CONTACT US
Suzanne Brown Walsh of Murtha Cullina discussed digital assets of a decedent.

Blogging from Heckerling – Digital Assets of a Decedent

Continuing with our reports from the Heckerling Institute on Estate Planning, January 2015

Suzanne Brown Walsh of Murtha Cullina discussed digital assets of a decedent. Although there is no universal definition of digital assets, it has generally come to mean electronic records which are accessed by tangible devices, such as a computer, smartphone, tablet or a server. Many individuals own online gaming pieces, photos, digital music, client lists, financial institution accounts, business records, frequent flyer and rewards programs, social media accounts, and more. There are 30 million Facebook accounts that belong to dead people. Some service providers have explicit policies on what will happen when an individual dies, but most do not. Digital assets are generally governed by contracts known as Terms of Service Agreements ("TOSAs") which control the relationship between the account holder and the custodian, and include terms of use, end-user license agreements and privacy policies. Many of these TOSAs do not authorize fiduciaries to have access to the decedent's digital assets.

Fiduciaries need to access digital assets in order to prevent identify theft. Fiduciaries are obligated to preserve the assets of the estate they are managing. When an individual is unable to continue to monitor his/her online accounts, it becomes much easier for criminals to hack these accounts, open new credit cards, apply for jobs, obtain identification cards, etc. Thus, a fiduciary needs to monitor and protect these accounts as part of his/her fiduciary responsibilities. Further, the fiduciary must marshall and collect assets, and this is becoming increasingly impossible to do in today's internet environment.

State laws criminalizing unauthorized access to computers and data, as evidenced by the Federal and State Computer Fraud and Abuse Acts, often prevent fiduciaries from accessing decedents' accounts, Further, federal privacy law and TOSAs also impede the fiduciary's access to digital assets. The fact that a fiduciary is authorized by the owner or state law to use a computer or to act for an account user is not an absolute bar to prosecution, as he/she may be violating the TOSA. TOSAs are frequently silent as to fiduciary access or postmortem options, or they may simply prohibit postmortem transfer altogether.

The Uniform Fiduciary Access to Digital Assets Act ("UFADAA") was drafted by a committee appointed by the Uniform Law Commission for the purposes of creating a uniform act to vest fiduciaries with the authority to access, manage, and distribute digital assets. UFADAA aims to resolve many of these impediments to fiduciary access, so that they can carry out their duties. UFADAA is ready for consideration and enactment by states.

In the interim, estate planners can ask their clients to inventory their online accounts and passwords. Also, documents should provide for authorization of the fiduciary to access and terminate such accounts.

For more content stemming from the 2015 Heckerling Institute on Estate Planning, please click here.

Marie Arrigo is a Tax Partner and Co-Leader of the Family Office Services Practice for the Personal Wealth Advisors Group which provides tax consulting and compliance services to family offices, individuals, trusts and estates, and closely held businesses.

* Required