or twitter? Have you ever wondered what happens to all of your digital life?
This digital trail that you are leaving behind has created a new issue of how to pass on property that you own when the only records of it are digital. The person who holds digital assets is called a “CUSTODIAN” and the contract that controls them is called the “TERMS-OF-SERVICE AGREEMENT”. This is that long contract that you agree to when you accept the Terms of Service. Recently, Apple was ordered to unlock an iPhone that was used in a terrorist attack, Apple refused as they saw it as an overreaching request and endangering the privacy and security of its users. The “CUSTODIAN” has a duty to keep user information private, but how do we plan for these digital assets? Are their situations when this digital information should be shared?
The Revised Uniform Fiduciary Access to Digital Assets Act became effective on August 8, 2016 (FADAA). The Act seeks to fill the gap between the fiduciaries who need to collect assets and the “CUSTODIAN” needing to maintain privacy, and allows for transfer of digital assets in the same manner that other assets and property are dealt with. If you get any bank statements online or pay any bills online, this affects you.
Key points from FADAA
- Sets three tier system to prioritize who controls the assets after you pass away.
- An “ONLINE TOOL” has the highest priority, this is when a custodian has a built in plan to transfer the account. Facebook has an online tool and they refer to it as legacy settings. It allows you to name a person that you want to control your Facebook account and choose what you want to happen. If you use Facebook you will find it under settings. According to FADAA, your legacy settings will override what your will or estate plan says if there is a contradiction.
- Digital Assets can be planned for in Powers of Attorneys, Last Will and Testaments Trusts and signed writings. If a user doesn’t use an “ONLINE TOOL” or one is not available, then the estate planning documents have the next priority. However, the “TERMS-OF-SERVICE AGREEMENT” may limit and control what happens to the account. Itunes, for example, only allows your purchases for your lifetime only leaving nothing left to transfer. Yahoo’s email policy user agreement ends upon your death, at which point, your account will be deleted.
- “TERMS-OF-SERVICE AGREEMENT” controls if there is not an “ONLINE TOOL” and it has not been addressed in estate planning documents.
- Custodian May Give Full Access to Fiduciary, Partial Access or provide a copy of Digital Assets
What information do you want the people who are settling your estate to have access to? Do you want your fiduciary to have access to all of your emails, all of your facebook messages, and all of your pictures? Be careful in making general assignments of all of your digital assets to your fiduciary. Besides your personal privacy considerations, if the “CUSTODIAN” thinks that the request is overreaching, they have the power to require a court to determine that it is reasonably necessary. If you are requesting that some of the content of your digital assets be transferred then the custodian will need specific instructions. Also if the specific instructions oppose the “TERMS-OF-SERVICE AGREEMENT” then they will not be followed.
What this means for you?
- Update Estate Plan – If you have any online bank accounts, or pay any bills online, your estate plan should be updated. We want to give the people managing your plan (Agent, Personal Representative and/or Trustee) the specific power of your digital assets so they can request a list of all of your digital assets. We want to know about bank accounts, and if the account was owned by them as an individual or in a trust, and if the account had a beneficiary.
- Create Inventory – As part of amending your estate plan you will need to create an inventory of your digital assets. You want your fiduciaries to be able to know what they are going to manage.
- Planning for Digital transfer – If you wish to pass on digital assets, we can help you with a specific Digital Assets Trust. During this process we will review your digital assets and how we want to transfer them. Taking careful consideration as to making requests that are easy for the “CUSTODIAN” to follow so that they don’t require a court involvement.
There is an opportunity to direct what happens to your digital assets. As mentioned above, a lot of discretion comes down to the “CUSTODIAN”, but with specific instructions and requests that are clear, the “CUSTODIAN” will be likely to follow them
While it will take some time to iron out all the specifics of the new act, we are excited about the progress that this means for the law and your personal legacy.
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