For many Americans, valued assets are no longer entirely tangible. While a standard estate plan might include assets such as a home, a car, or a bank account, digital assets may require alternate arrangements. Digital estate plans | California Estate Planning Lawyer

The Importance of Creating a Digital Estate

California’s Probate Code was written long before computers, smartphones, and other technological innovations became common household commodities. Until very recently, state law did little to accommodate digital assets. However, in 2016, then-Gov. Jerry Brown signed Assembly Bill 691, which facilitates the intergenerational transfer of digital assets to heirs and beneficiaries.

Also known as the Revised Uniform Fiduciary Access to Digital Assets Act, or RUFADAA, this legislation permits Californians to name an agent who can:

  • Disclose information such as account passwords to a designated beneficiary
  • Transfer control of digital assets such as a Bitcoin wallet to a named heir

However, RUFADAA has several critical limitations. Before the agent may begin redistributing the deceased person’s digital assets, they must have prior permission to access the decedent’s accounts.

Without the right estate plan, a digital estate—whether it contains social media accounts, cryptocurrency wallets, family photographs, or a combination of these—could be unsalvageable.

Accounting for the Entirety of Your Digital Estate

The term “digital asset” is somewhat vague. While definitions of what constitutes a digital asset may vary, a digital asset is typically defined as any electronic record, file, or account that is stored in any of the following formats:

  • Online
  • On a mobile device such as a smartphone or iPad
  • On a personal computer or another electronic device

A digital asset could be:

  • An email account
  • A Facebook account, Instagram account, WhatsApp account, or any other social media account
  • An online banking account
  • A virtual business or merchant profile
  • Photographs or documents stored in a service-specific “cloud”

Making sense of digital assets can be difficult. An online banking account, for instance, could be considered a digital asset; however, the funds contained in the account may not be considered a digital asset if they are held by a traditional brick-and-mortar financial institute. You should consider consulting a California estate planning attorney if you are not sure how to categorize your assets.

Preparing a Digital Estate Plan

Since the transfer of digital assets is facilitated by RUFADAA, a digital estate plan should include an inventory of the assets, an explanation of how they should be divided, and a designated executor. It should also be stored safely.

Inventory of the Assets

Digital assets, unlike many owned physical assets, are usually controlled by a third-party company or business or subject to a third-party company’s terms of use and service. Since social media services and cryptocurrency accounts may not have any procedure to facilitate the transfer control of an account from the decedent to an executor, a comprehensive digital estate plan should include a comprehensive list of all of the grantor’s digital assets.

Ideally, this inventory should include:

  • The name and location of the accounts
  • The username and password for each individual account
  • The answers to any account recovery questions
  • The phone number or application used for 2-factor authentication (2FA), if applicable

Explain How Digital Assets Should Be Divided

Since digital assets are so often subject to a third-party company’s internal policies, they may be subject to unexpected restrictions. For example, Facebook does not allow most individual accounts to be “transferred” during probate. However, Facebook—along with Google and Twitter—have “legacy” policies that may allow a named agent to:

  • Take control of the decedent’s account
  • Create, curate, and amend content visible on the decedent’s profile
  • Transfer any associated funds or financial details to an executor or beneficiary

However, some digital assets—such as monetized blogs, e-commerce profiles, and cryptocurrency wallets—could be considered personal assets and significant financial assets, too. They may be valuable in their own right or profit-generating enterprises.

If you have accounts that generate income, you should consider how they can be safely and securely transferred to a beneficiary.

Designate an Agent or Executor

Under RUFADAA, California residents may designate a special digital estate executor—an agent responsible for the preservation of the digital estate and the distribution of its assets.

Digital estate executors are considered fiduciaries, which means they have a legal obligation to act in the best interests of the decedent’s digital estate. However, since the “digital estate” is still a relatively new concept, executors may not be able to rely on the Golden State’s probate courts for assistance in compelling the transfer of digital assets.

As such, a digital estate executor should be somebody who is not only trustworthy but familiar with California’s succession laws and comfortable with technology. 

Be Stored in a Safe Place

Your digital estate plan, and the instructions for fulfilling it, should be stored in a safe but accessible place. While you could keep your digital estate plan in your home, it may be wiser to leave the instructions with your attorney, who could ensure both their legality and their safety.

Do You Need To Speak With An Attorney About Estate Planning?

If you need to speak with an experienced estate planning lawyer please contact us online or call us directly at 800.756.5596 to first register for one of our free, informative seminars. Your attendance will qualify you for a special discount for our estate planning services should you decide to make a free appointment at the conclusion of the seminar and choose to proceed with us. We proudly serve clients throughout California with offices in Torrance, Newport Beach, Orange, Woodland Hills and Pasadena.

 

Philip J. Kavesh
Nationally recognized attorney helping clients with customized estate planning guidance for over 40 years.