There is a whole new world of digital planning that financial planners need to learn about.  Specifically, they need to learn about their clients’ digital assets and help build estate plans that include them.

On a recent Journal on the Round webinar hosted by Bill Harris, co-founder of WH Cornerstone Investments and chairman of the FPA of Massachusetts, he asked a survey question and received 199 responses. 

Poll of attendees: Which of the following best describes your engagement with digital asset estate planning?

• 3 percent answered:  A lot. I have worked with my clients to develop a plan (management, inventory, etc…)

• 42 percent answered:  A little. I have discussed digital assets planning with my clients, but have not integrated it into their estate plan.

• 55 percent answered:  Not at all. I don’t know enough about it so have not addressed the issue with my clients.

The poll results made it clear that the majority of the webinar attendees need to know more on this topic. Thankfully Richard Ploss, counsel to Porzio, Bromberg & Newman P.C., and Michael Dribin, a partner of Harper Meyer Perez Hagen O'Connor Albert & Dribin, LLP, were able to educate the attendees on the Revised Uniform Fiduciary Access to Digital Assets Act (“RUFADAA”), which has financial planning and estate planning implications.

What Is A Digital Asset?

Now, like tangible personal property, there are rights to digital property. Ploss shared three points about digital assets:

• They are electronic records in which an individual has a right or interest.

• They are accessible only through an electronic device.

• They include content that is uploaded to a website.

When uploading something to a site like Facebook, the Terms of Service Agreement dictates the conditions. The problem is that few people read those agreements and they are usually in favor of the vendor, provider or what Ploss referred to as the custodian. In some cases, they actually transfer the ownership to the custodian. He gave Facebook and Snapchat as examples.

Some digital assets are under a user license that expires on user’s death unless there is some kind of joint account set up that allows others to continue to have access.

Thanks to RUFADAA, there is more clarity around digital rights and what people have rights to, but Ploss warns that if something is transferred to Facebook, it falls under the Terms of Service Agreement.

He added RUFADAA provides access, management and potential transfer of a copy of the digital asset by a fiduciary, pointing out four types:  agent under durable power of attorney, court appointed conservator or guardian, personal representative of decedent’s estate and a trustee under a trust agreement/declaration.

What Should Financial Planners Help With?

Ploss recommended five steps needed when working with clients:

• Step 1:  Identification of digital assets. “What do client have out there?” asked Ploss.  Things like PayPal might actually have money on them.

• Step 2:  Educate the client about the law. “The client doesn’t understand what is out there,” he stated.

• Step 3: Ascertain client’s goals with regard to digital assets.  “Do they even care about it?” asked Ploss.

• Step 4: Estate planning document revision.  He said, “It is very important to get that done.”  That is where the estate planning attorney can help.

• Step 5: Create and maintain digital asset inventory. “This is the real challenge. How do you motivate them?” asked Ploss. For planners, he pointed out, they spend more time with the clients than estate attorneys so this is something they can better stay on top of, as a paper inventory usually does not keep up.

How To Keep Digital Assets Alive?

Once a person passes away, Facebook and other services have mechanisms to shut down accounts, advised Dribin. When accounts are deleted, family memories in the form of pictures, videos and writings can be lost forever.

That is why it is important to have a trustworthy and technically competent digital executor that can have the information to access computers and other devices to get email and other online accounts.

“Inactive accounts should be shut down,” said Dribin. Otherwise there is a risk of misconduct, including identity theft. Facebook permits an account to be memorialized. With good planning, the right person can post obituary information on a Facebook profile, respond to new friend requests, and archive photos.

The estate plan should define people that will have access to that information and it should be clear how they attain it. However, Dribin warns, “Do not list usernames or passwords in a will, because this document becomes public upon death.”

Once it is determined who should have access to the digital assets, what then happens to things like frequent flyer miles, a PayPal balance, a domain name that has value?  It is also important to consider what the client really owns, advised Dribin. Are the digital assets non-transferable assets, per the terms?

He gave an example of a small business website being left for the heirs so they can keep it running when the principal passes away. 

A problem arises when the person that is granted access to the digital assets now might not be the person somebody wants overseeing them later in life.

At the end of the presentation, Harris pointed out that it was an “eye-opening conversation.” 

It is clear there is a lot for the financial planning profession to consider as new planning services around digital assets for their clients.

Note:  Byrnes Consulting helps the FPA’s 23,000 members with business growth strategies as part of the Financial Planning Association’s new Coaches Corner.

Mike Byrnes is a national speaker and owner of Byrnes Consulting LLC. His firm provides consulting services to help advisors become even more successful. Need help with business planning, marketing strategy, business development, client service and management effectiveness? Read more at ByrnesConsulting.com and follow @ByrnesConsultin.