The Unexpected Asset
Planning for Digital Assets and the new "Access to Digital Assets Act"
- Do you post pictures on Facebook, use on-line bill pay or store music or documents in the cloud? If so, it is critical to understand who has access to this online information in the event of an unexpected incapacity or upon your passing. The law is finally catching-up with technology in this area.
Might you or a loved one possess other unexpected assets? “Digital assets” also include domain names, eBay accounts and characters in virtual gaming (the latter of which has reportedly produced large, albeit rare, windfalls... up to $635,000 in a recent report).
On July 1, Indiana joined 17 other states (including Michigan and Minnesota) in enacting the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA). The "Act" defines the necessary steps to allow a "fiduciary" (i.e. a Personal Representative, Trustee, Guardian or Attorney-in-fact) to access, guard and protect such digital assets and online information. It has been introduced in 13 other states as well, including Illinois.
Under the Act, there are 2 types of digital assets:
- "Contents of electronic communication" (emails, text and direct messages, photos, etc.).
- "Other digital assets" (eBay, PayPal or iTunes accounts, domain names, loyalty programs and digital assets in gaming, etc.).
What steps should you now take?
The Act provides that the custodian (i.e. the online site or provider) can create an online tool for a user to direct their preferences as to whom such information can be disclosed. For instance, Facebook allows the designation of a legacy contact to whom limited information could be provided.
Estate planning documents should be revised to grant (or deny) a fiduciary access to your digital assets. Your will, trust and power of attorney should each include express provisions necessary to define who has the right to access both digital assets and contents of electronic information. Contents of electronic communication cannot be disclosed unless the user expressly consented to the disclosure or expressly authorized it in their will, trust or power of attorney.
If the user's estate planning documents do not contain such provisions and if the custodian's online tool has not been used, then the custodian's Terms of Service Agreement (TOSA) will determine fiduciary access. In some cases, the TOSA may prohibit this access completely and will even shut down the account in its entirety. Notably, Yahoo's TOSA prevents all such access and will lock down all passwords. Few individuals read a TOSA, evidenced by the fact that you are likely unaware that the use restrictions for Amazon's Lumberyard engine are expressly waived in the event of a zombie apocalypse.
If an individual (1) has not used the online tool, or (2) has not updated estate planning documents and (3) the TOSA does not prohibit a fiduciary's access then the Act provides default rules that will give guardians (after a court hearing), attorneys in fact under a power of attorney, trustees and personal representatives some access to limited information. Such information includes digital assets solely for the purpose of carrying out fiduciary duties, but not the contents of electronic communication, which may be lost forever.
The new Act has a tremendous impact on estate planning. It likely requires amending estate planning documents to expressly authorize (or deny) access to both digital assets and the contents of electronic communication. Failing to take these steps prior to a person's incapacity could result in the loss of access to critical information or deletion of digital assets. However, this extra effort will assure your unique preferences for access to this critical information will be honored.