2. Estate planning documents: Properly drafted estate planning documents such as a will, trust, or power of attorney, can also provide consent to access and transfer digital interests. However, the use of an online tool will trump provisions in estate planning documents.
3. TOSA: If there are no estate planning documents authorizing consent, the provisions in the TOSA for each provider are the final means to provide access.
As digital asset planning becomes more prominent, advisors need to be aware that if a client uses an online tool and also has estate planning documents in place addressing access to digital assets, the planning should be cohesive to avoid any unintended consequences. The use of an online tool is akin to the use of a beneficiary designation and should be done with great care and reviewed and reevaluated as part of a client’s overall estate plan.
Identifying Digital Assets
The first step to digital asset planning with clients is to have them create an inventory of their digital assets. Each asset needs to be independently examined in terms of whether it can actually be accessed and transferred, how, and by whom.
Inventories provide fiduciaries with a starting point to locate, access, and transfer assets to avoid unnecessary loss. However, a digital asset inventory should list the user’s digital assets but should NOT contain login and password information. Sharing this information is generally prohibited under several federal laws, such as the Computer Fraud and Abuse Act and the Stored Communications Act. Revisiting and updating digital asset inventories is also crucial to help keep the plan current.
The next step is to discuss updating the client’s estate planning documents to authorize or prohibit the access of digital assets by a fiduciary. As part of this discussion, it is necessary to confirm whether the client has utilized any online tools. If they have, advisors will need to ensure that the provisions in testamentary documents are consistent with the online tool designation, or if they are inconsistent that it is a deliberate decision.
In addition to the above, there are many other advanced techniques that can be implemented in digital asset planning, especially for people who have cryptocurrency, digital tokens or interests or rights in a blockchain or smart contract.
Planning for digital assets can become complicated depending on the types of digital assets owned, how they are stored, whether they are identified, and the technological expertise of the user and their intended beneficiaries and fiduciaries. Advisors should help educate clients on the existence of their digital assets to simplify transfer and disposal, reduce avoidable setbacks, ensure digital assets with financial or sentimental value are preserved, and to help protect against identity theft and other cybercrimes.
As the world changes and our physical and digital lives become more integrated, offering this cutting edge service will allow advisors to better handle the future needs of clients.