Digital Assets and Your Estate Plan

Prudent estate planning is an important way to protect your valuable assets. But when you think about those assets, what comes to mind? Traditionally, your estate plan covers any real property you own, like your home, as well as automobiles, bank and investment accounts, jewelry and other personal property like photographs and memorabilia. More and more, however, your assets may include intangibles such as digital photographs, business and personal websites, and social media accounts. And sometimes, certain assets can only be accessed electronically. For example, perhaps you no longer receive paper bank account statements but rather access and keep all of those records online. Fiduciaries exercising their authority under existing estate planning documents (like the executor of your estate or your designated agent under a power of attorney) have had difficulty accessing and managing these proliferating digital assets and records.

The problem arises when the language used in estate planning - which in some cases is mandated by state statute - does not specifically address access to and management of digital assets. What if, for instance, you designate an agent to manage your checking account through a durable power of attorney, but don't specifically give the agent access to the online banking records necessary to complete this function? What if the executor of your will attempts to settle your outstanding credit card debt, but you received all your statements electronically and the executor doesn't have your account password?

In 2017, the Texas Legislature sought to remedy this increasing problem by adopting a new law, called the Texas Revised Uniform Fiduciary Access to Digital Assets Act. This statute, added as Chapter 2001 to the Texas Estates Code, makes it easier for fiduciaries to access and manage digital assets when their owner dies or becomes incapacitated. More than 30 other states currently have adopted some version of this law, and others are considering it.

The Act defines several important terms:  

A digital asset is an electronic record in which an individual has a right or interest. In other words, it includes any information stored electronically, which would include, for example:

• emails;
• text messages;
• digital photos;
• other digital media including music, videos, and books (e.g., for a Kindle or e-reader);
• on-line bank and investment account records;
• on-line credit card or utility records;
• word processing documents;
• websites and blogs; and
• social media accounts (e.g., Facebook, Instagram, LinkedIn).

The Act contemplates two primary types of digital assets: a catalog or list of electronic records, as well as the actual content of those records. It is the difference, for example, between a catalogue of emails listed by date and sender, and the content of those emails. Note, however, that an underlying asset or liability that is not itself an electronic record is not a digital asset. In other words, while your online bank statements are digital assets, the actual funds in the bank account are not.

A fiduciary is a personal representative, guardian, agent or trustee. The executor of a will, the designated trustee under a trust document, and the appointed agent under a power of attorney are all fiduciaries.

A user is a person who has an account with a custodian. A custodian means a person that carries, maintains, processes, receives, or stores a digital asset for a user. In the estate-planning context, the user would be the decedent, the principal of the power of attorney, or the beneficiary of a trust. A trustee might also be a user if the trustee has the authority to establish electronic accounts under the trust documents. The custodian would be whoever holds the electronic records at issue - the user's e-mail provider, the financial entity that holds the user's online bank or investment account records, the utility company that holds electronic records of service, usage and payment, or the company that hosts the user's social media accounts.

The Act establishes a scheme of priority for fiduciary access to digital assets.

First, if the custodian has an online tool allowing the user to give instructions for disclosure to a third party, and the user has actually given instructions using this tool, those instructions control. Google and Facebook, among others, offer such tools. If the user has not used an online tool, then the user's instructions given via will, power of attorney, or trust document control. If the user has done neither, then the custodian's terms of service control a third party's access to the user's digital assets.

Next, the Act provides a process for fiduciaries to access a deceased or incapacitated user's digital assets, whether a catalog of such assets or the contents of electronic communications. These processes are slightly different, with the process to access the contents of electronic communications being more stringent.

These legal changes make it advisable to review your current estate planning documents to ensure their language is consistent with the new statutory rules. Documents particularly likely to be affected include wills, trusts, and financial statutory durable powers of attorney.

Your will, of course, establishes how your property will be distributed when you die. In considering what digital assets you may have, think about what kind of access you want your executor to have, what will be needed to allow your executor to fulfill your instructions, and to whom you might leave digital assets. Is there anyone you want to be able to read your e-mail, make changes to any websites you have, or access your social media accounts?  

A trust is a legal vehicle that allows one person to hold and manage property for another's benefit. For example, your will may establish a trust to hold property for the benefit of a child who may be a minor at your death. The trustee may also need to access and manage existing digital assets, such as records of bank and investment accounts.  

Finally, if you have a statutory durable power of attorney, which appoints an agent to act on your behalf in financial matters should you become incapacitated, you may need to revisit that document as well, keeping in mind what electronic records you may have and what you would like your agent to be able to do with them. A statutory durable power of attorney follows a form established by statute, and the state has revised that form by including a specific provision regarding digital assets. You should consider whether you want your agent to be able simply to log into your accounts and track your financial records and activities, or whether you want your agent also to control the funds in your account.

My approach to helping with your estate planning is to listen to your needs, wishes, and hopes before we begin to consider the specific approaches and documentation that best fit your circumstances. Call me at (903) 944-7537 when you are ready to begin the process.

Sources:

Digital Assets: The Basis of Cyberspace Estate Planning
Revised Uniform Fiduciary Access to Digital Assets Act (2015)