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I am always fascinated by a great action packed or science fiction movie that appears to foreshadow the direction our country is going when it comes to technology, global geo-political-military affairs, or the human condition and how we relate to each other. Whether it’s Soylent Green and the current state of processed foods, The Running Man and today’s prime-time reality shows, or Wall-E and the passengers on board the spaceship Axiom that were fixated on their virtual reality screens, I initially tend to say, “That’s pretty interesting but that will not happen”. Years later I conclude “yep, we went there!…and in short order, too.”
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This week I am reminded of the relentless targeted advertising John Anderton in the Minority Report endured as he walked through a shopping plaza trying to evade law enforcement. After discovering that Facebook wanted to have access to user banking information for targeted marketing purposes, I re-watched Minority Report…this time with a keen awareness of the fact that the information that we do choose to share by way of converting that information into digital assets in the cyber world does not belong to us once it is uploaded. What is duplicated or created when we upload information to cyberspace, these “digital assets”, in many cases, are no-longer exclusively controlled by us, the owners. In our haste to take advantage of and enjoy the conveniences of easily accessed information, entertainment and productivity in its various forms in cyberspace, we cede our exclusive rights to control what we upload. We cede that control to the digital platforms that provide the services, storage space or communication ability we wish to use. When did we voluntarily place limitations on our electronic communications, social media accounts, net working website accounts, frequent flyer miles, cash back points, i-Tune accounts and the like? Answer: When we impatiently searched for and selected the “I accept” button for the respective programs, sites or software. That multi-page document is called a Terms of Service Agreement or TOSA. It is not just about disclaimers, ethical use of the platform, or how they might share your information for marketing for legally required purposes. The TOSA is also about what you own and what you don’t own when digital assets are created as a function of your use of the site or service. Let’s: 1) define some of the important terms; 2) determine where we, as consumers, generally stand when it comes to the TOSA,; and determine what we can do during the financial and estate planning process to protect the digital assets we have simply as a function of using today’s technology.
The simplest definition of an asset is property that is useful or has value. Real assets refer to real estate, buildings, inventory precious metals, and other items that have intrinsic value. Financial assets refer to investments, currency, and items that are used for trade through the financial markets…they ultimately have no intrinsic value but represent a contractual claim and are typically liquid and easily traded. Digital assets are documents and other audio-visual content that are stored on computers, phones, websites, storage devices like hard drives, email servers, social media accounts…you get the picture. Cryptocurrencies are digital assets. Your files stored in “the cloud” are digital assets. So are web domains. In their digital form, these items are intangible. Some have sentimental value, and some have monetary value. Examples of digital assets that may have monetary value include frequent flyer points, credit card “cash back” balances, Pay Pal balances, and domain names. In today’s digital world, access to these assets can become limited if not flat out denied based upon the Terms of Service Agreement signed by the original user. In 2016, an Intel Security survey revealed that the average business employee had 27 passwords. In 2017 the password manager LastPass placed the estimate at 191. According to the January 2017 Pew Research Center Internet and Technology report “Americans and Cybersecurity”, 39% of respondents use the same or similar passwords for several different accounts. These passwords statistics have the potential to add up to a lot of TOSAs and digital assets. It is worth looking at some of the characteristics of TOSAs.
As mentioned earlier, TOSAs outline your rights, responsibilities and liabilities. When you skim through the tedious “small print” and hastily press, “I accept” because there are no mendacious motives on your part, you are also accepting the entirety of the default settings. These default settings cover your rights before and after your death. In general, social media accounts retain the digital assets posted, and the custodians (or social media companies) can use or dispose of the assets as they see fit. You may also have to sign a licensing agreement, which gives you, the user, permission to access digital assets in your accounts until death, at which time the right to access terminates. Typically, music share plans have licensing agreements. Because TOSAs restrict access to the user during life, and prohibit third-party access after death, it is important to proactively designate provisions for digital assets in estate planning documents.
The Uniform Law Commission (ULC) is an organization comprised of lawyers that work together to draft and propose legislation that clarifies and brings a measure of standardization to state statutory laws. Although federal laws determine who has access to your accounts, the ULC recognized the need for a fiduciary, (ie, agent, attorney in fact, personal representative, court appointed guardian and trustee) to have appropriate access to and control over digital assets in the same manner as other assets. In 2015, The ULC created the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA), which addressed this need and provided a measure of standardization across states and US territories. Specifically, it:
“…extends the traditional power of a fiduciary to manage tangible property to include management of a person’s digital assets. The act allows fiduciaries to manage digital property like computer files, web domains, and virtual currency, but restricts a fiduciary’s access to electronic communications such as email, text messages, and social media accounts unless the original user consented in a will, trust, power of attorney, or other record.”1
RUFADAA does not include financial assets: for example, the act covers access to an investment account online, not the right to manage the assets within the account. It is also important to recognize that RUFADAA DOES NOT apply to EMPLOYER digital assets. Therefore, you want to avoid placing personal communications and audio-visual documents on electronic devices that belong to your employer, like a phone, tablet, or office computer. In effect, the fiduciary can manage, conserve and access digital property just like real and tangible property. While the RUFADAA does provide a measure of consistency in rules and procedures from state to state, it is imperative that you check with your specific state of residence when drafting your estate planning documents; not all state standards are identical since the state rules must ultimately address and reflect state specific legislative experiences, needs and concerns.
Handling the preservation, liquidation, and potential bequeathing of digital assets are estate planning waypoints. Here are just a few of the questions you need to ask yourself and discuss with your financial and estate planning professional.
- How many personal and business online accounts do I have? How many passwords do I have? Create an account and password list. Consider how to best secure that list, whether it is using an online management service or placing the list in a safe. There are also services available that help locate digital assets. DO NOT place an itemized list in a will because after your death, your will becomes a matter of public record.
- Do I own an online business? What about a personal or business blog? All of the uploaded content is copyrighted. Consider whether or not these digital assets need to be integrated into a business succession plan or assigned to heirs.
- What do these digital assets mean to me? This question really gets to the heart of why financial planning is life planning and is not a financial exercise exclusively for the wealthy. Sentimental value is real. The photos, videos, meme’s…they meant enough to share with friends, do you care to have them archived for your loved ones? There is no right or wrong answer…there is only your answer.
- Who do I trust to do what I want with my digital assets? Whoever you choose will be your digital executor. Not all states allow for specific digital executors, so be sure to consult with an estate planning professional to understand what your options are in your state. Discuss your wishes and the location of the digital assets and password documents with this trusted family member, friend or associate…your chosen fiduciary.
Some suggested action steps:
- Complete an online tool, which is an electronic service provided by the custodian. It is separate from and overrides the TOSA and the estate planning documents. Be sure that whatever provisions you call for in the provider’s access authorization tool match the provisions outlined in your estate planning documents.
- Depending on your desires and the nature of the digital assets, you can grant full access, partial access, or a copy of records. In the case of emails, you may have a choice between allowing access to a catalogue (a list of dates, times and email addresses of communications) or full access to the entirety of the catalogue AND content of the emails.
- Incorporate your answers and some of the appropriate action items above in to your existing estate planning documents. Seek professional estate planning advice to determine how to use your will, POAs, DPOAs, and trusts to facilitate your desires. No two financial or estate plans are the same. In the event of your death or temporary incapacitation, knowing that your digital assets can be managed in accordance with your wishes and not default settings selected in haste provides peace of mind.
We are more dependent on information in digital form for business and pleasure than ever before, and our dependency will continue to increase. The Uniform Law Commission created and updated the Uniform Fiduciary Access to Digital Assets Act to address and standardize state fiduciary law in our technology driven world. RUFADAA addresses internet user control of digital assets, uniformity of state fiduciary laws, and federal privacy laws. Whether or not retinal scans for the purposes of targeted marketing to consumers while they are walking down the street are in our near future is something I cannot answer. In a rush to get real time information and services, we are tempted to select “I accept” to Terms of Service and Licensing agreements in haste, without realizing that the digital assets we are creating are: 1) not ours forever and 2) not easy to get to when we are gone. Financial and life planning won’t save us from having to read the details of TOSAs and licensing agreements, but we do have the tools available that help us seize and maintain control of our digital assets where we can. Terry