Estate Planning: Control What Happens With Your Digital Assets After Death

In this digital age, most people have some type of digital assets. These range from having social media accounts (Facebook, Twitter account, iTunes account), to financial accounts (cryptocurrency accounts, bank accounts), to email accounts, to document storage accounts (Dropbox, One Drive) and everything in-between. Many of these are inheritable assets that will need to be accessed by your fiduciary after you pass away. To address these issues, many states, including California, have enacted the Revised Uniform Fiduciary Access to Digital Asset Act (the “RUFADAA”) to provide guidance with these issues.

In most cases, gaining access to these accounts is virtually impossible unless you know the passwords for each account. When we need to update passwords on a pretty continual basis, it is very difficult to remember all the passwords for these accounts, especially because most have differing requirements for the passwords that may be used on that site. The best practice would be to leave a current and updated list of all digital assets and accounts with the most recent password in a secure location for your successor trustee or personal representative, along with your will and your trust documents.

Many digital assets have online tools that allow the user to provide instruction with regards to how their digital account should be managed and may allow the user to delete the account or block access to their account. These online directions will likely prevail over the instructions in a will or a trust so it is a good idea to consider how these online tools are currently configured for each individual digital asset and ensure that these directions are in accordance with your will and trust directions.

One must also be aware of the terms of service agreement (“TOSA”) that we all routinely agree to when we sign up for online digital access. Some TOSAs state that upon your death, the account will be deleted and all content deleted unless you have taken affirmative steps to appoint someone to handle these accounts after death. For example, Facebook typically “memorializes” Facebook profiles when it becomes aware that a user has passed away. This effectively freezes that user’s profile and no one may download or post on the profile any longer. Sadly, this may mean that your children and loved ones cannot download your photos or posts for posterity. However, Facebook allows the user to designate a legacy contact who can control the decedent’s profile.

With regard to digital currency accounts, it is very important for tax purposes that the basis of your investment in that account be memorialized so that your beneficiaries or heirs can properly record the value of the account. Currently, your heirs and beneficiaries may be entitled to the step up in basis, similar to the step up in basis for inherited stocks and bonds, upon the decedent’s death. However, if the decedent sold the digital currency before death, the fiduciary managing the estate or trust would have to have a way of ascertaining the decedent’s cost basis in the digital currency in order to report a capital gain or loss by the decedent in the final tax return for the decedent.

When you meet with your estate planning attorneys, make sure that you inform them of your all your digital assets so these can be included as part of your estate plan. It behooves you to keep an updated list of all these digital assets along with the passwords in a safe and secure place so that upon your passing, your fiduciary will be able to handle these digital assets in an orderly and methodical manner.