Why is estate planning for your digital assets so important?

In general, a digital asset includes any type of electronic data that you have the right to access. According to the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA), a digital asset is defined as "an electronic record in which an individual has a right or interest." This broad definition encompasses a wide range of digital possessions, including:

• Content stored on devices (cell phones, laptops, tablets, e-readers and external hard drives)
• Financial accounts (banking, investment, cryptocurrency)
• Utility accounts
• Social media accounts (Facebook, Twitter, Instagram, LinkedIn)
• Domain names and websites
• Email accounts
• Online subscriptions and memberships
• Cloud storage (Dropbox, OneDrive, Google Drive)
• Online shopping and payment accounts (eBay, PayPal)
• Reward programs (airline miles, hotel points)
• Digital media licenses (iTunes, Amazon Kindle)

As technology continues to permeate every aspect of our lives, the list of digital assets we accumulate grows longer, making it increasingly important to address them in our estate planning efforts.

Digital assets are often lost forever when the owner dies. Estate and inheritance laws have not caught up with the growing use of digital assets, and most people do not realize the importance of creating an estate plan that includes their digital assets. Three primary reasons contribute to the potential loss of digital assets:

• Unknown passwords. Many digital accounts require usernames, passwords and security questions to gain access. For privacy reasons, users often refrain from sharing this sensitive information, making it nearly impossible for family members or personal representatives to access these accounts after the owner's passing.
• Restrictive terms of service. Digital assets are governed by private contracts known as terms of service agreements, which often prohibit third-party access or transfer of accounts, even to personal representatives or family members. Service providers prioritize user privacy and security, leading them to delete accounts upon notification of the owner's death rather than granting access to others.
• Lack of awareness. Unlike tangible assets, digital assets leave no physical footprint, making it challenging for family members to identify and locate them after an individual's passing.

These challenges underscore the importance of proactive digital asset planning to ensure that these valuable assets are not lost forever.

Failing to include digital assets in your estate plan can have far-reaching consequences, both emotional and financial. Here are some compelling reasons why digital estate planning should be a priority:

• Preventing asset loss. Without proper planning, valuable digital assets such as blogs, social media accounts with advertising revenue, PayPal accounts and cryptocurrency holdings could be lost forever, depriving your beneficiaries of their rightful inheritance.
• Avoiding identity theft. Unattended digital accounts can be prime targets for identity thieves, who may attempt to open credit cards, apply for jobs or obtain identification documents in the deceased's name. Proper account closure and notification can help prevent such fraudulent activities.
• Preserving memories. Digital assets often hold sentimental value, such as family photos, videos and personal correspondence. Ensuring that these cherished memories are preserved and passed on to loved ones is a crucial aspect of digital estate planning.
• Minimizing financial losses. Overlooking digital assets can result in unnecessary financial losses to the estate, such as late fees, service charges and missed opportunities to cancel or transfer valuable accounts and subscriptions.

By incorporating digital assets into your estate plan, you can safeguard your digital legacy, protect your loved ones from potential financial and emotional distress and ensure that your digital footprint is managed according to your wishes.

To effectively address digital assets in your estate plan, there are four essential steps to follow:

• Create an inventory. The first and most crucial step is to create a comprehensive inventory of your digital assets, including device passcodes, online account information (URLs, usernames, passwords, security questions and answers) and any other relevant access details. This inventory should be regularly updated to reflect changes in your digital landscape.
• Update your power of attorney. Most states have adopted versions of the RUFADAA, which requires explicit authorization for agents under a power of attorney to access digital accounts. Consult with an experienced estate planning attorney to ensure that your power of attorney document includes the appropriate language referencing your state's fiduciary access to digital assets statute.
• Incorporate digital assets into your will and trust. Similar to the power of attorney, your will and trust documents should include specific language authorizing your personal representative or successor trustee to access and distribute your digital assets according to your state's laws. Additionally, you should provide clear instructions for the distribution or deletion of specific digital assets.
• Create offline backups. To ensure that your digital assets are not lost due to restrictive terms of service agreements, consider creating offline backups of important content, such as family photos and personal documents on physical devices that you own and control.

By following these steps and working closely with an experienced estate planning attorney, you can ensure that your digital assets are properly accounted for and managed according to your wishes.

Without proper estate planning, family members cannot access online accounts, like social media accounts, after your death. Before you can create an online account, you must enter into a terms of service agreement. Most user agreements prohibit access by third parties. Furthermore, these agreements often prohibit transferring the account to someone else.

Many service providers state that federal statutes, including the Stored Communications Act and Computer Fraud and Abuse Act, prevent them from allowing family members to use or access their deceased loved one’s account.

• Stored Communications Act (18 U.S.C. Sec 2702)(1986). This federal law creates privacy rights to protect the contents of certain electronic communications and files by certain providers of electronic communications services or remote computing services. If the law applies, an online account service provider is prohibited from disclosing the contents of electronic communications and files. The law does not contain an express exemption regarding transferring the contents of an online account to a personal representative during estate administration. The statute does allow third parties to access a user’s account with the user’s “lawful consent.” “Lawful consent” can be provided by authorizing an agent under a power of attorney or providing a personal representative with the clear authority to access accounts and digital assets. Many family members and fiduciaries have had their access requests to a deceased family member’s email and social media accounts denied because of this law. Providers deny access because the estate planning documents did not expressly authorize access for that account. Many of the state fiduciary access to digital asset laws were drafted to give fiduciaries the required “lawful consent” under this statute by including such consent in estate planning documents.
• Computer Fraud and Abuse Act (18 U.S.C. Sec 1030)(1986). In certain circumstances, this law makes it a criminal offense (a felony) to access another person’s account, even with the password. This law was passed to prevent fraud and reduce identity theft, but it can also be a major obstacle to families accessing the online accounts and digital assets of a deceased family member. Many service providers cite this statute when refusing to allow family members to use or reset the password for a deceased person’s account.

Some people assume that they can simply share the passwords with their family members. However, there are legal concerns associated with accessing a deceased family member’s account without the service provider’s permission. The family member may be violating laws such as the Computer Fraud and Abuse Act (CFAA). The penalties for violating the CFAA are surprisingly severe, including jail time and fines. Moreover, if the service provider sees that the account was improperly accessed after the owner’s death, it can make further interaction with the service provider complicated.

In general, only comprehensive digital estate planning will allow your family members to legally access your online accounts. An experienced Legacy Plan Network Attorney can guide you through the steps required to ensure that these assets are not lost.

In the digital age, our lives are inextricably intertwined with technology, and our digital assets have become an integral part of our modern existence. Failing to include these assets in our estate planning efforts can have severe consequences, both emotional and financial. By taking proactive steps to inventory, secure, and properly distribute our digital assets, we can ensure that our digital legacy is preserved and passed on according to our wishes.

The complexities of digital estate planning can be daunting, but with the guidance of an experienced estate planning attorney and a commitment to staying informed about the ever-evolving legal landscape, we can safeguard our digital footprints and provide peace of mind for ourselves and our loved ones.