Time to Update Your Digital Assets Estate Planning Strategy

Estate planning laws and practices are catching up with the reality of today’s digital world. It is a slow process and still has a way to go, but big strides recently were made. You need to review how your estate planning handles digital assets and decide if an update is in order.

There are several types of digital assets. One category is social media accounts, such as Facebook, Instagram and many others. Another category is personal accounts. This is a wide-ranging category that ranges from email accounts to financial accounts to various subscription web sites. Automatic bill paying is included in this category. The third category is digital assets that generate income. A person might have a website that earns advertising revenue and perhaps other types of income. There are many others types of digital assets that can generate income.

Until recently, little was certain about how digital assets would be treated after the owner passed away. Few states had laws covering the issues, and the companies involved with the digital assets each had their own policies. Some companies had no policies.

Much changed when the Fiduciary Access to Digital Assets Act (FADA) was developed in 2015 by the National Conference of Commissioners on Uniform StateLaws. This is a group that drafts model legislation on different topics for state legislatures to consider. Estate planning matters primarily are state issues, so each state has to enact its own laws or allow its courts to develop them. So far, 25 states have enacted some version of FADA. It was introduced, but not enacted yet, in 11 other states. The remaining states haven’t taken action.

Under FADA, a fiduciary (such as an estate executor, trustee, or an agent under a power of attorney) who already has the right to manage a person’s tangible property has the additional right to manage the person’s digital property. But FADA has limits. Fiduciaries automatically can manage only computer files, web domains and virtual currency under FADA. A fiduciary has limited access under FADA to manage email, text messages and social media accounts, unless the original user authorized it in the will, trust, power of attorney, or other document. In other words, you specifically have to grant your fiduciary the right to access and manage those accounts. An advantage of this bifurcation is that you can name one person as executor to manage your tangible estate and the first category of digital accounts. Then, using a limited POA or other document, you can name another person to manage the other digital assets.

For more details on FADA and updates on its status in each state, go online to www.uniformlaws.org and search for Fiduciary Access to Digital Assets Act. Keep in mind that each state can adopt its own version of FADA, so your state’s version might differ from the model law.

In states that haven’t enacted FADA or a similar law, many issues still are up in the air. Some commentators say that an estate executor who accesses a deceased person’s digital assets, even when permission is stated in the will or other document, violates federal anti-hacking law. Also, digital service providers can ignore a will and rely on their own policies or attorneys’ advice.

Here’s how to plan for digital assets in your estate planning, regardless of whether or not your state has enacted a law similar to FADA.

• Develop an inventory. You need a list of all your digital accounts, assets, automatic payment plans and subscriptions. The list should include the name, digital address or other way to access it, and the access information such as username, password and security questions. You also might use one of the many commercial services that offers to manage passwords and access codes.

Be sure to include digital liabilities as well. These are automatic payment plans, automatic renewal programs and other arrangements under which your bank account or credit card is automatically charged on a regular basis.

The inventory is essential. Without it, your heirs and executor are lost. Many estate planning specialists have stories of executors hiring computer experts to crack passwords to computers and accounts. Of course, your executor might not even learn about your digital assets without the inventory.

• Decide what you want done and who should do it. For example, you might want only your spouse and one of your children to have access to your email accounts, not the executor. You might want family members to handle social media accounts, such as Facebook and Twitter. Keep in mind that the major digital providers have adopted policies that allow digital heirs some level of access to the accounts. Policies are in place for Google, Facebook and Twitter, for example. But the policies differ and change over time. You need to check the service agreement or user agreement of each provider to learn the details, and then be alert for changes. FADA indicates a person’s expressed intention in a will or trust overrides limitations in a provider’s service agreement.

• State your decisions in your will. In states where FADA is in place, directions in your will or living trust control who has access to your digital assets. In other states, the rules aren’t clear, but it is best to include the directions in your will to establish your intentions and to have them in place in case the state does enact FADA.

Keep in mind that some digital accounts aren’t assets. When you purchase and download an electronic book from Amazon.com’s Kindle service or music from iTunes, you aren’t acquiring legal title to the file. You only have a license for personal use under most of the service agreements. You don’t have assets that legally can be given or bequeathed to someone. The rights are supposed to end with your passing.

Many people have far more digital assets and accounts than they realize. They must be included in your estate plan, and the plan must be updated and revised as the law on estate planning for digital assets is revised.

A valuable help in organizing your digital and other assets is my workbook, To My Heirs: A Book of Final Wishes and Instructions. It is available as a PDF file you can either print or enter your information in the file, and then update it when needed. It’s my most popular report and often the most valuable thing you can leave to heirs. It’s available for $24.99 through the website: www.retirementwatch.com, roll over “About Bob Carlson” and click on the “Bob’s Library” tab. Or call 800-552-1152.