When thinking about estate planning, clients may not consider assets held behind firewalls and encrypted passwords on the Internet. But so-called “digital assets” — including online entrepreneurial ventures, music and photography collections, copyright work, digital currency, and bank accounts — may be lost forever without advance planning.
Many of these online “properties” have monetary value as well as emotional worth. A recent survey by security software company McAfee estimated that the average value of an individual’s digital assets is more than $35,000.
Privacy is a hot topic
With the proliferation of social media, many laws have been introduced to protect the privacy and identity of account owners. Until recently, however, lawmakers have not comprehensively addressed transferring digital assets to someone else. Only a few states have passed legislation.
When an account owner dies, heirs may face major obstacles in gaining access to digital assets. Beneficiaries and estate executors may end up challenging service providers operating under stringent privacy laws and service agreements.
National law group crafts a solution
Seeking a solution at the state level, the National Conference of Commissioners on Uniform State Laws in July passed the Uniform Fiduciary Access to Digital Assets Act (UFADAA), governing a fiduciary’s access to digital assets. The Act notes that if a fiduciary has access to a tangible asset under the law, they should have the same access to a similar digital one. The Act also provides account holders the opportunity to express decisions about the privacy of this information in a will or trust.
Now that the UFADAA has been approved, it will be released to the states for individual legislatures to decide on the law’s passage.
Still, challenges remain
Even if a state has adopted laws granting access to digital assets to a fiduciary, not all service providers may allow for the transfer of assets. If clients want to determine the future of their email, social networking, and other online accounts, they can start by making a list of accounts and understanding the individual service agreements with each provider. A financial advisor can guide clients on crafting a digital estate plan and understanding how current federal and state laws may affect their strategy.