Most peoples’ lives are connected to a computer, or cell phone, or another electronic device. Today, a large percentage of the population has a social media account. Many individuals have downloaded apps for various purposes such as purchasing music or movies or doing online banking. Cloud based storage systems, cryptocurrency, virtual property, intellectual property rights to blogs and websites, ecommerce accounts like PayPal and Venmo and the abundance of social media apps have exponentially increased the types of digital assets that need to be considered when creating or updating an estate plan.
Federal privacy laws prohibit close friends and relatives from accessing one’s digital assets without proper written authorization. It is essential for individuals to update their estate planning documents to include their digital assets. Facebook, for example, allows you to name a “legacy contact” who can change your profile and make decisions about your account; however, most digital assets lack this feature. Your digital personal representative does not have to be the personal representative of your estate. In addition to designating your digital personal representative, you should also inform the digital personal representative of your digital asset inventory location.
In 2017, Nebraska enacted a version of the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA). The burden is placed on the decedent to provide directions for disclosure to digital assets and to designate a person to access all digital assets. The Nebraska statute identifies a hierarchy of instructions for treatment of digital assets.
Online service providers can create an “online tool” that acts as a digital power of attorney to specify who has access to the decedent’s site (e.g. Facebook’s legacy contact). If the digital asset does not have an “online tool” then the person can use a will, trust, or another writing to determine what should happen to the digital assets. Because Wills become public documents, the Act allows for individuals to make an ancillary document to the Will that lists passwords and other sensitive information that will not become part of the public record. If none of these steps have been taken with a decedent’s digital assets, then the service provider’s Terms of Service Agreement (TOSA) will govern fiduciary’s access to information.
Inserting a digital asset clause in estate planning documents is necessary; however, it is insufficient to ensure an individual’s digital assets will be protected and passed to their intended beneficiaries. Further complexity in digital asset planning is created because of the myriad of digital assets that don’t fit into a single asset category like “personal property.” An example of an asset that is more difficult to define as an asset class is cryptocurrency. Digital currency functions as a quasi-digital and financial asset. For example, due to Bitcoin’s anonymity, there are no beneficiary designations on Bitcoin accounts. Special attention must be given in testamentary documents to specifically address access of these accounts and how they will be distributed through those documents.
Once a person who holds digital assets has designated and given access to the personal representative or trustee, they must also contemplate the tax consequences of those asset. For example, consideration must be given to the potential capital gains tax on the asset as well as determining the fair market value of the asset to determine if there is an adjusted date of death cost basis.
Due to the variety of digital assets an individual possesses, the owner of digital assets should leave specific instructions on how to delete, memorialize, or designate heirs or legatees of their digital assets. Nebraska law provides the authority to designate a fiduciary to have control over a decedent’s digital assets. Careful planning will ensure the fiduciary is aware of all necessary digital assets and will further ensure proper distribution of those assets consistent with the digital owner’s intentions.
© 2019 Vandenack Weaver LLC
For more information, Contact Us
You must be logged in to post a comment.