Digital Assets – Coming Soon to a State Near You!

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Cutout Constellation

 

Colorado may soon be getting some legislation in place concerning digital assets in the probate context! Today’s post will look at the benefits of having a digital assets clause in such estate planning documents as a general durable power of attorney or in a will.

Here’s the link to SB 16-88, which is a bipartisan bill entitled “Concerning the ‘Revised Uniform Fiduciary Access to Digital Assets Act,’” or RUFADAA for short.  The RUFADAA has been introduced in 29 different state legislatures so far.  I have already written several blog posts on this topic of “digital assets,” and my most recent one on the topic mentioned the revision of the uniform act by the Uniform Law Commissioners (ULC) last July.  If you’re looking for a bit of background on digital assets, read this post.

Of course I still don’t know for certain whether the RUFADAA will pass (still working at using my crystal ball successfully . . . ), but it seems like it will.  On Monday (2/22/16), it was introduced in the House and assigned to the Judiciary Committee.  The controversies which plagued its predecessor, the UFADAA, have largely been eliminated with the ULC’s RUFADAA.

So to begin, here’s a few helpful pointers.

  1. Specify and distinguish between assets and access

It’s not enough to simply generally describe online or digital assets in a POA or other estate planning document because there are important nuances and details which third parties, upon whose approval an agent acting for a principal must depend, which must be address.  The difference I’m talking about here is identified in the bill’s distinction set forth in §15-1-1502(9), which states a “designated recipient” means a person chosen by a user using an online too. To administer digital assets of the user,” and §15-1-1502 (10) “digital asset” means an electronic record in which an individual has a right or interest . . . .

Keep in mind that some internet service providers already provide their own online tools by which a user can designate individuals who are authorized to receive the content of a user’s account in the event it is inactive for a period of time determined by the internet service provider (ISP).  On Facebook, for example, this is known as a legacy contact.

In this circumstance described above, the fiduciary for a decedent estate (a/k/a the personal representative in Colorado) or an agent under a POA must contend first with the user/principal’s specific direction (if it exists) and to the extent that no designation was made by the user/principal, then the governing instrument (e.g., a POA) would control.  Finally, if there is neither a specific direction by a user/principal as to who shall have the power to access nor a POA or other governing instrument, then the standard term of service agreement controls.

  1. Recognize and give priority where applicable to “online tools”

This coordination of designations in an ISP’s online tools with, for example a POA, is an important undertaking for RUFADAA purposes.  If the user (be they a principal under a POA or the decedent in an estate administration proceeding) has already designated a person or persons to have access consistent with the ISP’s online tools, this will take precedence over the estate planning documents.  See the RUFADAA at §15-1-1504.  In this context, it would be a good idea for the user to ensure that the selected agent is not only just the agent for POA purposes but is also a designated recipient as identified above.

  1. Things are continually evolving!

Evolving was chosen over changing because it has a more positive gloss, doesn’t it? The change is ongoing.  These will keep estate planning and probate lawyers on our toes to advise client of developments affecting access with the use of online tools and also ensuring that a user’s selected fiduciary (agent, personal representative, etc.) will have access to the assets as intended by the user.

So – a scenario to avoid would be one in which the user designates one person to have access by naming them a designated recipient, but then (perhaps at some later date, unwittingly) names another and different person as (for example) agent under a POA.  This kind of a conflict will cause problems and should be avoided.  No, this online networked world we live in is not getting any simpler to manage!

© Barbara E. Cashman 2016   www.DenverElderLaw.org

The Revised Uniform Fiduciary Access to Digital Assets Act

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Siennese Door

This is an important development regarding the Uniform Law Commission’s Uniform Fiduciary Access to Digital Assets Act (UFADAA).  I learned that there is a new and revised version of the uniform law which has in the last few days been approved by the ULC.  It is known as the Revised Uniform Fiduciary Access to Digital Assets Act (2015).  In my last post on this topic in May, I described the short-lived history of HB 15-1189, the UFADAA in the Colorado legislature.

In June, yours truly was interviewed, along with Connie Smith of Fairfield & Woods, for the article “Assembling the Digital Legacy” which appeared in Law Week Colorado.  The article, written by Doug Chartier (sorry, no link as it is paid subscription only), described the ever changing landscape of identifying and managing digital assets for the living (as agent, conservator or trustee) or for the deceased (as personal representative).  The article reads a bit like an obituary for the UFADAA, which was enthusiastically presented in nearly two dozen state legislatures but met stiff opposition from diverse groups including (in Colorado) the Colorado Bankers Association and the ACLU.  Only one state has adopted the UFADAA so far and in most states where the legislation was introduced the UFADAA has already been rejected. This over what is broadly termed as “third party privacy concerns.”  The basic concern would be, to give one example, for those with whom the digital asset owner would have communicated – say via email, and whose private and protected information would be disclosed to a fiduciary acting on behalf of another (as defined in the UFADAA, but generally an agent under a POA, a personal representative of an estate and so forth) without the third party’s knowledge or consent.  It isn’t just about reading mail anymore, or emails for that matter!

Here’s a recent article in Forbes magazine about how forgetting to make plans about digital assets like social media can create post-mortem lawsuits.  One of the spot-on observations made in the article was about the difficulties in transferring digital assets and its potential to create unplanned business succession challenges as well as ongoing estate planning difficulties.  Getting back to the Law Week article, both Connie Smith and I agreed that online services for storage of passwords, usernames and other credentials for online accounts (digital assets, broadly defined) are problematic because of the concentration of personal data.  I give my estate planning clients an organizational “letter of instruction” which has a page for these online accounts and other digital assets. At this time I think the best way to maintain this information is in paper format, which can be easily updated on a personal computer and printed out periodically.  And no, you shouldn’t call the document “my online accounts and how to access them,” but maybe come up with something more creative!

In the meantime, don’t forget about making plans for those digital assets.  Here’s a helpful article from the American Bar Association on this topic.  Unfortunately, I wasn’t able to link to the revised version of the UFADAA on the Uniform Law Commisioner’s website – it does not yet appear to be available there.  I have a word version of the revised UFADAA, but haven’t had the chance to read it while comparing its previous version.  I’m sure that will be a topic of a future blog post. . . . !

©Barbara Cashman  2015   www.DenverElderLaw.org