Neglected Property
As people of all ages increasingly store their important documents and other property in a digital format, it seems logical that they would include their digital assets as part of their estate. However, that’s generally not the case.
According to a 2020 survey by the Law Society, a legal organization in England and Wales, only 26% of the 1,000 survey respondents reported knowing what would happen to their digital assets after their death, and only 7% had included any digital assets in their will or trust.
Assuming that comparable percentages hold true in the U.S., home to an estimated 30 million Bitcoin owners, it does not require much imagination to visualize the chaos that looms for personal representatives and successor trustees seeking to get a firm handle on the estates for which they are legally responsible.
The practical challenge: Managing assets held in an online account for which the log-in credentials are unknown.
UFADAA
To get ahead of the curve and help fiduciaries carry out their duties, most states (including Arizona) have adopted the Uniform Fiduciary Access to Digital Assets Act (UFADAA) or its revised version.
Arizona adopted the Revised UFAADA in 2016, empowering trustees, personal representatives, guardians, conservators, and agents under powers of attorney to access and distribute the digital assets of the deceased or incapacitated person to whom they owe a fiduciary duty.
UFAADA provides a priority system for distribution of digital assets:
First, if the company holding the digital assets allows the account owner to name another person to have access to the user’s digital assets, the owner’s online instructions will have priority. This is by the far the preferred arrangement.
Second, if the owner does not name another person, the owner may provide for the disposition of digital assets in a will, trust, power of attorney, or other written instrument. This is a major inconvenience for the fiduciary, as gaining access to the account requires submitting to the company the proper estate documents and convincing the company to cooperate.
Third, if the owner has not provided any direction, either online or in an estate plan or other written document, the company’s terms of service for the owner’s account will determine how the account and its contents are to be managed. For the fiduciary and the owner’s beneficiaries, this can be a disaster: If the terms of service do not address fiduciary access, the law requires the custodian of the digital assets to provide only limited access.
Planning for Your Digital Assets
To take advantage of UFAADA’s first step, be sure to include a provision in your will, trust, power of attorney, etc., that designates who has access to your digital assets and what will happen to your digital assets upon your death or incapacity. If such a designation is not properly outlined in your estate planning documents, your appointed fiduciary may have little or no access to your digital assets.
In the absence of such a provision, the UFAADA is useful only to the extent that the online custodian chooses to cooperate.
Password Vault
While adding a “digital asset” provision to your will or trust generally requires the assistance of an estate planning attorney, there is one strategy that you can and should pursue totally on your own: storing all of your account credentials in an online “vault,” keeping the vault up to date, and placing your vault credentials with your will or trust.
Your estate plan is a reflection of the importance you place on proper management and distribution of your assets after you are gone, and, whether it’s a trust or a simple will, its creation involved a significant financial investment.
It would be a shame to undermine your carefully conceived instructions, and waste the cost of your plan, by inadvertently placing your important assets beyond your fiduciary’s reach.
