Digital Asset Planning

Posted On: August 1st 2018

Dear Client:

Plan for your digital assets . . . one byte at a time! It is undeniable that internet and digital device usage has become a common and convenient tool to manage, organize, and distribute data and communication. Article 13-A of the Estates Power and Trust Law (EPTL) is the governing authority for the administration of digital assets in New York. Under Article 13-A, a digital asset is defined as “an electronic record in which an individual has a right or interest.” Accordingly, email, social networking, online banking and media accounts are just some examples of digital assets within this broadly defined term. However, only digital records, not the “underlying asset or liability,” is subject to Article 13-A. As such, cash or stock that is represented in an online account would not be considered a digital asset; only the actual online account would be subject to the provisions in Article 13-A.

Stated simply, a digital account holder has the authority, under Article 13-A, to bar or grant access to the content of his/her digital assets. Although in practice a trusted advisor or family member may have your login credentials, the right to access such assets must be expressly granted in a power of attorney, will or trust agreement. A fiduciary that uses the account holder’s credentials, without such express authority, may be in direct violation of Federal privacy laws. Article 13-A also permits use of online tools to grant such authorization (currently only Facebook and Google have such tools). Online user tools function similarly to beneficiary designations made on insurance policies. It bears noting that in the absence of such express authorization, a fiduciary can request a “catalogue of electronic communications.” No content is included in this catalog. Rather, it merely identifies the persons (and their electronic addresses) as well as the dates and times of electronic communications. It is important to note that disclosure of an electronic catalogue can be barred by prohibiting the same in your governing documents.

In developing a digital asset plan, consideration should be given to the following:

1. Inventory of Digital Assets Compile a list of your digital assets and their corresponding logins. This is essential to protect against identity theft, ensure that all accounts are identified and properly managed, and that your ultimate plan for disposal is met. Once completed, this information should be kept in a secure location that is accessible to your fiduciary upon your incapacity or death.

2. Scope of Access For each digital asset included in your inventory, establish whether you wish to bar your fiduciary from accessing such asset or, if you are intending to grant access, whether such access will be full or partial.

3. Online User Tools A copy of any completed online user tools should be kept with your inventory.

4. Ultimate Disposition of Digital Assets As with traditional assets, your governing documents should clearly state your wishes regarding the disposal of your digital assets.

The introduction of litigation in this area is not surprising; it does, however, demonstrate the need to address the disclosure and disposal of digital assets in estate planning documents. Please call us at your earliest convenience if you have any questions or would like to schedule a meeting.

Very truly yours,

Schwartz, Fang & Keating, P.C.