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PROTECT YOUR DIGITAL ASSETS NOW, BUT ENSURE ACCESS LATER TO YOUR FIDUCIARY

April 5, 2019 • Posted By • Trusts and Estates

New York Law Journal published C. Raymond Radigan and Lois Bladykas’ article, “Protecting Digital Assets in a Digital Age,” addressing how estate planning should expand to reflect assets consist of more than real and personal property.  

When making an estate plan people are mostly concerned with the disposition of their traditional assets such as real and personal property. They fail to address and protect their digital assets, which includes online accounts, social media accounts, photographs, documents, internet-based businesses, and digital files. When a person dies with a trust, will or intestate, digital assets are difficult to access by anyone other than the owner. Obstacles prevent access to digital assets after the death of the account owner. This does not occur with traditional real and personal property. Obstacles to accessing digital assets of decedent consist of:

Passwords. Individuals typically have unique usernames and passwords for each of their digital assets. If passwords are not documented and routinely updated, fiduciaries will have difficulty accessing digital assets.

Data Encryption. Complicates retrieval of digital assets by fiduciaries because they may not know how to properly access encrypted material.

Relevant Federal and State Laws. Unauthorized access to computers and data violates criminal and data privacy laws. See, NY Penal Law, art. 156. To address these concerns, Estates Power and Trust Law Article 13-A was enacted to govern the administration of digital assets. Article 13-A defines digital assets as “an electronic record in which an individual has a right or interest.” EPTL §13-A-1(i).

The legislative intent behind the enaction of Article 13-A is, “[t]he wide use of digital assets has created an urgent need for legislation dealing with the administration of these assets upon the death or incapacity of the user. As a practical matter, there should be no difference between a fiduciary’s ability to gain access to information from an online bank or other internet-based business and the fiduciary’s ability to gain access to information from a business with a brick and mortar building. This measure would amend the EPTL to restore control of the disposition of digital assets back to the individual and removes such power from the service provider.” Sponsor’s Memo., Bill Jacket, L. 2016, ch. 354.

Once a fiduciary has authority over tangible and/or personal property of a decedent, the fiduciary then has the authority to access any digital assets stored within. Article 13-A expressly applies to “a fiduciary acting under a will, trust, or power of attorney executed before, on, or after the effective date” of the statute. EPTL §13-A-2.1(a).

Additionally, Article 13-A provides that users of digital assets may “use an online tool to direct the custodian to disclose to a designated recipient or not to disclose some or all of the user’s digital assets, including the content of electronic communications.” EPTL §13-A-2.2(a). Furthermore, “[i]f the online tool allows the user to modify or delete a direction at all times, a direction regarding disclosure using an online tool overrides a contrary direction by the user in a will, trust, power, or attorney, or other record.” Id. The statute also imposes the legal duties upon a fiduciary charged with managing digital assets, including the duty of care; duty of loyalty; and duty of confidentiality. EPTL §13-A-4.1.

Importantly, according to Article 13-A there is a difference between disclosure of digital assets and disclosure of the content of electronic communications. Disclosure of digital assets is allowed “unless the user prohibited disclosure." Id. On the other hand, disclosure of the content of electronic communications is authorized only where the user “consented or a court directs disclosure.” EPTL §13-A-3.1. See, Matter of Serrano, 56 Misc.3d 497 (Sur. Ct. New York County 2017) (holding that fiduciary has authority to request decedent’s Google contacts and calendar information which constitute digital assets, but denied fiduciary’s application to disclose decedent’s email communications).

Attorneys should direct their clients to appoint a “digital executor” who will arrange and protect decedent’s digital assets. Wills and trusts should also contain a digital powers and duties clause to outline the role of the digital executor. As more assets are stored online, the protection and accessibility of our digital assets is imperative.