Digital Assets and Your Estate Plan
In 2016, both Florida and Michigan passed Fiduciary Access to Digital Assets Acts. These statutes were needed to clarify the legal rights of fiduciaries (including personal representatives or executors of estates, trustees, power of attorney holders, and guardians; Michigan’s statute also includes conservators) to access the online accounts and assets of deceased or incapacitated persons. These statutes in Florida and Michigan, as well as many other states, are very similar to each other since they are based on a statute that was prepared by the Uniform Law Commission, which is a non-profit organization that works to achieve uniformity of state laws when appropriate.
WHAT ARE DIGITAL ASSETS?
Digital assets include, but certainly are not limited to:
- email accounts
- personal photos, documents, or data that you store with a third-party service on the internet
- online bank and brokerage accounts
- social media accounts (Facebook, Twitter, etc.)
- music, movie, entertainment, and game accounts
- art, designs, literature that you created and store with a third-party on the internet
- online currency
- domain names and addresses
These days, most people have many digital assets and accounts, and can have trouble themselves managing their accounts and various passwords. Imagine how difficult it would be for someone else to identify, access, and manage or close those accounts if something were to happen to the account owner and the account information is not well-organized and available to family and fiduciaries. In some cases, these assets and accounts have grown to have significant monetary or sentimental value that might not be completely appreciated by the account holder during their life. In order to complete a thoughtful and thorough estate plan, it is important to take a careful inventory of all of your assets, and digital assets are no exception.
Just to be clear, the Fiduciary Access to Digital Assets Act deals with access to, and not ownership of, the digital assets. For example, even though you might give the personal representative of your estate the right to access your digital accounts after your death or incapacity does not mean you are giving those assets to that person. Just like with all assets of your estate, your personal representative has the fiduciary duty to gather all of your assets and distribute them according to your will or according to law if you have no will. This fiduciary duty also applies to digital assets, and the Act only addresses rights to access, not ownership.
THE CONCEPT OF CATALOGUE VS. CONTENT
Preexisting federal law, and related state laws, affected how the Uniform Fiduciary Access to Digital Assets Act was drafted. In summary, those federal and state laws are designed to protect the privacy rights of internet account holders. The custodians of digital assets, which can include internet service providers and others who hold or transmit digital assets, face potentially severe penalties for violating those privacy laws. Their business models also depend greatly on their ability to assure their customers and users that their accounts will be kept private. Therefore, much of the debate, and some of the complexity, in the new digital access statutes arose because the custodian companies that provide accounts and hold digital assets wanted to make sure their obligations are clear, so that they are not subject to unreasonable risks of liability.
For the purposes of your estate planning, after you have identified and determined the value of your digital assets, you need to consider the difference between the catalogue and the content of your digital communications. You have the ability to direct who, if anyone, may have access to the catalogue of your electronic communications (which is a list of communications sent, to whom, and when) and who, if anyone, may have access to the content of your communications. I have seen these concepts described as the catalogue being information found on an envelope, and the content being the letter within the envelope. The important point is that you can control who has access, and the extent of that access, to your digital assets generally, and communications specifically.
Some readers might be thinking, “What’s the big deal? My spouse, or maybe one of my children, knows about all my accounts and where I keep my passwords, so they can just access those if they need to and we don’t have to make this complicated.” But as a matter of law, and certainly from the custodian’s perspective, it is not that simple. If your deceased spouse or family member owned an account or digital asset in their own name, legally, you do not have the right to access that account or asset without some express authority. Without that authority, the custodian will most likely be unwilling to assist you because the custodian would face potential liability.
THE HIERARCHY OF AUTHORITY TO DETERMINE ACCESS TO DIGITAL ASSETS
Both the Florida and Michigan statutes create a hierarchy of documents or sources of directions to guide the custodian who is presented with a request for access to digital assets from a fiduciary or family member after the account owner’s death or incapacity. Specifically:
- An account owner may use an online tool if it is recognized by the custodian as a means to direct the custodian. Under the statutes, an “online tool” refers to 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 user, to provide directions for disclosure or nondisclosure of digital assets to a third person. If the tool allows the account owner to modify or delete the direction in the tool at any time, then the direction in the tool will override any contrary direction in a will, trust, or other document. Presumably if there is no ability to modify or delete the direction in the tool, a later will or other document will control. I understand that several custodian companies provide the ability to use an online tool for this purpose, and presumably such tools will become more common in the future.
- If no online tool has been used to give direction to a custodian, then any direction in a will, trust, power of attorney, or other record will prevail.
- The terms of service for any online account can provide access rights to family members or fiduciaries. But any direction provided by the account owner under items 1 or 2 above will override the custodian’s terms of service agreement so long as the terms of service agreement does not expressly and distinctly require affirmative action to address this issue. If the terms of service do expressly and distinctly address this issue, they may prevail over any direction in items 1 or 2 above.
As you can see, it is important understand the terms of service and to be consistent in the way you address these issues since the terms of service might override express directions, and since a thoughtful will or trust can be overridden by the inconsistent directions in an online tool.
CONCLUSION
In general, these new statutes make it clear that if you wish to provide your fiduciary with the authority to access the content of all of your digital assets, you need to take affirmative action and expressly grant that authority in a tool, in a will, trust, power of attorney document, or through the terms of service of a particular custodian on your online account. Notably, there are provisions in both the Florida and Michigan statutes that allow a personal representative of an estate, a trustee of a trust, or an agent with general authority (i.e. power of attorney holder) to have access to just the catalogue of electronic communications in all cases, unless the account owner expressly prohibited such access.
But even where the personal representative, trustee, or agent have right to access the catalogue under the statute, the custodian can elect to first require a court order before disclosing that catalogue. Importantly, the catalogue disclosure alone may not provide adequate information to effectively administer the estate. In the absence of effective authorization to access content when needed, court action may be required to obtain an order allowing access to content. Obviously, it would be preferable to avoid any court action through careful estate planning.
