KEY TAKEAWAYS
Over the past several years, the rise of the Federal estate tax exemption has dramatically reduced traditional estate planning. Today, it is less about estate tax planning and more about simply ensuring that the correct legal documents are in place to transfer assets correctly. The new estate planning that is often left behind deals with all of your “digital” assets.
The Importance of Digital Estate Planning
Traditional estate planning covers assets you can see and touch. Homes, bank accounts, and stock brokerage accounts are just a few examples. Today, though many people have more than tangible assets – they have digital assets too. Digital assets such as websites, domain names, digital photos, and even social media accounts aren’t tangible. This creates a grey area regarding who has access to them and when it’s illegal to touch them.
Just because you leave a physical asset, like a computer to a beneficiary, doesn’t mean you also bequeath the digital files located within the computer.
Digital estate planning says where the digital files should go and it doesn’t have to be to the person receiving the computer itself. In fact, in some cases, accessing accounts could land users in legal trouble even if they are a beneficiary of the estate.
What are Digital Assets?
Today there are millions of digital asset possibilities. Some have financial value. Others, such as passwords, are just private information that if shared, could provide financial value.
Here are a few examples:
- Online bank accounts
- Cryptocurrency
- Passwords to an online brokerage account
- Email account (and password)
- Digital storefront domain and password
- Digital music
How to Manage Digital Assets
In the past, account owners simply passed along a list of IDs and passwords to their accounts if they died or were unable to handle decisions themselves.
This was the start of many problems, though. First, if you read the terms of service for most accounts, the ownership isn’t transferable. In other words, it’s illegal for anyone else to log into the account and use the digital assets as they desire.
Worse yet, if no one has the owner’s IDs and passwords, the service provider is under no obligation to share them and could dissolve the account. This led to legislators creating digital estate planning laws, but it wasn’t easy.
The Revised Uniform Fiduciary Access to Digital Assets Act
There were several attempts to address the digital asset issue, but they all fell through until the Revised Uniform Fiduciary Access to Digital Assets Act. The original act was adopted by just one state – Delaware.
The RUFADAA, though, was adopted by a majority of states in recent years and provides account owners with an online tool that dictates how their digital assets should be handled. The custodian online tool supersedes any terms of service, as long as the service provider agrees to it and it falls within their terms of service.
The online tool allows owners to dictate who can access their account and to what degree. It applies to all power of attorneys, executors, and any other third-parties the account owner names in the digital tools. This is separate from any individuals named in legal documents for tangible assets. For example, an executor of a will may not have access to the owner’s Facebook page or eBay business.
Digital Estate Planning is an Important Part of your Estate
As you create your estate plans, you must include digital estate planning, especially if you have a large number of online accounts that include valuable information. Talk with your estate planning specialist about your state laws and determine how you want your digital estate handled.