by John Jensen
A new model law aims to address issues of access to digital accounts in estate plans.
Most of us have a growing number of digital accounts, ranging from social media to family photos to virtual wallets (PayPal, Bitcoin, etc.), that are stored in the cloud or on smart phones or tablets. In fact, studies show that Americans now average 90 separate digital accounts. Many of our donors do not give much thought to what will happen to these accounts after their passing and perhaps assume that their executors will take care of digital treasures along with their other personal property.
How wrong they are!
The right to access
Under the Terms Of Service (TOS) of most digital accounts, the person signing up agrees to be the only individual who can access these accounts. When the user passes away, no one else is permitted, under the typical TOS agreement, to access these digital files.
Even if you are careful enough to record all the usernames and passwords, your executor could be violating the contractual TOS to which we all agree when we open these accounts. In fact, the executor may be violating state law if he or she uses these passwords, even if you have allowed it.
Most state probate codes do NOT give executors the right to access digital assets. In situations where family members have requested access to photos or other items stored on the cloud, courts have generally ruled against them, and the digital assets have simply been lost forever. This is now changing in many states—but with a huge caveat.
A new law on the horizon
The Uniform Fiduciary Access to Digital Assets Act is now law in 23 states and is expected to soon pass in remaining states. This model law allows an individual to explicitly and in writing give any fiduciary (executor, trustee, conservator, power of attorney, etc.) legal access to any digital assets or accounts. If this authorization is in place at death, companies must comply with state law. In situations where the executor doesn’t have the usernames and passwords, a probate court can order companies to provide access, and they will have no choice but to comply.
The fiduciary is also given the right to decide which digital assets should be kept, shared or destroyed to protect items that, in their discretion, are best kept private. The Uniform Act allows the fiduciary to decide if a photo might be misunderstood or a private letter to a loved one might be best not to share with family or others. The deceased can give special instructions in this regard to the executor, trustee or other fiduciary.
The act provides that where the deceased individual fails to appropriately give this power to the fiduciary, NO ONE will have access. Those treasured photos, videos and documents will simply float away into the ether. Given the conflicting concerns about access and privacy, the requirement that the direction be explicit and in writing is unlikely to change.
Keep in mind, however, that like all Uniform Acts, some states will pass them exactly as recommended. Other states may change or omit some provisions and perhaps add components unique to that state. This means one should discuss their state’s exact law with their attorneys.
What does this mean to fundraisers?
The primary goal of most planned gift marketing is twofold. First, fundraisers should encourage donors to create their estate plans and make gift provisions for charitable interests in those plans. Second, they should help donors understand that if they fail to keep their plans up to date, their desires regarding the disposition of their assets to their heirs and charitable interests may not reflect their wishes at the time of their death. Such unintended consequences are why Sharpe Group has long placed such strong emphasis on motivating, educating and encouraging donors to review and update their wills and trusts. We now have a new arrow in our quiver. Time to make use of it!
As we communicate with donors in person and through other channels, we can now add another very compelling reason to update an estate plan. Since this is a new law, almost everyone will need to update their plans to include this language in their will or trust.
By informing donors about these new provisions, particularly donors who are completing final estate plans, you will be doing them a service. You will also help ensure that more donors will revisit their plans and possibly update their charitable provisions.
What could be better than simultaneously helping your donors and encouraging a gift at the same time?
As you talk with donors, raise the topic as something you have just recently learned. If the law has not yet been passed in a given state, encourage donors to put the authorization in their wills or trusts regardless. Most experts believe it is just a matter of time before the model law, in some form, will be enacted in all 50 states.
Refer to this in your planned giving marketing materials. Encourage donors to discuss this with their attorneys. Like all marketing messages, this will take time to sink in, so raise the issue repeatedly over time.
Presumably, files stored on personal hard drives, DVDs and similar media are part of the personal property left by a donor, similar to photographs and other documents found in desk drawers and safety deposit boxes. Keep in mind that many of these may be password protected, so it is important to encourage donors to keep their usernames and passwords somewhere easy to locate.
Encourage donors to make sure that their most precious photographs and other digital property are backed up somewhere other than on cloud sources. They might also appreciate learning that it can be a good idea to transfer videotape and audio recordings to more permanent media as tape recorded prior to the 1990s may be nearing the end of its useful life.
To learn which states have enacted the new law, click here. You may also want to check out our blog post “What Happens to Assets in the Cloud When You Pass Away.”
The Sharpe Gift Planning Newsletter and Website library contains articles that address this issue that you can include in your various communications. Sharpe consultants can also assist you in other ways to raise and encourage discussion on this topic. ■
John Jensen is a Sharpe Group Senior Vice President and Senior Consultant.
