Privacy + Estate Planning = Handling Your Digital Assets After You Die

The recently-proposed Revised Uniform Fiduciary Access to Digital Assets Act (“Revised UFADAA”) is a potential solution to a problem that most of us eventually will face:  how will our digital assets be accessed and used (or kept private and destroyed, depending on our wishes) after we die, and by whom?  As 23 states consider enacting this legislation in 2016, the time has come to think about this issue, not only for ourselves, but also for our parents, grandparents and other older relatives who have created on-line accounts that may hold valuable and/or sentimental digital assets.

Paper has long been an unsung hero for the executor of a decedent’s estate. A business card on a decedent’s desk can lead the executor to an attorney who holds a copy of the decedent’s current estate plan; a bank statement in the decedent’s mail can alert the executor to unknown financial accounts or coming-due bills; a note on the decedent’s bedside table can act as a supplement to the decedent’s will. Papers filed with the county clerk clarify ownership of real property. Even sentimental items, like photographs, depend on paper to be stored in an album that can later be distributed to heirs that would appreciate such a keepsake. Property is relatively simple to distribute when there is physical evidence of such property’s existence.

But as the world marches towards on-line accounts, relying on paper to track down property the old-fashioned way is becoming more problematic and less effective. Communications are now often stored only in electronic form; receipts for purchases are often emailed instead of printed; significant contracts are executed with a click of a mouse, and even sentimental things like photographs and family videos are being stored in “the cloud” through online services. Evidence of valuable assets such as digital music files, e-books, or video libraries, or even accumulated frequent traveler points, may not exist in paper form in a person’s records.  Indeed, even the account IDs and passwords needed to access those on-line accounts may themselves only be stored on-line in a “digital wallet”. This digitalization of life can make an executor’s task more difficult as he or she administers a decedent’s estate.

The Problem:  Once You Die,  Existing Rules Make it Hard For Your Estate to Access Your On-Line Accounts

On-line service providers may be hesitant – or even unwilling – to release information stored in digital form by the decedent. A common fear is that unauthorized access to such content could violate the Computer Fraud and Abuse Act. Many on-line service providers attempt to steer clear of this by requiring that an individual agree to terms of service that limit how digital information is accessed once that individual dies. For instance, Apple requires through its Privacy Policy, which is incorporated into Apple’s Terms of Use, legal process (e.g. court order, litigation, etc.) before online account information will be released. (Apple: see Disclosure to Third Parties).  Amazon limits access to an individual’s digital property through its Terms of Use by granting the user a “non-exclusive, non-transferable right” that is only to be used for “your personal, non-commercial purposes”. (Amazon: see Section 3. Rights and Restrictions). This serves to prevent third parties from claiming any right to digital property, even if it is believed that the digital property has been purchased outright. So, while an executor can sell a decedent’s house or close a bank account, that executor could encounter more difficulty in obtaining information that is stored on-line in a digital format.

And this is not simply a challenge at death; such limitations apply during an individual’s life as well in connection with agents acting under a power of attorney, conservators, and trustees.

A Potential Solution:  The Uniform Law Proposal

In hopes of updating the law to the current digital asset landscape, in 2014 the Uniform Law Commission completed a draft of the Uniform Fiduciary Access to Digital Access Act, and then revised it in 2015.  The Revised UFADAA attempts to strike a compromise between a fiduciary’s need to access protected digital information and an online service provider’s obligation to protect the privacy of a decedent-customer. The Revised UFADAA has been endorsed by the National Association of Elder Law Attorneys, Facebook, and Google, among others.

The Revised UFADAA affords a fiduciary the power to manage digital assets as it would tangible assets. A “fiduciary”, is defined as “an original, additional, or successor personal representative, [conservator], agent, or trustee”. Family members of a decedent may not unilaterally claim this power to access digital assets (unless, of course, they have been appointed as a fiduciary).

Many States Are Now Considering the Revised UFADAA

Currently, 23 states have introduced the Revised UFADAA for the 2016 legislative session, includingArizona, Utah and Colorado.  The Revised UFADAA contains the following notable sections:

Section 5 – A fiduciary has the same rights under an online service provider’s terms of services as the decedent. The fiduciary is treated as if standing in the shoes of the “protected person” – the owner of the digital assets. A custodian maintains its same rights under the terms of service. The Revised UFADAA defines a custodian as “a person that carries, maintains, processes, receives, or stores a digital asset of a user”.

Section 6 – A custodian may choose how much access it will give to a fiduciary based on the custodian’s business model. A custodian’s options are:

  • Grant a fiduciary full access to a protected person’s account(s);
  • Grant a fiduciary just enough access to a protected person’s account sufficient to perform the fiduciary’s tasks; or
  • Provide a fiduciary a copy/list of digital assets that could have been accessed by the protected person if they were able to act on their own.

Sections 7 through 14 – Outlines what specific classes of fiduciaries must do in order to make a request of a custodian to access digital assets.

  • Custodians cannot be compelled to grant full access to a decedent’s account(s) if not specifically provided for in a will, trust, power of attorney, or other record, including a court order.
  • At the least, a custodian can provide the copy/list of digital assets, per Section 6.

Section 15 – A fiduciary has the same duties regarding digital assets as with tangible assets, namely a duty of care, loyalty, and confidentiality.

Section 16 – A custodian is immune from liability for an act or omission done in accordance to the Revised UFADAA and if done in good faith.

It bears noting that the scope of Section 6 could be influenced by the wishes of the owner of the digital assets, in that the owner may direct in his or her estate plan the extent of the fiduciary’s access to digital assets.

The prevalence of digital assets has outpaced the law. The Revised UFADAA seeks to grant at least limited access to information concerning digital assets while still providing custodians protection from liability for disclosing information regarding these digital assets. Ultimately, each state must decide whether the Revised UFADAA is its answer to how much access a fiduciary should have regarding digital assets.  Stay tuned for further developments.

Source: http://www.jdsupra.com/legalnews/privacy-estate-planning-handling-your-89739/

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