Understanding Digital Assets

The world is becoming more and more digitized and so are your client’s assets. Most Americans own multiple digital devices and have tons of online accounts. Because the average person is unaware of the extent of digital assets they have, they usually don’t know how to begin identifying them for planning purposes and are unfamiliar with the legal complexities involved in accessing and transferring digital assets at their passing. To better serve the changing needs of clients, advisors should consider discussing digital asset planning as part of their routine practice to help better protect, manage and plan for their client’s digital assets and digital identities.  

Under the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA), digital assets are defined as “an electronic record in which an individual has a right or an interest.” Most states have enacted a version of RUFADAA to better address the ability of a fiduciary to access a person’s digital assets at their death or incapacity. Digital assets are not devices, tablets, computers, smart phones or hard drives, but rather the underlying data and information stored on devices, or in accounts stored, maintained or accessed online or in a cloud.

For instance, digital assets include everything from pictures stored on devices to websites, copyrights, emails, financial information, social media accounts, loyalty programs, electronic books and online records. Cryptocurrencies, tokens, smart contracts and records stored or rights accessible on blockchain networks are also considered digital assets.

Planning For Digital Assets

Discussing digital asset planning with clients is necessary to help safeguard and transfer digital assets to the client’s intended recipients, or to carry out the client’s wishes in prohibiting access or ensuring digital accounts are deleted. Planning also helps curb the risk of identity theft and other cybercrimes.

Some digital assets are associated with a financial value, which could translate into a monetary loss if the asset is not identified, while others may have priceless, sentimental value. Videos, pictures, digitally saved journals, and messages from a loved one could be permanently lost if their existence is not properly disclosed. Proper planning will help fiduciaries expedite identifying, finding, accessing, and transferring digital assets that are able to be transferred during an estate administration.

Generally, a person’s digital interests will be transferrable if the required authorizations are clearly documented and the digital interests are properly identified. The default rule under RUFADAA is that a user needs to explicitly authorize a fiduciary’s access to the user’s digital assets. However, some providers of online accounts prohibit the transfer of a user’s digital assets under a Terms of Service Agreement (TOSA), which can explicitly limit the user’s right to transfer the asset or account. For example, iTunes are incapable of being transferred because the account holder only has a lifetime license. 

As a guideline for digital asset planning, RUFADAA provides a hierarchy of consent to access a user’s digital assets:

1. Online tool: An online tool is an agreement between the user and the service provider, separate from the TOSA, which specifies directions for the disclosure or non-disclosure of digital assets to the designated recipient. Google and Facebook already have online tools on their platforms, and more service providers will likely allow this planning option in the future.

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