- Written by Attorney Seunghee Cha; Bulkley, Richardson and Gelinas, LLP; Hadley, MA; 413-256-0002
- Published: August 13, 2021
Most people own digital assets and conduct business online. In this digital era, it is necessary to plan for proper access, management, and transfer of digital assets in the event of incapacity and death.
Given the legal uncertainties, it is important to be proactive about the administration of your digital assets.
Digital assets are electronic records in which you have a right or interest. They may be stored on a computer, smartphone, memory cards, or online in the cloud. The definition does not include any underlying asset unless the asset is an electronic record. Typical examples of assets that may take the form of “digital assets” are documents (word processing, PDFs), photos, videos, emails, music, information on Facebook, bank and investment accounts, IRS e-filings, crypto-currency, and domain names.
Why should you have a plan?
- Help your family and fiduciaries: Providing information about your digital assets and authorizing access minimizes the burden and cost of handling your affairs.
- Prevent financial losses: Digital assets may be lost if not discovered and properly marshaled.
- Preserve family mementos: Your photos, letters, and blogs contain family memories and history.
- Safeguard against identity theft: During incapacity and even after death, your personal information must be protected.
- Protect your privacy: You may possess data not intended to be preserved and may need to designate someone to destroy it.
Unfortunately, existing laws and industry practices pose challenges to planning. Service agreements usually prohibit access to your account by others. Some laws permit authorized persons access but deny their ability to manage and distribute digital assets.
To address these challenges, many states passed the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA) (2015). The statute defers to the owner’s intent, gives preferences to online tools for designating authorized users provided by custodians, grants access to fiduciaries affirmatively authorized by the owner, and upholds service agreements absent any online tool or affirmative record by the owner. RUFADAA was introduced in Massachusetts but has not passed into law.
Given the legal uncertainties, it is important to be proactive about the administration of your digital assets. Here are some suggestions:
- Create an inventory of digital assets and instructions.
- Designate authorized persons access if permitted by the hosting company.
- Grant fiduciaries in your estate plan (agent under a power of attorney, personal representative under the will, trustee) access and administration powers.
- Back up your digital assets. If you have crypto-currency, provide the private key to a trustworthy relative or fiduciary—otherwise it may be lost forever.
- Explore online storage services—beware that some may not comply with applicable laws and may not guarantee service.
Whether they have monetary or sentimental value, digital assets are an integral part of your life. Good planning will ensure their preservation for you and your beneficiaries.