At Jones Law we regularly counsel clients on the importance of including Digital Assets and electronic accounts within their Estate Plan. Even with the increased popularity of AI, NFTs, Cryptocurrency, and the like, the transfer of Digital Assets within Estate Plans and Trusts can be complex and require the assistance of a skilled Estate Planning Attorney.
Legal authority on accessing digital assets as a fiduciary was first addressed in 2015 by the Uniform Law Commission, under the Revised Uniform Fiduciary Access to Digital Assets Act, or RUFADAA (“the act”). Under this act, a digital asset is defined as “an electronic record in which an individual has a right or interest.” Passage of this act marks the first time that property law acknowledged the existence of property rights within digital property.
Aa an experienced Colorado Estate Planning Attorney, my goal is to build a plan that includes Digital Assets as part of a client’s full financial picture. This article will delve into the specifics of the RUFADDA act and discuss its implications for Estate Planning at large.
Who are the Parties to Estate Planning Under RUFADAA?
The act provides definitions for the different people and entities within an estate plan. First, the fiduciary. The fiduciary is a person who is acting as a personal representative, agent, conservator, or trustee on the decedent’s behalf. A custodian is “a person that carries, maintains, processes, receives, or stores a digital asset of a user.” The custodian is granted legal authority to deal with fiduciaries who seek to manage those assets after the user’s death. The user is referring to the decedent or owner of the digital asset. An online tool is an electronic service provided by a custodian that allows the user, in an agreement distinct from the terms-of-service agreement between the custodian and the user, to provide directions for disclosure or nondisclosure of digital assets to a third person. Though there are lots of roles at play, the core four are: the fiduciary, the user, the online tool, and the custodian.
As a Professional Fiduciary, Jones Law can serve as a Personal Representative or Trustee of an Estate, or we can represent a named Personal Representative as their lawyer. Under an estate plan, a Personal Representative’s duties “commence upon his appointment.” Among important duties of a Personal Representative, are the duty of due care, loyalty, good faith, and confidentiality. Under the fundamental principles of estate planning, a trustee or fiduciary is charged with the task of totaling all assets and overseeing any distribution of them in the best interest of the estate and the best interest of the beneficiaries receiving those assets. With the addition of RUFADAA, a decedent has specific property rights in digital assets as well, so Personal Representatives and fiduciaries are charged with treating those assets just as they would the physical ones.
What qualifies as a Digit Asset?
According to recent studies, nearly 92% of Americans have an online presence by the age of two. The rise in popularity of the smart phone has resulted in whole generations having their baby pictures taken on smart phones. Per Consumer Affairs, 90% of Americans own smart phones. This is why Jones Law places emphasis on Digital Assets in Estate Planning.
Many things housed on your smart phone could translate to real life value. To that point, the average United States consumer values their digital assets at nearly $55,000. These assets can consist of a wide range of things under the act, such as websites, domain names, photos, electronic accounts, and other assets that only exist in digital form. Jones Law will help you to clarify your Estate Planning goals, by helping to identify what matters most to you, protect your physical and digital assets while helping to guide you through the complexity of transferring Digital Assets after death.
Ensuring that you have chosen a skilled custodian of your estate can prevent your identity from being stolen upon your demise, or prevent your memories from being caged in by terms of service agreements. This is why Jones Law takes time to educate their Estate Planning clients and recommends they leave clear instructions as to who can access their phone and photos, so these items do not get lost or tied up by the online tool’s terms of service.
Terms of Service Agreements
Terms of Service Agreements are another key element to consider when drafting an Estate Plan with Digital Assets. Due to the lack of case law and regulation of the Terms of Service Agreements in the United States, most people don’t know that these can create headaches for their loved ones when they pass. Terms of service agreements are those lengthy, fine print passages you are asked to read when you sign up for almost any application nowadays. Most people hastily click “accept” to move into the app, unknowingly relinquishing rights to their Digital Property by doing so. Speak with a lawyer at Jones Law in order to better understand your rights and how to protect your property after death.
As an example, the terms of service for a Yahoo! account state that all accounts are non-transferable, and any rights to them terminate upon the account holder’s death. This came up in a case about a Marine that died in Afghanistan, Justin Ellsworth. His parents wanted access to their deceased son’s Yahoo! mail account but Yahoo! would not allow them access to any emails written by their late son. Frustrating as that may be, legally, that is the terms of service at work. Courts in the United States have routinely held that terms of service agreements, and other similar provisions, are enforceable, even though the average person does not read them in full. That is why a skilled Colorado Estate Planning Attorney will encourage you to designate a Custodian for your Digital Assets prior to your death.
Personal Representatives can only exercise rights in assets to the extent the decedent is found to own those assets. Therefore, without a recognized Custodian for Digital Assets, a Terms and
Service agreement can keep a Personal Representative from controlling those assets after death of the owner.
Valuation of Digital Assets
Personal Representatives and Trustees are responsible for ascertaining the value of all property owned by the estate. If a digital asset is alleged to have monetary value, the determined fair market value of that digital asset will be derived by the meeting of minds between a willing buyer and seller. Of course, this notion is not extended to digital items such as standard family photos, which would be deemed to have only sentimental value unless the loved ones happen to have a public following. Working with a trusted professional, you can properly value and protect your Digital Assets for yourself and your loved ones.
During this time of technological revolution, the best Colorado Estate Planning Attorneys understand the complexities surrounding the transfer of Digital Assets. Whether you own a domain name, Coinbase Account, Bitcoin Account, a Yahoo! account, or a myriad of other Digital Assets, you should be apprised of how to properly access, evaluate, and protect your digital assets with the same care and understanding you provide to more traditional, physical assets. Without proper Estate Planning and guidance, you and your loved ones stand to lose both monetary and sentimental value.
At Jones Law, we are committed to helping individuals and families create estate plans that reflect their unique values, assets, goals and needs. We are here to guide you every step of the way.
Contact Jones Law at (303) 674-1117 today to schedule a confidential consultation and take the first step toward protecting your digital assets for your loved ones.
