Virtual Value – Integrating Technology into Estate Planning

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Estate planning considerations in an increasingly digital world

At a time when new technologies and platforms are opening us up to new ideas and making our lives more convenient and connected, technological innovation is viewed by many as an exclusively positive force for change.

But software, systems, apps and web- and cloud-based services are so new—and the tech landscape is evolving so quickly—that this change comes at a cost: those connections and conveniences come with a new set of challenges and complications. Adjusting to new digital realities in an increasingly virtual world can be difficult, and perhaps nowhere is that more evident than in the world of estate planning.

Traditionally, estate planning is an exercise that results in getting the right assets to the right people with the right restrictions and determining who executes your wishes if you become sick, incapacitated or pass away. The issue, of course, is that organizing your possessions and deciding what happens to them in your absence becomes more complex when the definition of possessions is expanded from tangible assets and possessions to include virtual belongings.

For individuals and couples planning ahead for what will happen to their assets after they are gone, it has become increasingly important to take into account digital assets, passwords, photos, etc., and determine how to make sure those items are in safe hands after they pass away.

Access

One of the first and most significant challenges is access–or lack thereof. The growing various digital platforms and assets in our lives means that accessing accounts or files is no longer a matter of looking in a desk or a filing cabinet, but instead requires passwords.

From online accounts and banking to social media platforms with photos and proprietary content, our lives are increasingly online, and accessing and managing those profiles and platforms in our absence can be a formidable task. It is especially tricky for seniors and/or for others who may be dealing with dementia and other forms of cognitive impairment. A forgotten password can be anything from a minor inconvenience to an enormous technical and logistical hurdle.

Part of the issue is that relatively few people have even thought about these issues, and giving others access to or control of our online assets raises a host of troubling privacy concerns. Not only might the individual be uncomfortable knowing that someone else has access to their passwords and private content, but many caregivers, lawyers and estate planning professionals are understandably leery of the liability and exposure that comes with password access to every nook and cranny of their clients’ lives.

Assets

Traditional assets—whether they are financial instruments like stocks, bonds, and life insurance, or more tangible assets like cash, real estate, jewelry, fine art, etc.—are relatively easy to manage for estate planning purposes. There are policies and programs in place specifically designed to track, manage and disburse those assets. Pictures and personal effects with less obvious financial value have always been a different category, however, and that ambiguity becomes even more pronounced when those personal assets are digital or online. Not only is assigning value much trickier, but determining how to store, retain and disburse those assets presents technical and moral/ethical complications. In some cases, even identifying those assets can be close to impossible, as some people have a virtual presence that encompasses a large number of websites, platforms and personal accounts.

Solutions

While formal “online authority” documents and authorization protocols are still rare—if not nonexistent—and banks and other institution are still largely paper focused, the importance of assigning a digital asset custodian is gaining momentum. Facebook and other popular social media sites now allow you to designate an authorized custodian to manage your account, and several states have passed or are in the process of passing legislation to address these complex issues.

Colorado’s new legislation, for example, known as the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA), which went into effect in August, tackles these issues by establishing specific circumstances in which fiduciaries (and other representatives) can access digital assets, and attempts to balance privacy issues and the interests of the institutions where the assets reside (like Facebook, Google, or a financial entity). Michigan also passed similar legislation in March 2016 known as the Fiduciary Access to Digital Assets Act (FADA).

One way the law does this is to rely on existing online tools like Facebook’s legacy contact and Google’s inactive account manager, but challenges still remain. For example, think about how unlikely it is that most of us will remember to go back and adjust those settings for all of our online accounts if we named someone who is no longer in our lives as a legacy contact. Precedents are still being established with regard to state laws versus contractual/regulatory permissions, and jurisdictional issues (determining which state laws govern specific accounts) remain tricky.

Mindset

Ultimately, adapting our estate planning policies, practices and perspectives is less about specific steps and more about a shift in mindset. Keep track of your online assets and consider access and privacy issues thoughtfully. It’s really about thinking these issues through before they become a problem, and working with a trusted professional to determine practical, effective and tech-savvy solutions that you are comfortable with. It is also about understanding that old rules do not always apply: who would have thought, just a few short years ago, for example, that a character in an online video game could have actual real-world monetary value and need to be included in estate planning considerations?

And, of course, best practices for traditional estate planning still apply. Even in a world where technology rules, it still makes sense to consider establishing a trust; using milestones and major life events (marriage, the birth of a child) as a reminder to get your estate planning responsibilities taken care of; and to designate a trusted family member with healthcare power of attorney.

Jeffrey Moss is a Member of Dawda, Mann, Mulcahy & Sadler, PLC. He concentrates his legal practice in the areas of tax law, estate planning, business transactions, tax exempt nonprofit matters and real estate transactions. Contact Jeff at jmoss@dawdamann.com.

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