We live in a digital world. We bank online, post vacation photos on Instagram, and buy bitcoin with one click on the phone. Considering how much of modern life happens digitally, it makes sense to provide access and instructions to heirs as a part of planning an estate. Transferring ownership of digital assets is more complicated than leaving an antique vase or piece of jewelry to a loved one. Here’s what you need to know to include your digital property in your estate plan.
What Is a Digital Asset?
Digital assets are electronic records or materials that exist, as their name suggests, digitally. Digital assets cover a wide range of properties, including social media accounts, email accounts, cryptocurrencies, PayPal or Venmo balances, credit card points, email, medical records, apps, documents, and photographs—to name just a few.
Some digital assets belong to you, for instance, your photos. But, unlike a physical print you can hand to another person, sharing a digital image requires using a third-party provider like Google, Amazon, or Microsoft. These third-party providers have their terms and conditions for digital asset access that you’ll need to be aware of in order to extend your access to someone else as part of your estate plan.
The Uniform Fiduciary Access to Digital Assets Act: Why It Matters
In 2014, legislation was enacted in response to heirs being unable to access social media accounts and other digital assets. Prior to the legislation, there were very few laws dictating what an heir could do to get access to a loved one’s digital assets. Due to privacy laws, unless the heir could provide logins and passwords, the heir was unable to access these accounts. As a result, companies would delete the account, or the digital assets would remain untouched on electronic mediums.
Under the first Uniform Fiduciary Access to Digital Assets Act (UFADAA), an executor or agent could have access like the owner. If they didn’t have the password, they could request access from the third-party provider under the law. However, this version of the law was met with resistance since it invaded the deceased person’s privacy, created liability issues for the third party who had promised to keep accounts secure, and created conflicts with federal privacy provisions.
In 2015, the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA) was passed in response to privacy concerns. Blanket access is removed, and heirs now need to have written authorization from the deceased to access digital accounts. Under the current version of the law, the following is authorized:
- The deceased person must have explicitly consented to disclosure for the agent/executor to have authority over electronic communications.
- The executor must petition the court to explain why access to a particular digital asset is needed to wrap up the estate.
- If the executor doesn’t have permission through a will, trust, or other legal documents, the third-party provider may consult the terms-of-service agreement to comply with the request for access.
- Third-party providers may ask for a court order from an executor or heir, as well as limit access to a digital asset that is reasonably necessary to wrap up an estate.
- Third-party providers do not have to give access to deleted accounts or joint accounts.
Currently, RUFADAA has been enacted in 46 states, except for Louisiana, Massachusetts, and Oklahoma. Delaware had adopted the original version.
Passing on Your Digital Assets: What to Know
Although RUFADAA is the law in a majority of states, you cannot rely on the law alone to ensure your digital assets go to the people you want to have them. Legislation is relatively new, and precedent is still evolving.
There is a three-tier system provided by the act that may make things easier for your heirs to gain digital access:
- Extend access through specific platforms. Some third-party providers will allow you to designate online the individual who will have access to your account. Choosing to extend access in this way will trump any directive in a will, trust, or power of attorney. For example, Facebook allows individuals to list a legacy contact who will be allowed to access their account should they become incapacitated or pass. Also, Google will allow you to control what happens to your account via the Google Account Inactive Manager feature, and you may designate when your account should be inactive, what should happen to your account, and which persons can have access to the parts of your account you designate.
- Appoint a digital executor through your will, trust, or power of attorney. If you haven’t extended permission online, or there is no option to do so, you can list heirs who may have access to your digital assets. Keep in mind some digital assets are hard to pass on via a will because you don’t have licensing rights to things like social media accounts, subscriptions, and email, and the terms of the agreement may limit your rights.
- Rely on the third-party’s terms in the service agreement. In situations where neither of the above options has been executed, access to your digital assets will be governed by the third-party provider’s terms of service agreement.
How to Make a Plan for Passing on Digital Assets
Making a plan to pass on digital assets is the ideal way to ensure the right individuals may access your electronic legacy. In general, go beyond giving your executor permission to your digital assets in a will, trust, or power of attorney. One way to do this is to write a handwritten note to include with your estate plan documents leaving information and instructions on how to access your accounts and files.
In preparing your note, do the following:
- Make a list of your digital assets and name who has access.
- List all usernames and passwords.
- Tell your executor what to do specifically with each account. Do you want your Facebook account deleted? Do you want all photos on your computer to be shared with your family? Do you want your blog saved? Go through your digital life and make a plan for each segment. Be clear in your instructions about what you want to happen with each.
- Make certain this note or letter with the instructions is in a safe place. You can store this document with other important information like your will, passports, or health care power of attorney. Be sure this document is easily accessible because your executor will need quick access.
- Keep the information current. As any account information changes, make certain you update it in your letter/note.
As more and more of our lives move into the digital realm, digital assets can be just as valuable as physical objects. That’s why it’s important to plan to ensure they are left to the people you would like to have them after you pass.
This article is intended for general informational and educational purposes only, and should not be construed as financial or tax advice. For more information about whether a reverse mortgage may be right for you, you should consult an independent financial advisor. For tax advice, please consult a tax professional.