Digital Assets in Estate Planning
In 2016, Governor Andrew Cuomo signed Senate Bill 7426A into law. I wrote an article at the time of its passage expressing the importance of planning with digital assets. This area of the law has only become more important as more people begin to invest in areas like cryptocurrency and Bitcoin that is labeled as digital.
What are Digital Assets and their Importance to Estate Planning
Digital assets can be described in a number of different ways. Although this list is not exhaustive, digital assets can be personal (photographs, videos, emails, playlists), social media (Facebook, Myspace, LinkedIn, Twitter), Financial Accounts (bank accounts, automatic bill pay, Amazon.com, PayPal, e-Bay), Business Accounts (customer orders, credit card data, bank account numbers, patient/client information), Domain Names or Blogs, Loyalty Program Benefits (airline miles, credit card “cash back”, retail benefits), and BitCoin.
Estate planning attorneys should suggest to their clients that they create an inventory of their online life including a list of how and where the assets are held, along with usernames and passwords. If there are “secret” questions then the answers to those questions should be documented. The inventory should be carefully stored and if necessary the attorney should keep this document in the client’s file only to be used by a Power of Attorney or Executor when it needs to be used. An even more innovative solution is placing digital assets into a Revocable Living Trust. Assuming the asset is transferable, the asset could be titled into the name of the Trust with the Trustee receiving specific instructions for how to handle the asset along with the information being private, unlike a probate proceeding for a Will.
Fiduciary Access to Digital Assets
The legal rights of Executors, Administrators, Agents, and/or Guardians to access digital assets has been unclear. The Uniform Law Commission established a Drafting Committee on Fiduciary Access to Digital Information in 2012. The goal was for the committee to vest fiduciaries with the authority to access, manage, and possibly to distribute digital assets. The most recent iteration of the Uniform Fiduciary Access to Digital Assets (“UFADAA”) provides the legal authority for a fiduciary to manage digital assets in accordance with the user’s estate plan, while ensuring that a user’s private electronic communications remain private unless the user consented to disclosure. The UFADAA has been enacted by 45 states including New York as of this writing.
New York
The New York law signed by Governor Cuomo in 2016 distinguished between electronic communications and other digital assets. Broken down even further, there is actually a distinction woven within the law between the content of an electronic communication and the listing or catalogue of electronic communications. For digital assets, the law provides a definition that they are any record that exists in electronic form. This means that the law does not apply to a bank account for which the owner may have online access. Bitcoin, however, would be a digital asset. This distinction is important because in the absence of explicit authorization from the user or a court order, an Executor or Administrator cannot obtain the content of the electronic communications.
To further handle a fiduciary’s access to digital assets, the New York law establishes a three tiered structure for establishing access. The first tier is the intent expressed by the user with an online tool. Many websites and custodians of digital material will give the user the option of allowing certain people to access the asset in the event of death or disability. I advise my clients to seek out the term of service agreement or legacy setting to allow access per their wishes. The second tier, provided the user has not expressed his or her wishes using an online tool, is an expression of authorization in a Will or Power of Attorney. The last tier is the provisions in a custodian’s terms of service agreement. Section 13-A-4.1 of the NYS Estates, Powers and Trusts Law now imposes all fiduciary duties to the management of digital assets, including the duties of care, loyalty, and confidentiality.
Moving Forward
Since the passage of the 2016 law, New York Courts continue to rule on issues related to the administration of digital assets in estates. In the Matter of Serrano, decided by a Surrogate Court in 2017, the Court decided that the decedent’s email calendar was not included in the definition of electronic content and the personal representative was entitled to access the calendar and contact list.
In Matter of Coleman, decided by Westchester County Surrogates Court in 2019, the Court decided that the personal representatives could not access a decedent’s icloud account for Apple. The Court ruled that the fiduciaries had not demonstrated the need to access the content of digital assets for estate administration, but left it open ended to apply if the disclosure of content information was deemed necessary.
In Matter of Murray, decided in Suffolk County, in 2019, the Court denied access by a fiduciary to content information of electronic communications stored in decedent’s iphone. This Court acknowledged the delicate balance between decedent’s right to privacy and a fiduciary’s duty to marshal estate assets. We are continually seeing the important distinction between content and non-content digital information being drawn by each Surrogate Court.
It remains important for estate planning attorneys to modify Wills, Trusts, and Power of Attorney to reflect a fiduciary’s ability to access digital assets. In an area fraught with identity theft and issues with cybersecurity, it is important for a person to have usernames, passwords and accounts listed somewhere so that in the event of death or disability it is available. Instructing that this information be stored somewhere should come with the warning of unauthorized access to an account or website, and clear intent for who can have access to it pursuant to the three tiers listed above. Fiduciaries who are given access to online accounts and digital assets should be aware of their fiduciary responsibility to discontinue access or “turn off” automatic payments. Every fiduciary in the near future will have to also decide whether to administer someone’s assets and/or estate online or to assume those responsibilities in a more traditional way. Regardless if it is in the context of estate planning or estate administration, every person needs to understand the implications of leading an online life and having digital assets.
If you would like to schedule a consultation to talk about your estate planning, please feel free to contact Daniel S. Williford at dwilliford@mccmlaw.com or call him at 585-512-3511.
This publication is intended as an information source for clients, prospective clients, and colleagues and constitutes attorney advertising. The content should not be considered legal advice and readers should not act upon information in this publication without individualized professional counsel.
About MCCM
McConville Considine Cooman & Morin, P.C. is a full-service law firm based in Rochester, New York, providing high-quality legal services to businesses and individuals since 1979. With over a dozen attorneys and a full paralegal support staff, the firm is well-positioned to right-size services tailored to each client. We are large enough to provide expertise in a broad range of practice areas, yet small enough to devote prompt, personal attention to our clients.
We represent a diverse range of clients located throughout New York State and New England. They include individuals, numerous manufacturing and service industry businesses, local governments, and health care professionals, provider groups, facilities and associations. We also serve as local counsel to out-of-state clients and their attorneys who have litigation pending in Western New York courts. For more information, please contact us at 585.546.2500.