Do You Have Digital Assets?
This month, Governor Andrew Cuomo signed into law an amendment to the New York Estates Powers and Trust Law, creating a new section that specifically addresses the administration of digital assets in a decedent’s estate. Estate planning attorneys have guided their clients using techniques to transfer property to beneficiaries for generations. Digital assets, however, are seen as a new frontier for estate planners on how to address a variety of issues concerning their inheritance.
What Are Digital Assets and What Is Their Importance to Estate Planning?
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, eBay), 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.
As digital footprints begin to grow, it is important to plan ahead. Estate planning attorneys should always suggest that clients 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, the answers should be documented. The inventory should be carefully stored and if necessary, the attorney should keep it in the client’s file only to be used by a power of attorney or executor if needed. An even more innovative solution is placing digital assets into a revocable living trust. Assuming the asset is transferable, it 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 have 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. A small number of states including California, Connecticut, Rhode Island, Oklahoma, and Idaho have passed laws, but many of them have shortcomings. Connecticut’s 2005 statute and Rhode Island’s 2007 law, for example, only cover “electronic mail.” This can be a function of the technology that exists at the time and how restrictive the law or proposed legislation is drafted.
The New York law signed by Governor Cuomo this month distinguishes 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 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 give the user the option of allowing certain people to access the asset in the event of death or disability. 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. 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.
For many estate planning practitioners, it is becoming more important to modify wills, trusts, and powers 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 user names, 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 also have to 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.
For assistance with these matters, please contact a member of our Wills, Trusts and Estates practice.
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.
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.
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