Is Your Estate Plan Keeping Up with the Digital Age?
Who will get to read your emails and blog posts when you die?
Can my kids get copies of my digital photos and mp3 music files after I pass away?
The North Carolina legislature recently answered that question by passing the Revised Uniform Fiduciary Access to Digital Assets Act (the “Act”). North Carolina General Statutes Chapter 36F. The passage of this Act addresses a long-standing need for regulation in the area of control over our digital assets. Society is ever-reliant on technology in our functioning lives, but until recently North Carolina had no law in place to address how these digital assets are to be managed when one becomes incapacitated or passes away.
What Counts as a Digital Asset?
The Act defines a digital asset as “an electronic record in which an individual has a right or interest.” N.C.G.S. § 36F-2(10). This includes social media accounts, email accounts, iTunes and other music accounts, blog sites, online storage sites and potentially any other website or medium where an individual has an online account or has previously engaged in an online transaction.
Why the Act Was Needed
Prior to the Uniform Laws Commission taking up the effort to draft a uniform law for the states, individuals’ use of their digital assets was controlled almost entirely via the individuals’ contractual relationships with the service providers. These “Terms of Service”, drafted by the service providers, gave users very little flexibility with regard to what happened when they became incapacitated or died.
Yahoo, for example, previously did not allow any access to an email account after death and permanently deleted any content in that email account upon notification of death. The text below comes from a prior version of Yahoo’s User Agreement:
“No right of survivorship and non-transferability. You agree that your Yahoo account is non-transferable and any rights to your Yahoo ID or contents within your account terminate upon your death. Upon receipt of a copy of a death certificate, your account may be terminated and all contents therein permanently deleted.”
Emails with important details and files regarding financial matters or business deals, sentimental emails among family members, digital photos, and other important information or files that resided within an individual’s Yahoo email account would be wiped away immediately and permanently.
Prior to the Act, when someone became incapacitated or died, a validly executed power-of-attorney or will would have no effect to over-ride these Terms of Service. Court actions attempting an over-ride were expensive to obtain and rarely successful.
Who Does the Act Effect?
The Act is somewhat limited in that it only grants authority over digital assets to those acting in a Fiduciary capacity, i.e., Executors or Administrators of an Estate, Agents under a Power of Attorney, Guardians, and Trustees (“Fiduciary”). However, the importance of the Act is universal as it affects any individual that owns a digital asset. The Act now empowers every individual with the ability to make affirmative choices regarding the disposition and management of their digital assets upon their death or incapacity.
Managing Digital Assets
“Wait a minute…I’ve got my mp3 files on my computers and I’m going to leave them to my children in my will…they’re mine so no problem, right?”
This is a common and incorrect misconception. A digital music file is indeed a digital asset. The individual does not own the song. The individual’s interest in that music is a limited license to listen to that music that was granted by the copyright owner. That copyright license is not transferable just because an individual owns a copy of the music file. Giving someone else a copy of those songs is a violation of copyright law.
Managing digital assets is more complex than identifying an individual’s email accounts and how to access them. Digital assets are governed by a diverse and broad set of laws at both the state and federal level. Estate and trust law, copyright law, data privacy laws, and computer access and hacking laws all come into play when managing digital assets. Interwoven among these complex set of laws are the individual Terms of Service mentioned above.
Email communications can have a presumption of privacy and email content is covered by various privacy and computer hacking laws. As a result, email providers have worried about their liability for allowing third parties to access a deceased individual’s email accounts. The Act addresses those privacy concerns by requiring that specific affirmative consent be granted by the account owner.
Some service providers have created an online tool located in the account settings that allow a user to determine what happens to their account when the pass or become incapacitated. For those digital assets, the online tool provides that consent, but only for that particular account. It is imperative that estate planning documents are updated to make sure all other digital assets can be accessed after death or incapacitation. The estate planning documents also provide the flexibility to provide individual instructions for each digital asset in someone’s portfolio.
The Act also requires the Fiduciary to verify the account at issue belongs to the account holder and provide copies of the document giving the Fiduciary authority over the account holder’s affairs, among other things. These examples are why it is critical to engage an expert who can help navigate these complexities when managing and planning for the disposition of digital assets.
Practical Tips for Considering Digital Assets in an Estate Plan
With the level of complexity involved in managing digital assets, steps need to be taken to protect one’s digital legacy.
1. Understanding what Digital Assets You Have
Individuals should understand the nature of their digital assets and document the online accounts and other digital assets they have. Keeping an updated password list will make the job of the Fiduciary much simpler when the time for the Fiduciary to take action arrives. However, do not share these passwords or the location of these passwords with just anyone so that your accounts do not become subject to unauthorized access.
2. Terms of Service
Use of Digital Assets are covered by a Terms of Service. These agreements may over-ride local laws and only provide limited alternative to manager Digital Assets after death or incapacity. An individual must understand what their rights are under these Terms of Service as a Fiduciary will be limited to the same extent the individual would be. This may require the individual to take affirmative action prior to death of incapacitation to preserve certain digital assets that may not allow fiduciary access.
3. Understand the Rights you have in your Digital Assets
Having an understanding what rights you have in digital assets is crucial. Are there copyright license restrictions in order? Will I be violating a license agreement? A Fiduciary also has certain duties under the law. Does the Fiduciary understand their legal duties of loyalty, care, and confidentiality under the Act? It is also critical for an individual to understand the Terms of Service in place for each digital assets. Some service providers do not allow third party access at death or incapacitation regardless of instructions left in an estate plan. For these assets, the individual may need to take affirmative steps earlier in life to preserve the records in these accounts. These should be addressed carefully and outside assistance by someone with experience in the area may be appropriate.
4. Update your estate plan.
The ability to allow a Fiduciary to access digital assets after death or incapacity requires that the digital asset owner provide the consent to do so. Granting a Fiduciary access to digital assets in a will and power of attorney is one way to show this consent under the Act. An individual should contact an attorney to make sure their will and power of attorney specifically address that individual’s digital assets.
The passage of the Uniform Fiduciary Access to Digital Assets Act in North Carolina is a great step forward in allowing individuals more autonomy over their digital assets. They are no longer reliant on extreme restrictions that were previously contained in individual Terms of Service. Individuals should take this new opportunity to affirmatively plan for their digital legacy and engage the assistance needed to navigate the new complexities that come with this opportunity.
Most Read IRIS Articles of the Week: April 17-21
Here’s a look at the Top 11 Most Viewed Articles of the Week on IRIS.xyz, April 17-21, 2017
Click the headline to read the full article. Enjoy!
Like so many others in the industry, I was wrong. For years, I was certain that the bull market was nearing its end. I thought the market was over-extended, and that, surely, the wild equities run was coming to an end. But everyone else was bullish, and perhaps rightfully so. And while I’ve watched equities continue on their spectacular rise, I do think now is the time (really!) to put a hedge in place. Here’s why. Here’s how. — Adam Patti
The realities for fixed income investors have changed. How is this being reflected in markets? Bond investing has become increasingly difficult over the past decade. Markets have been heavily distorted by ultra-low interest rates and quantitative easing, as well as by extreme risk aversion in response to the global economic crisis and the eurozone debt crisis. — Nick Gartside
Is being a financial advisor worth it? I am an optimistic person and I encourage other people to keep a positive mental attitude (shout-out to Napoleon Hill and W. Clement Stone). However, by taking a good, hard look at the negatives in life, we can successfully pivot towards the positive aspects that will help us achieve our goals. — James Pollard
How do you treat one of your most valued, existing clients? Here’s a list of some things that come to mind. — Andrew Sobel
According to many advisors I speak with, the only clients that leave are those who have died. And while attrition may not be a big problem in this industry, I have to assume that at least a few clients change advisors without doing so via the funeral home. — Julie Littlechild
I was talking with an advisor last week about how to get into conversations about what he does. He was relaying the story of going jogging with a friend who could be a good client but is, more importantly, connected to a large network of people who fit this advisors ideal client description. — Stephen Wershing
Big picture thinkers are not unicorns - rare and mystical. And they were not born with the innate ability to think big. They do, however, pay attention to the broader landscape and take the time to think, analyze and evaluate. — Jill Houtman and Danny Domenighini
Your reputation is who you are and how you show up, Monday to Monday®. Many of us take our image and reputation for granted. Give careful thought to the kind of reputation that you would be proud of Monday to Monday® and that would resonate with your purpose and priorities. — Stacey Hanke
The generational changing of the guard is a fact of life as old as time. Young replaces old in responsibility, importance, control and culture. Outside of the family, the workplace is perhaps where this is seen most regularly by most people. — Shirley Engelmeier
Next time you hear your prospects give you price objections, it’s not because of the price. The give price objections because they don’t know the full value proposition that they’d be paying for. And it’s not based on their need, or your features and functions. It’s based on the buying criteria they want to meet internally. — Sofia Carter
Last week we wrote about the economic rationale behind going independent vs. moving to another major firm as an employee. As a follow-up topic, we thought it prudent to analyze transition packages attached to big firm moves and peel back the layers of the onion to show the components of these deals. — Louis Diamond
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