In the last of the February series of “Blogs from the Board,” Holly Isdale of Wealthaven advises advisors on how to prepare their clients for “digital death.”
In today’s digital world, designating the fate of physical assets after death isn’t enough. For example, the average household in the US has six or more Internet connected devices, and 61% of Americans do their banking online, often by cellphone. What happens to all that digital data when someone dies? What are the ramifications for family business owners where confidential information may be across multiple accounts or platforms? For families and their advisors, the ability to manage a post-mortem digital presence over both personal and business assets is becoming a significant concern as we move more of our lives into the ethernet.
This topic of “Digital Death” encompasses the myriad issues presented when our digital lives continue after our mortal life has ended. It includes issues of access to digital data, in all its forms, as well as the problems associated with collecting, valuing, or transferring digital assets.
In the US, the law has not kept pace with the evolution of our digital lives. Currently, only 11 states have laws regarding digital assets, and they’re all over the place in terms of who has a right to access what. Plus, many online companies and sites have terms of service contracts that limit access, and deny users the ability to transfer digital assets after death.
Outside the US, there is also an increasing focus on digital asset management in a fiduciary or estate context. Globally, most digital asset laws relate to preserving confidentiality or protecting intellectual property rights of a provider (e.g., Facebook, Instagram, Gmail, etc.) and take significant steps to limit access to information, while this access is exactly what the fiduciary or personal representative needs! At the same time, information is now stored globally and those ubiquitous “terms of service” contracts that pop up when you access an application often set jurisdiction for disputes in foreign jurisdictions.
Many companies are taking digital access after death issues into their own hands. Just this month, Facebook announced that it will allow users to select an executor, or Legacy Contact, to manage their Facebook page after death. Yahoo! has implemented Yahoo! Ending (but only in Japan) and Google allows users to designate a trusted contact to access their account data after three months of inactivity.
While this is definitely a step in the right direction, the fractured changes create a confusing system where each digital account is managed differently. Without uniform laws in place, it can be nearly impossible for estate practitioners to keep track of applicable terms of service for various platforms as well as constantly changing laws and practices globally.
The US Uniform Fiduciary Access to Digital Assets Act (UFADAA) is model legislation that would ensure a consistent approach across state jurisdictions, allowing for the access to digital assets by the fiduciary or personal representatives, but limiting their rights to those of the decedent. Some version of digital rights legislation is pending in upwards of 30 states, although timing of enactment will vary by state legislature as will the scope of the legislation. Currently some of the existing laws provide only for access to email accounts of a minor, while Delaware’s law goes the farthest, presuming authorization of fiduciary access unless otherwise stated in the estate documentation. As such, it’s important for advisors to know the laws of the applicable jurisdiction and encourage the families to take pre-emptive action by adding authorization (or de-authorizing access) in their estate documents.
So what can you do now to ensure your client’s digital assets are protected?
Step 1 – Be Aware of the Issue
Stay informed on digital death issues, and recognize holes in the estate planning.
Step 2 – Get Authorization Added to All Relevant Documents
Add digital authorization to all estate documents, including wills, revocable trusts, powers of attorney and even health care proxies.
Step 3 – Help Your Clients Organize Their Digital Assets and Accounts
This doesn’t mean just writing authorization for one person to access the accounts. This means doing a thorough inventory of every digital account your client has, along with the necessary information needed to access them. Invest in a password keeper and ask important questions about each account: What are the password reset requirements? Which email account will a reset password be sent to?
The more information your clients can provide to their families, the better chance that they’ll be able to access the digital information they need, even in a legal environment that hasn’t quite caught up with our digital lives.
If you’d like more information on what Digital Death is, or further tips on how to organize your clients’ assets, please visit www.digitaldeath.com.
About the contributor:
Holly Isdale is a tax attorney by training and has spent the last two decades advising wealthy families on estate, financial and investment matters. Holly founded Wealthaven in 2010 to serve as an outsourced, full service, family office for some families and handle strategic projects as needed for other clients. Elected to the FFI board in 2013, she holds the FFI Certificate in Family Business Advising. Holly can be reached at firstname.lastname@example.org.
Yours in Practice,