California Estate Planners Grapple with the New Frontier of Digital Assets

In an era when our lives are increasingly digital, California estate planners face a new challenge: how to handle digital assets in estate plans.

From cryptocurrency and online banking to social media accounts and digital photo libraries, the average Californian now owns a significant portfolio of digital assets, many of which hold both sentimental and monetary value. The complexity of digital asset management in estate planning has grown exponentially in recent years. While traditional assets like real estate and physical possessions have well-established procedures for transfer upon death, digital assets present unique challenges. These include issues of account access, password recovery, and navigating the terms of service agreements of various online platforms. California, known for its tech-savvy population and home to many of the world’s largest tech companies, is at the forefront of addressing these challenges.

In 2016, the state adopted the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA), providing a legal framework for the management and disposition of digital assets after death. Under RUFADAA, Californians can now legally designate someone to manage their digital assets after death or incapacitation. This designation can be made through a will, trust, power of attorney, or other legal document. However, estate planning experts warn that simply naming someone isn’t enough.

Detailed instructions on accessing these assets are crucial, as is a regularly updated inventory of digital assets. Cryptocurrency presents a particular challenge. With its decentralized nature and the importance of private keys, losing access to information could mean permanently losing potentially valuable assets. Estate planners advise clients to include detailed instructions for accessing and transferring cryptocurrency in their estate plans while also considering the security implications of documenting this sensitive information. Social media accounts and email, while often overlooked, can hold significant sentimental value. Photos, conversations, and other digital memorabilia stored on these platforms are increasingly being recognized as important parts of a person’s legacy. California law now allows individuals to specify in their will or trust what should happen to these accounts after death.

Despite these advances, many Californians remain unaware of the importance of including digital assets in their estate plans. A recent survey found that while over 70% of Californians own significant digital assets, less than 30% have made any provisions for them in their estate plans. Estate planning professionals across the state are launching education campaigns to raise awareness about digital asset planning. They emphasize that in our increasingly digital world, a comprehensive estate plan must go beyond physical assets to include our digital lives as well.

As technology continues to evolve, so too will the challenges of digital asset planning. From the rise of NFTs to the potential of the metaverse, estate planners in California are bracing for an ever-changing landscape. The message is clear: in the 21st century, estate planning must be as digital as our lives have become.

How does the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA) specifically address the management of digital assets

The Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA) provides a comprehensive framework for managing digital assets in estate planning. Here are the key provisions and mechanisms through which RUFADAA addresses the management of digital assets:

Key Provisions of RUFADAA

1. Legal Authority for Fiduciaries

RUFADAA grants fiduciaries, such as executors, trustees, and agents under powers of attorney, the legal authority to access and manage a decedent’s digital assets. This includes electronic communications like emails, social media accounts, and other online accounts, provided the decedent has given explicit consent.

2. Hierarchy of Instructions

RUFADAA establishes a clear hierarchy for how digital assets should be managed:

• Online Tools: If a user has employed an online tool provided by a service provider to specify their wishes regarding digital assets, these instructions take precedence.
• Legal Documents: In the absence of an online tool, instructions in legal documents such as wills, trusts, or powers of attorney are followed.
• Terms of Service Agreements: If neither of the above is available, the terms of service agreements of the digital platforms will dictate access.

3. Privacy and Consent

The act respects the privacy choices of users by requiring explicit consent for fiduciaries to access the content of electronic communications. This consent can be provided through an online tool or specified in legal documents. Without such consent, fiduciaries may not access the content of communications, although they can access other digital assets.

4. Custodian Protections

Digital asset custodians (companies like Google, Facebook, etc.) are protected under RUFADAA. They can require court orders before granting access to digital assets and are only obliged to provide information that is “reasonably necessary” for estate settlement. Custodians are not required to disclose deleted assets or provide access to joint accounts.

5. Fiduciary Duties

Fiduciaries managing digital assets are subject to the same duties of care, loyalty, and confidentiality as they are with tangible assets. This includes responsibly managing and protecting digital assets in the best interest of the estate or trust.

6. Scope and Definitions

RUFADAA broadly defines digital assets as electronic records in which an individual has a right or interest. This includes various digital properties such as emails, social media accounts, cryptocurrencies, online financial accounts, and digital media files.

7. Planning and Awareness

RUFADAA encourages individuals to plan to manage their digital assets by creating an inventory and providing clear instructions in their estate planning documents. This proactive approach helps ensure that digital assets are managed according to the decedent’s wishes and reduces the administrative burden on fiduciaries.

Wrapping up RUFADAA

RUFADAA provides a structured and legally sound approach to managing digital assets in estate planning. Balancing the rights of fiduciaries, the privacy of users, and the responsibilities of custodians ensures that digital assets are handled appropriately after a person’s death or incapacitation.