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ESTATE PLANNING FOR DIGITAL ASSETS

Posted by: Begley Law Group

by Thomas D. Begley, Jr., CELA

The Uniform Law Commission has proposed an Act titled “Revised Uniform Fiduciary Access as to Digital Assets Act” (Revised 2015). The Act has been adopted in 20 states.[1] The Act was introduced in 2016 in 12 additional states.[2] Under the Act, a fiduciary is defined as a person appointed to manage the property of another person, subject to strict duties to act in the other person’s best interest. Common types of fiduciaries include executors of a decedent’s estate, trustees, conservators, and agents under a power of attorney. The purpose of the Act is to extend the traditional power of a fiduciary to manage tangible property and to include management of a person’s digital assets. The Act allows fiduciaries to manage digital property, like computer files, web domains, and virtual currency, but restricts a fiduciary’s access to electronic communications such as email, text messages, and social media accounts, unless the original user consented in a will, trust, power of attorney or other record.

Under the Act, a “User” is defined as a person that has an account with a custodian.[3]

An “Account” is defined as an arrangement under a terms-of-service agreement in which a custodian carries, maintains, processes, receives, or stores a digital asset of the user or provides goods or services to the user.[4]

“Digital Asset” means an electronic record in which the individual has a right or interest. The term does not include an underlying asset or liability, unless the asset or liability is itself an electronic record.[5]

“Fiduciary” means an original, additional, or successor personal representative, [conservator], agent or trustee.[6]

“Online Tool” means an electronic service provided by a custodian that allows the user, in an agreement distinct from the terms-of-service agreement between the custodian and the user, to provide directions for disclosure or non-disclosure of digital assets to a third person.[7]

“Terms-of-Service Agreement” means an agreement that controls a relationship between a user and a custodian.[8]

The Act gives priority to the user’s wishes as expressed using an online tool. There is a three-tier priority system for determining the user’s intent with respect to any digital asset.[9] Top priority is given to the user’s wishes as expressed using an online tool. The second tier is, if the user does not give direction using an online tool but makes provisions in an estate plan for the disposition of digital assets, the Act gives legal effect to the user’s directions. A fiduciary charged with managing the user’s digital assets must provide a copy of the relevant documents to the custodian when requesting access. The third tier is if the user provides no other direction, the terms-of-service governing the account will apply. If the terms-of-service do not address the fiduciary access to digital assets, the default rules in the Act apply.

The terms-of-service agreement applies to the original user or to a fiduciary acting for the original user.[10]

 

Procedure for Disclosing Digital Assets

The custodian has a choice of providing the fiduciary with full or partial access to the user’s account. The custodian may provide a copy of any record of a digital asset that the user could have accessed if the user were alive and had full capacity to access the account. The custodian may assess reasonable administrative charges for the cost of disclosing the asset, but need not disclose any asset deleted by the user. The Act prescribes the process for obtaining digital information from the custodian. The legal duties imposed on a fiduciary charged with managing tangible property apply to the management of digital assets.[11] The custodian must comply with requests no later than 60 days after receipt of the required information. If a custodian fails to comply, the fiduciary-designated recipient shall apply to a court for an order directing compliance.[12]

 

Significance of Digital Assets

Fiduciaries are responsible for handling financial affairs for a decedent, a principal under a power of attorney, or a ward. Since many financial accounts are online, fiduciaries need access.

 

The Importance of Digital Assets

Fiduciaries need to monitor and protect digital assets from identity theft. Fiduciaries need to marshal assets to discharge their duties. Passwords and encryption often make access by fiduciaries difficult. It is good practice for an attorney to provide a client with a form to be left for a fiduciary listing usernames and passwords.[13]

Estate Planning attorneys should include appropriate language authorizing fiduciaries to access and deal with the client’s digital assets when preparing Wills, Living Trusts, and Powers of Attorney.

 

 

[1] Arizona, Colorado, Connecticut, Florida, Hawaii, Idaho, Illinois, Indiana, Maryland, Michigan, Minnesota, Nebraska, New York, North Carolina, Oregon, South Carolina, Tennessee, Washington, Wisconsin and Wyoming.

[2] Alabama, Iowa, Louisiana, Maine, Mississippi, New Jersey, Ohio, Oklahoma, Pennsylvania, Rhode Island, Utah and West Virginia.

[3] Revised Uniform Fiduciary Access to Digital Assets Act (2015) §2(26).

[4] Revised Uniform Fiduciary Access to Digital Assets Act (2015) §2(1).

[5] Revised Uniform Fiduciary Access to Digital Assets Act (2015) §2(10).

[6] Revised Uniform Fiduciary Access to Digital Assets Act (2015) §2(14).

[7] Revised Uniform Fiduciary Access to Digital Assets Act (2015) §2(16).

[8] Revised Uniform Fiduciary Access to Digital Assets Act (2015) §2(24).

[9] Revised Uniform Fiduciary Access to Digital Assets Act (2015) §4 Comment.

[10] Revised Uniform Fiduciary Access to Digital Assets Act (2015) §5.

[11] Revised Uniform Fiduciary Access to Digital Assets Act (2015) §15.

[12] Revised Uniform Fiduciary Access to Digital Assets Act (2015) §16.

[13] Revised Uniform Fiduciary Access to Digital Assets Act: Striking a Balance Between Privacy Expectations and the Need for Fiduciary Access to Digital Assets, by Suzanne Brown Walsh, JD, and Catherine Anne Seal, CELA, CAP, NAELA Journal, Volume 12, No. 2, Fall 2016.

Filed under Estate and Trust Administration, Estate Planning, Estate Planning.
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