Is Your Estate Planning Practice Programmed For The Digital World?

Almost everyone of school age in the United States owns some form of digital assets, many of which have both sentimental and pecuniary value. Whether it is the pictures and text messages on a smartphone; digital documents, logos, websites and online stores for a business; or the online bank accounts, utilities accounts, shopping accounts, and online bill pay programs that a growing number of Americans are now using; addressing digital assets is now necessary for the majority of estate planning clients. In this article, I will discuss what digital assets are, how to best classify digital assets, and what advice you should be giving your clients to start the conversation concerning digital assets.

Anything that is stored in electronic format is a digital asset. A hard drive, thumb drive, computer, iPod, and cellphone are all tangible items that can be devised like any other piece of tangible personal property. However, the pictures, movies, songs, text messages, computer programs, apps, and other digital media stored on those electronic devices, as well as anything stored in the cloud, are considered digital assets. Because of strict privacy laws, or the inherent encrypted nature of the asset itself, many digital assets require special authorization to access. If not properly planned for, these assets may be lost forever when the client passes away. So that clients may be best counseled concerning the disposition of their digital property, I have found it helpful to classify digital assets into six general categories.

The first category is those assets to which access may be necessary for estate administration, such as email accounts, utility accounts, bank accounts, and social media accounts. Any recurring payments will need to be examined and possibly stopped, utility accounts will need to be accessed and transferred, and online memberships to services such as Netflix will need to be canceled. The second category are those assets solely of sentimental value, and which the client will likely want preserved, such as family photos and films stored on a computer hard drive, or online in a location such as Facebook or Instagram. The third category are digital products that have been purchased by the client and/or have inherent value, such as downloaded movies, songs, video games, and online website domain names. It is important to note that many of these types of assets have user agreements that govern their use and ownership. It is possible that the client only purchased a license to use a particular product, such as is often the case with songs from iTunes and many downloaded software programs. The fourth category are assets that are themselves valuable, such as bitcoin, other online currencies, PayPal accounts, Credit Card Rewards accounts, and Apple Store accounts. The fifth category are assets capable of producing income, such as YouTube accounts, blogs, certain social media accounts, eBay, online stores, Twitch accounts, etc. The final category are those assets of a very personal nature that many clients may want deleted outright, such as the text messages on their cell phone, online browsing history, and personal papers and documents. As you can see, the list of potential digital assets can be quite extensive.

When counseling a client, it is good to help them understand the breadth of their digital footprint. The best way to accomplish this is by having the client perform a digital audit. The primary audit should consist of the listing of every online account the client has, along with the username and password for each account, as well as the answers to any potential password prompts. The secondary audit would consist of a list of groups of digital assets, such as online photo albums, movies, etc., the location and identification of the device they are stored on or their location online, and any information required to obtain access to the asset. Additionally, clients should be advised to research what estate planning tools particular online accounts and assets may have available, as many vendors and custodians of digital assets such as Google and Facebook now allow the account owner to designate an account beneficiary, much like a transfer-on-death account.

A client with multiple online accounts should also be advised to consider using a password manager, such as LastPass, DashLane, or OneLogin for both estate planning and online security purposes. Many of these password managers will allow the client to store their username and a very complicated, virtually uncrackable password for each of their online accounts in an encrypted format that is only accessible via a master password. Not only will a password manager help prevent a client from becoming a victim of online hackers, but will also allow their Personal Representative to manage their online estate much easier via the use of single master password.

Lastly, all estate planning documents, including Durable Powers of Attorney, Wills, and Trusts, should be updated to include clauses that address digital assets. The Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA) has been adopted, in some form, by a majority of the states. Florida has adopted the act as the Florida Fiduciary Access to Digital Assets Act, which became effective July 1, 2016, and has been codified as Florida Statute Chapter 740. To better facilitate the fiduciary’s access to the principal’s digital assets, however, estate planners should not rely solely on the statute, but should specifically grant that authority to the fiduciary in the client’s estate planning documents. It is also advisable to draft a separate written digital asset memorandum, often known as a Virtual Asset Instruction Letter or “VAIL,” describing what is to be done with the various classes of assets owned by the client, instructions for accessing those assets, and the client’s wishes concerning the devise of those assets that are divisible, similar to a separate written memorandum concerning tangible personal property. While this document should be kept in a secure location along with the client’s Trust or Last Will and Testament, under no circumstances should the Digital Asset Memorandum be made a part of the client’s Will, as the Will becomes public record when entered into probate, and it would not be wise to have the client’s usernames and passwords out in the public domain. The client might also consider naming a trusted person, perhaps one who is technologically savvy, to serve as his “digital personal representative.” The Estate Personal Representative could then rely on or delegate the duties of accessing, devising, and disposing of the client’s digital assets to this “digital personal representative.”

A majority of the tasks that were once accomplished by mail or via telephone are now conducted online, and this trend does not seem to be slowing down. As more of our personal, professional, and business lives are conducted online, on the web, or in the cloud, digital assets will become an ever-growing percentage of a decedent’s overall estate. While this article is by no means a primer on estate planning for digital assets, I hope that it has stimulated some ideas, and that it will get you talking to your clients about addressing their online estate.

Originally Published on October 16, 2018 in the
Manatee County Bar Association Inter Alia
Brandon Robinson
Probate Department