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The Importance of Addressing Digital Assets in Estate Planning

Posted Wednesday, June 20, 2018 by McKean J. Evans

More than ever, technology is fundamental to our lives. In 2018, even hardened luddites maintain email, social media, and/or cloud-storage accounts, or store considerable information on their smartphones. Maintaining digital information electronically may be second-nature, but it is important not to overlook it when considering estate planning issues.

Digital assets are particularly relevant to one important estate planning component: the power of attorney. A power of attorney is a written document by which the signer (the “principal”) grants authority to a specific person (the “agent”) to do certain acts or exercise certain powers if the principal becomes incapacitated or unavailable. Agents operating under powers of attorney will likely need to access the principal’s digital assets to effectively carry out their obligations. Unlike traditional assets such as real estate, accounts held at financial institutions, or tangible personal property, digital assets are only accessed through electronic devices. They can be easy to overlook, or to inadvertently discard or delete.

Digital assets are often stored remotely on cloud-based servers operated by third-party entities such as Microsoft, Apple, and Google, which retain control of the servers hosting the digital asset. Storage of digital assets on these entities’ servers is subject to intricate terms of use. Improper access of these assets can expose agents to criminal penalties under the federal Computer Fraud and Abuse Act (CFAA), 18 U.S.C. §1030.

Digital assets are increasingly important. Bitcoin is the obvious example. In one famous case, an individual reportedly tried to comb through a landfill after inadvertently throwing away the credentials to $75 million worth of Bitcoin. Some traditional financial accounts like checking or savings accounts now offer online-only account options. Other examples include digital works generated by musicians, photographers, and other artists, and accounts on streaming channels such as YouTube or Twitch. Even online videogame accounts can be valuable.

Besides assets with monetary value, most people routinely maintain other critical information on cell phones, email, social media, and/or cloud storage. This might include monthly bills for utilities or other critical services, or monthly statements or insufficient funds notices from accounts maintained at brick-and-mortar institutions. It might also include assets with significant personal value to the principal or their family, such as photo albums or correspondence.

Washington’s Uniform Fiduciary Access to Digital Assets Act (UFADAA), Chapter 11.120 RCW, applies to principals exercising authority under a power of attorney. UFADAA provides a framework for granting agents authority to access a principal’s digital assets. The UFADAA permits a principal to allow or prohibit disclosure to his or her agent of some or all of the principal’s digital assets. RCW 11.120.040. Such a designation overrides contrary provisions in terms-of-service agreements, as long as the contrary provision does not require the principal to act “affirmatively and distinctly” from the principal’s assent to the terms of service. Id. An authorized agent is specifically empowered to obtain the content of the principal’s electronic communications from a custodian maintaining such communications, provided that the agent provides the information required by the statute. RCW 11.120.090.

However, agents should be wary of federal anti-hacking laws that could be read to impose liability on an unwary agent accessing a principal’s digital assets. The Computer Fraud and Abuse Act prohibits obtaining information from Internet-connected devices “without authorization.” 18 U.S.C. §1030. It is therefore critical for powers of attorney to expressly authorize the agent to access digital assets – but the principal’s authorization is only half the equation. One federal court has suggested the CFAA makes it a crime to access digital assets even with the individual owner’s authorization if the person accessing the asset also lacks the authorization of the entity hosting the data (e.g., Google or Facebook). In Facebook, Inc. v. Power Ventures, Inc., the court stated that authorization from Facebook users was inadequate to give authorization to access data stored on Facebook’s servers without Facebook’s authorization.

In sum, digital assets are a critical element of any power of attorney or estate planning mechanism. If you have questions regarding a power of attorney or estate planning issue, contact McKean for a free consultation at 206-805-1493 or mevans@pivotallawgroup.com.

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