Planning for and Administering Digital Assets

Turning Virtual Impossibility into Tangible Reality

Ingrid, a 42-year-old, single mother of three, died unexpectedly last month, and her adult daughter Annette has hired you to help her with the intestate administration. You learn from Annette that Ingrid comfortably supported herself and her children from advertising revenue generated by her parenting and motherhood blog site, neverendingdiapers.com, an associated Twitter account, and a YouTube channel about the joys and challenges of parenting. Ingrid assembled many of her blog posts into an e-book, Ninja Potty Training, which Annette believes enjoys steady sales through the blog site. In addition, Ingrid supplemented her income by selling consigned jewelry and children’s clothing through a companion website, ingridsinspirations.com.

Most of Ingrid’s correspondence with family and friends, and hundreds of cherished photos, are posted on her Facebook page and (Annette believes) saved through some cloud-storage service. A music fanatic, Ingrid’s iTunes song collection is legendary. Annette has found no paper financial records and no list of digital passwords.[1]

Problems for Fiduciaries. Where does Annette begin trying to administer the estate? What savings, checking, investment and retirement accounts did Ingrid possess? Where is income from the various online activities paid? Are third-party service providers (think PayPal) involved? Are there unfilled book, jewelry and clothing orders, and who owns the goods in Ingrid’s possession at her death? How does Annette access Ingrid’s digital accounts? Can she do so legally? Can Annette, a pretty good writer herself (and the inspiration for many of Ingrid’s stories), continue the blog as if Ingrid were still posting, to help support herself and her siblings through this lucrative enterprise Ingrid created? Can the photos, of great sentimental value, be located and saved?

Scenarios like this play out every day for personal representatives of estates (PR), trustees of trusts, attorneys-in-fact/agents under powers of attorney and conservators. Many of us rely on digital records more than physical records. With 20-somethings and even teens becoming millionaires through the digital economy, access to digital information and assets, and the ownership rights in them, is a big deal in estate and trust planning and administration. The issues should expand exponentially as those who have always relied heavily on digital and online existence become propertied adults.

Help has arrived. With the promulgation of the Uniform Law Commission’s (ULC) Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA)[2] and Tennessee’s adoption of it (TRUFADAA),[3] fiduciaries and estate planners should find it easier to navigate these issues. TRUFADAA addresses a fiduciary’s access to a user’s “digital asset,” which is “an electronic record in which an individual has a right or interest.”[4] TRUFADAA seeks to balance the interests of fiduciaries with the interests and concerns of internet service providers and privacy advocates.[5]

TRUFADAA provides three tiers of consent for or prohibition of fiduciaries accessing digital information. The general rule (third tier) is that the “terms of service agreement” (TOSA) for a digital account controls to what extent a fiduciary may access the user’s digital assets.[6] Many (Most? All?) TOSAs favor nondisclosure, to protect the user’s privacy and, presumably, to reduce the demands on service providers. However, a designation in a user’s will, trust, power of attorney or “other dispositive or nominative instrument” (second tier) controls over a TOSA “that does not require the user to act affirmatively and distinctly from the user’s assent to the terms of service.”[7] Lastly, the second and third tiers are trumped by (first tier) any direction through an “online tool” offered by the digital assets custodian that “allows the user, in an agreement distinct from the terms-of-service agreement between the custodian and user, to provide directions for disclosure or nondisclosure of digital assets to a third person.”[8]

Beyond the question of whether a fiduciary may access a user’s digital assets is the question of what information the fiduciary may access. When disclosing digital assets, the custodian may, “at its sole discretion,” (1) grant full access to the user’s account, (2) grant partial access to the user’s account “sufficient to perform the tasks with which the fiduciary or designated recipient is charged,” or (3) provide “a copy in a record of any digital asset that, on the date the custodian received the request for disclosure, the user could have accessed if the user were alive and had full capacity and access to the account.”[9]

As to the user’s electronic communications (e.g., e-mail and Facebook messages), unless the user prohibited disclosure (under the three-tier system described above) or a court orders otherwise, all fiduciaries (PR of user’s estate, a trustee of a trust succeeding to the user’s rights, and an agent/attorney-in-fact/guardian/conservator for the principal/ward user) have a right to a “catalogue” of the communications, which is “information that identifies each person with which a user has had an electronic communication, the time and date of the communication, and the electronic address of the person.”[10] In addition, if a court so orders, a decedent consented (under the three-tier system described above), a trustee is the original user (the trustee created the digital asset/account), the trust so provides, or to the extent expressly provided in a power of attorney, the custodian must disclose the “content” of the user’s electronic communications, which is:

information concerning the substance or meaning of the communication which (A) [h]as been sent or received by a user; (B) [i]s in electronic storage by a custodian providing an electronic communication service to the public or is carried or maintained by a custodian providing a remote-computing service to the public; and (C) [i]s not readily accessible to the public.[11]

Easier and More Effective Administration. While Annette has a lot of sleuthing to do to get her arms around her mother’s assets, digital and otherwise, the job should be easier than it was before TRUFADAA. With Ingrid’s email address, Annette can at least review a catalog of Ingrid’s emails for clues about vendors and accounts for other assets.

Access Versus Ownership and Transferability. Although TRUFADAA clarifies and eases issues related to accessing digital information and assets, it does not affect what ownership and use rights exist and the transferability of those rights during life and at death.[12] Some TOS agreements provide that rights are not assignable. Subscription services and licensing agreements often end with the subscriber’s or licensee’s death. Under TRUFADAA, a PR has no greater ownership rights than the decedent had, and takes possession of nothing the decedent could not transfer.[13] The PR should be able to get any information needed for accounting to the beneficiaries and for a final income tax return, but some use rights will cease to exist.

Planning Pointers. Perhaps the most important element of planning for digital assets is to keep a good digital asset inventory, including account numbers and passwords, and either provide that information to named fiduciaries or provide a procedure for the fiduciaries to obtain the information. Doing so can save countless hours and significant cost attempting to find and obtain access to digital assets.

Beyond that, users of digital services can provide, through online tools or estate planning documents, who may access the digital assets. However, an online tool is specific to one account, so estate planning documents more easily provide consent for all accounts.

Standard will, trust and financial power of attorney forms should include language giving fiduciaries access to digital assets and information. Such provisions can be customized for clients known to have significant digital assets. The following is an example:[14]

Electronic Media and Digital Assets. My executor shall take control of, read, write, reply, conduct, continue or terminate any email, membership accounts, networking websites, blogging or short message services websites, any email service websites or other websites, and domain or other registration names, including, but not limited to, the power to obtain and use passwords and the power to deal with, sell, or terminate any such accounts that are part of my estate. This authority specifically includes the authority to access any catalogue of electronic communications sent or received by me, and any other digital asset in which I have a right or interest, pursuant to the Revised Uniform Fiduciary Access to Digital Assets Act, compiled in Tenn. Code Ann. §§ 35-8-101, et seq. The authority granted to my executor under this paragraph is exercisable only to the extent it does not violate any applicable law or contractual terms governing the use of such email, accounts, websites, or services. For purposes of this paragraph, “catalogue of electronic communications” and “digital asset” have the meanings provided in the Revised Uniform Fiduciary Access to Digital Assets Act.

Conclusion. Many of us and our clients have digital assets of significant sentimental or financial value. Attorneys can help clients successfully transfer that value.15

Notes

  1. Any resemblance to actual websites or book titles is accidental. Any resemblance to potential clients is appreciated.
  2. Available at http://www.uniformlaws.org/Act.aspx?title=Fiduciary%20Access%20to%20Digital%20Assets%20Act,%20Revised%20(2015).
  3. Public Chapter 570, codified in Tenn. Code Ann. § 35-8-101 et seq., effective July 1, 2016, for wills and powers of attorney executed, trusts created, and conservatorships and guardianships commenced, before or after TRUFADAA becoming law.
  4. Tenn. Code Ann. § 35-8-102(10).
  5. See Google’s and Facebook’s endorsement letters, available at http://www.uniformlaws.org/Act.aspx?title=Fiduciary%20Access%20to%20Digital%20Assets%20Act,%20Revised%20(2015).
  6. Tenn. Code Ann. § 35-8-104(c).
  7. Tenn. Code Ann. § 35-8-104(b)-(c).
  8. Tenn. Code Ann. § 35-8-104(a). Examples are Google’s Inactive Account Manager, and the ability for a Facebook user to name a “legacy contact” or to instruct that the account be permanently deleted at the user’s death. Some commentators have questioned whether RUFADAA gives Internet companies and other holders of digital assets sufficient protection under the Stored Communications Act (SCA) and other federal statutes. See Natalie M. Banta, “Death and Privacy in the Digital Age,” 94 N.C. L. Rev. 927, 943 (2016); Suzanne B. Walsh, “Coming Soon to a Legislature Near You: Comprehensive State Law Governing Fiduciary Access to Digital Assets,” 8 Charleston L. Rev. 429, 433 (2014). TRUFADAA states that an order of the court to direct a custodian to disclose digital assets to a fiduciary must contain a finding that compliance does not violate SCA. Tenn. Code Ann. § 35-8-116. The official comments to RUFADAA cite SCA throughout the act. Because TRUFADAA, negotiated with the participation of digital giants, provides a system of user consent, and because most states have adopted some version of RUFADAA, the author’s guess is that courts will find that its provisions are consistent with federal law, including SCA, the Computer Fraud and Abuse Act, and the Privacy of Customer Information Act. Any uncertain custodian may petition a court for authorization to disclose digital information.
  9. Tenn. Code Ann. § 35-8-106(a). Query, what happens if the fiduciary and the custodian disagree as to what access is “sufficient” under (2)?
  10. Tenn. Code Ann. §§ 35-8-102(4), 35-8-108, 35-8-110, 35-8-113, and 35-8-114.
  11. Tenn. Code Ann. §§ 35-8-102(6), 35-8-107, 35-8-109, 35-8-111, and 35-8-112. Note that, although the introductory language of Section 35-8-112 provides that access is granted to a trustee who is not the original user “[u]nless … otherwise … provided in a trust,” creating the impression that trustee access is the default if the trust does not speak to the issue, 35-8-112(2) requires that the trust include “consent to disclosure of the content of electronic communications to the trustee.”
  12. See Joseph Ronderos, “Is Access Enough? Addressing Inheritability of Digital Assets Using the Three-Tier System Under the Revised Uniform Fiduciary Access to Digital Assets Act,” 18 Tenn. J. Bus. L. (2017), http://trace.tennessee.edu/transactions/vol18/iss3/5.
  13. Tenn. Code Ann. § 35-8-105(b).
  14. It is possible that some of this language owes its existence originally to a commercial source. It is in my firm’s form system, and I make no claim of original authorship.
  15. For a popular discussion of RUFUDAA, see “Say you’re dead — who gets access to your online accounts?” CBS Money Watch, available at www.cbsnews.com/news/say-youre-dead-who-gets-access-to-your-online-accounts.

Eddy R. Smith EDDY R. SMITH practices trust and estate law with Holbrook Peterson Smith PLLC in Knoxville. He is a fellow of the American College of Trust and Estate Counsel and past chair of the Tennessee Bar Association Estate Planning and Probate Section. He can be reached at esmith@SmartLawTN.com.

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