Everything You Need to Know About Including Digital Assets In Your Estate Plan—Part 1
Advances in digital technology have made many aspects of our lives exponentially easier and more convenient. However, digital technology has also created some serious complications when it comes to Wills and Trusts planning. In fact, if you haven’t properly addressed your digital assets in your Will and Trust, there’s a good chance that most of those assets will be lost forever at the time you die.
Without the proper Wills and Trusts planning, just locating and accessing your digital assets can be a major headache for your loved ones following your incapacity or death. Further, if your loved ones can access your digital assets, in some cases, doing so may violate privacy laws or the terms of service governing your accounts. Additionally, you may also have certain digital assets that you don’t want your loved ones to inherit, so you’ll need to take steps to restrict or limit access to those assets.
For this reason, there are several special considerations you should be aware of when including digital assets in your Will and Trust. Here we’ll discuss the most common types of digital assets, along with the current laws governing them. Then we’ll offer some practical tips to ensure your digital property is properly managed and passed on in the event of your incapacity or death.
Types of Digital Assets
Digital assets include a wide array of digital files that you have stored in the cloud, on smartphones and mobile devices, or on your computer. When it comes to Wills and Trusts planning, your digital assets will generally fall into two categories: those with financial value and those with sentimental value, which could mean far more to the people you love than the assets with financial value.
Digital assets with financial value include cryptocurrency like Bitcoin, online payment accounts like PayPal, loyalty program benefits like frequent flyer miles or credit card reward points, domain names, websites and blogs generating revenue, as well as other intellectual property like photos, videos, music, and writing that generate royalties. Such assets have real financial worth for your loved ones, not only in the immediate aftermath of your death or incapacity, but for years to come.
Digital assets with sentimental value include email accounts, photos, video, music, social media accounts, apps, and websites or blogs with no revenue potential. This type of property typically won’t be of any monetary value, but it can offer real sentimental value following your death and inform future generations in ways you may not have considered.
As an example, I cherish an image of one of my ancestors from the 1920s, and I only wish I knew more about him. Imagine if your future generations can use your digital assets to learn from your experiences as a direct result of how you handle those assets.
Do You Own Or License The Asset?
Even though you might not know it, you don’t own many of your digital assets at all. For example, you do own assets like cryptocurrency, so you can transfer ownership of these items in a will or trust. But when you purchase some digital property, such as Kindle e-books, all you really own is a license to use it. In many cases, that license is only for your personal use and is non-transferable.
Whether or not you can transfer this licensed property depends almost entirely on the account’s Terms of Service Agreements (TOSA) to which you agreed upon opening the account. While many TOSA restricts access to accounts only to the original user, some allow access by heirs or executors in certain situations. Some even say nothing at all about transferability.
Review the TOSA of your online accounts to see whether you own the asset or just a license to use it. If the TOSA states the asset is licensed and offers no method for transferring your license, you’ll likely have no way to pass the asset to anyone else.
To make matters even more complicated, even though your loved ones may be able to access your digital assets if you’ve provided them with your account login and passwords, doing so may violate the TOSA and/or privacy laws. To legally access such accounts, your heirs will have to prove they have the legal authority to access them. This process until recently was a huge legal grey area.
The good news is that most states have adopted laws that help clarify how your digital assets can be accessed and disposed of in the event of your death or incapacity.
The Law of the Digital Land
Until recently, there were no laws governing who could access your digital assets in the event of your incapacity or death. As a result, if you died without leaving your loved ones your usernames or passwords, the tech companies who controlled the platforms housing the assets would often delete the accounts or leave them sitting in a state of online limbo.
This gaping hole in the legal landscape caused considerable heartbreak for families looking to collect their loved one’s digital history. It also caused major frustration for the executors and trustees charged with cleaning up the estate. This led to the loss of an untold amount of both tangible and intangible wealth. The federal government finally stepped in to find a solution for this problem starting in 2012. By 2014, the Uniform Law Commission passed the Uniform Fiduciary Access to Digital Access Act (UFADAA).
A revised version of this law, the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA) was passed in 2015. As of March 2021, it has been adopted in all but four states. The law lays out specific guidelines under which fiduciaries can access your digital assets. The Act allows you to grant a fiduciary access to your digital accounts upon your death or incapacity. This is done by either opting them in with an online tool furnished by the service provider or through your Will and Trust.
The Act offers three-tiers of access. The first tier gives priority to the online provider’s access-authorization tool. For example, Google’s “inactive account manager” tool lets you choose who can access and manage your account after you pass away or become incapacitated. Facebook also 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. If no such instructions are provided, the third tier stipulates the provider’s TOSA will govern access.
The bottom line: If you use the provider’s online tool and/or include instructions in your Will and Trust, your digital assets should be accessible per your wishes in most every state under this law. However, it’s important that you leave your fiduciary detailed instructions about how to access your accounts. This should include usernames and passwords, because without such information, your executor or trustee won’t be able to even access your digital assets if something happens to you.
Make a Plan for Your Digital Assets
Given that leaving detailed instructions is the best way to ensure your digital assets are managed in the way you want when you die or if you become incapacitated, in the second part of this series, we’ll offer practical steps for properly including your digital assets in your Will and Trust. Meanwhile, contact us, as your Personal Family Lawyer®, if you have any questions about including your digital property in your Will and Trust.
Next week, we’ll continue with part two in this series, discussing the best ways to protect and preserve your digital assets using your Will and Trust.
This article is a service of Levi L. Alexander, Personal Family Lawyer®. We do not just draft documents. We help to ensure you make informed and empowered decisions about life and death, for yourself and the people you love. This is why we offer a Family Wealth Planning Session™. During this session, 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 to schedule a Family Wealth Planning Session and mention this article to find out how to get this $750 session for free.