The digital revolution, by moving information from paper to digital form, has saved countless forests from destruction. It has also created quite a bit of wealth in the form of digital assets. Most people own some form of digital assets, even if their value is relatively difficult to quantify.
- Some common examples of digital assets include:
- Digital photographs,
- Paypal accounts,
- Digital currencies (probably),
- Powerpoint presentations,
- Excel spreadsheets,
- Notepad and Word files,
- HTML documents,
- PDF documents, and
- Audio files.
This list is far from exhaustive. New forms of digital assets are constantly being created. It is important that you understand how to manage these assets for the benefit of those you leave behind when you die.
Special Problems with Digital Assets
Digital assets present particular problems to various fiduciaries who may be charged with disposing of these assets after you die. If you fail to properly plan for the disposition of your digital assets after you die, these assets could be stuck in limbo for some time.
Without effective contrary instructions, the Terms of Service agreements between you and each service provider will govern who can access the assets and on what conditions. These agreements may be numerous, complex, overly restrictive, and inconsistent with each other. If you are like most people, you haven’t even read through any of them.
What Could Happen
With no digital asset plan, your estate executor might not have access to the password for an online bank account that contains funds that now belong to your heirs. Even if they do, they are not automatically entitled to log into the account and transfer these funds to an estate bank account. Moreover, the service provider is not necessarily prohibited from denying the executor access to these funds.
Ultimately, your executor might need separate court orders that apply to each service provider. Winning these court orders and ensuring their execution could cost a great deal of time and money, especially in the form of legal fees. Indeed, accessing these assets could end up costing more than the value of the assets themselves. It is critical that you arrange for access to these assets and that you forbid access to anything you wish to keep private.
New York’s Digital Assets Law
There is no unified federal law governing the inheritance of digital assets. There is, however, the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA), which is a federal model act that has been adopted (with certain changes) by various states.
In 2016, New York enacted its own digital assets law, Administration of Digital Assets (ADA), based on the RUFADAA. The ADA deals with post-mortem access to digital assets and imposes duties on the fiduciaries who deal with them—service providers and estate executors, for example.
The ADA defines a digital asset as “an electronic record in which an individual has a right or interest.” It does not apply to assets that are merely represented in electronic form. Stocks and bonds, for example, are not considered digital assets simply because they are listed in an electronic record. Nevertheless, electronic records that represent assets that are themselves electronic records are considered digital assets (probably including cryptocurrencies).
What New York’s Digital Asset Law Does
The ADA provides a clear process by which fiduciaries can access a deceased owner’s digital assets without having to deal with the differences among the Terms of Service agreements of various service providers. The ADA also allows the owners who create wills, trusts, powers of attorney, etc. in a manner that authorizes or forbids access to specified digital asset accounts or portions thereof. It greatly simplified the process of obtaining a court order.
To authorize or restrict access to their digital assets after death, the owner may use the following methods, in descending order of authority:
- An online account access authorization tool overrides a contrary term in the owner’s will or in a Terms of Service agreement. An example is the tool offered by Facebook that allows a designee to memorialize the account of a deceased account owner.
- A provision in a will, trust, power of attorney or equivalent document overrides a contrary provision in a Terms of Service agreement.
- The terms of a Terms of Service agreement apply if no contrary provisions appear in a will or an online tool provided by the service provider.
The ADA is too complex to summarize here. Suffice it to say, however, that the foregoing order of priority does not always apply. A particular term in a Terms of Service agreement, for example, can override the terms of the will if the owner had to assent to that term separately from the rest of the terms.
Tips on Creating an Estate Plan for Your Digital Assets
Your digital assets estate plan should be integrated with your general estate plan. The considerations are similar, but not identical. Following is a rough step-by-step guide.
- Inventory your digital assets. Your lawyer can help you identify what constitutes a digital asset and what doesn’t. In some cases, for example, you might believe that you own something when all you really have is a license that you cannot transfer to your heirs.
- Create a list of these assets that is clear and comprehensive enough to allow a stranger to identify and access them. Include your URLs, usernames, and passwords.
- Put your data on the cloud and back it up. A number of commercial services offer online safe deposit boxes that are difficult to hack. Back up all your info on your own computer.
- Update your legal documents in detail, to grant and withhold consent to access specific portions of your digital assets. You should update your last will and testament, for example, to draft terms that will prevail over any contrary terms in a Terms of Service agreement. Don’t forget to update powers of attorney, revocable living trusts, etc.
- Review and revise your digital estate plan regularly. Digital estate planning is currently a fast-moving field of law, and the law could change at any time. Work with a trusts and estates legal practitioner to prevent changes in the law from catching you or your beneficiaries flat-footed.
Keep your passwords and other secret information secure, but provide a way for your fiduciaries to access them later.
Now Is the Time to Begin Your Digital Estate Planning
Even if you created a thoughtful estate plan for your physical assets, you might not have included your digital assets. Alternatively, you might have included digital assets, but have done so in an inappropriate manner. We can help! Please contact the Law Office of Andrew M. Lamkin, P.C. online or by calling 516-605-0625 so that we can discuss your options.