What is a day without perusing Facebook, Twitter, or Instagram? Can you communicate at work or at home without using email? Can you purchase your necessities without PayPal, Amazon, or direct online access to your bank account? These are all examples of digital assets that have embedded themselves into our core. We have come to rely on them much like electricity and running water. Yet, if we do not protect these digital critters, they may disappear. Much like tangible property and financial assets, electronic assets must now be added to your financial portfolio as well as to your estate planning documents.
Let’s first define a “digital asset.” They include your smartphone, email accounts, social media accounts, domain names (your personal or business website), eBay, iTunes, iCloud, digital photo albums, online banking, and finally, the Bitcoin. Now that you know what your digital asset portfolio consists of, how do you protect it? By protect it, we mean what happens to your accounts in case of your sudden incapacity? Even worse, what happens to them in case of sudden death? Here is how access to digital assets plays out in today’s world.
First, let’s be clear that any digital assets created during the time of your employment generally belong to your employer. Any documents you create or emails you write using your work email address belong to the organization you work for. This is because the privacy protections of federal law do not apply to private email services that are provided by your employer or your educational institution.
In 2016, the Florida Fiduciary Access to Digital Assets Act (“the Act”) was passed to address how fiduciaries may deal with access to digital assets of the principal. The principal is the creator, known as the “user” of the assets. A fiduciary is a person appointed by the user and can take the form of a guardian, agent under a power of attorney, personal representatives or trustee.
The Act establishes that the user must direct the disclosure of digital assets, done through the use of an online tool or by executing estate planning documents. Note that the use of an online tool directly with the service provider or financial institution supersedes a contrary direction in a Last Will and Testament (“Will”), a Trust, or a Power of Attorney. In the absence of an online tool directive, the user’s estate planning documents will govern.
What Happens in Case of Sudden Incapacity?
Regarding estate planning documents, the best document to protect your assets in case of sudden incapacity is a Durable Power of Attorney (“DPOA”). In the DPOA, the user must specifically initial the “superpower” relating to digital assets, digital accounts, and digital devices. This will grant the agent (person appointed) to access the contents of the user’s digital assets and devices in case the user becomes incapacitated. The agent will also be able to make legal and financial decisions and conduct transactions on the user’s behalf. The DPOA ends when a person passes away. Note that if you created a Power of Attorney prior to October 2011, it is time to update it as the laws have changed.
What Happens in Case of Death?
There are two way to safeguard the survival of your digital assets after you have passed away. First, you must manually go through each digital asset, one by one, through the use of their online tool, and designate who should have access to your account in case of your death. This is called designating a legacy contact, or a beneficiary of the account. Although tedious, is the best system currently available. Next, you should backup your online designations by creating a Will naming a personal representative or a Revocable Trust naming a successor trustee.
Note the current default rules regarding personal representatives and trustees. Currently, the personal representative is authorized to access all the decedent’s digital assets other than electronic communications (email accounts). A successor trustee can access both digital assets and electronic communications when the trust itself becomes the user of a digital asset (that is held in trust) or when the trustee becomes a user for business purposes. Confusing? Yes. Therefore, it is best to use a combination of direct online tools to designate a legacy contact along with proper estate planning to best achieve your goals.
Lastly, our favorite, the Bitcoin. Bitcoin is a form of cryptocurrency. Cryptocurrencies are lines of computer code that hold monetary value. Cryptocurrency is also referred to as digital currency. It is a form of digital money that is created by some serious number crunching and monitored by millions of computer users called miners.
Bitcoins are stored in a virtual wallet which uses a string of random characters called a “public key.” This public key is a code used for sending and receiving the cryptocurrency in business transactions. The owners, however, have a “private key” to access the contents inside the wallet. If an individual passes away owning Bitcoins, but never passed on the private key, his heirs may know about the existence of the wallet but will never be able to gain access to the Bitcoins inside. To prevent this, the Bitcoin owner, during his lifetime, must ensure that someone they trust gets a copy of the private key by writing down the code, storing it on a local drive or cloud based software, or enlisting the services of a private company that manages cryptocurrency. It is important to incorporate bitcoins into your estate plan to ensure that once you pass away, your bitcoins live on in the hands of the intended beneficiary.
One thing remains clear, and that is, a sound estate plan can help you protect your assets whether those assets include bank accounts, emails, digital assets or bitcoins. Contact OC Estate & Elder Law today at (954) 251-0332 or firstname.lastname@example.org for your free consultation. We help families protect all their assets, regardless of what the future digital trends may look like.