RUFADAA: The most important law you’ve never heard of

Last July, I was given the distinct privilege of speaking at the 2016 AICPA National Advanced Estate Planning Conference. After completing the balance of my three sessions, I spent the rest of my time speaking with attendees, as well as attending a host of excellent sessions. 

One session I particularly enjoyed was presented by Anne Coventry and Karin Prangley, who covered the latest developments in digital estate planning. That may not seem very important at first glance, but the reality is that it could be VERY important for your clients. And that importance is only likely to grow in the coming years. 

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Consider the fact that today, the average American has more than 20 accounts online. Couple that with the fact that roughly 95 percent of teenagers, and even 85 percent of adults, are internet users and you begin to realize that you may have a fair amount of digital assets.

Digital assets? Say what?

In short, digital assets represent anything created, communicated, sent, received or stored by electronic means. These assets may have their own financial value, such as a desirable domain name, may be the way to access assets with financial value, such as an online bank account that stores statements, or they may just have personal and/or sentimental value, such as a personal email or social media account. 

Clients control these assets to a large degree during their lifetime, they generally control these assets to a large degree, but what happens when they die? That’s where the train begins to go off of the track. Our laws have simply not caught up with our technological advances, and in truth, technology companies have not really made the process easy either.  

If you think your clients have got this all handled because somewhere, either on paper or digital form, they have some master list of all their logins and passwords, think again. In many cases today, it is illegal for anyone other than an account owner to access a particular digital account.

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You may think of “hacking” as someone sitting in dark room somewhere with a Guy Fawkes mask on, feverishly typing away on a keyboard. But anytime someone accesses information without proper authorization, that — hacking — is exactly what they’re doing. Even if they give permission for an executor or other person to access their accounts, it may be moot.

Many user agreements (terms of service) — those longwinded popups where you quickly scroll to the bottom and click accept — expressly prohibit you from transferring your digital asset either in life or upon death. Consider the following excerpt from Yahoo!’s terms of service provided by Coventry and Prangley:

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“Yahoo! Terms of Service: No Right of Survivorship and Non-Transferability. You agree that your Yahoo! account is non-transferable and any rights to your Yahoo! ID or contents within your account terminate upon your death. Upon receipt of a copy of a death certificate, your account may be terminated and all contents therein permanently deleted.”

So basically, Yahoo!’s terms of service say that at the moment your client dies, their account and everything in it are poof… no more. Do they have important emails with documents, pictures or other content that they’d want passed along to children or made available to their representatives after death, such as bank, credit card or other statements? Too bad!

And remember, they can’t — at least not legally — just pass along their login and password info for someone else to use, because that would be an illegal violation of Yahoo!’s terms of service – and hacking (hacking just sounds so much more nefarious, right?).

Clearly, this is not good. Thankfully, help may be on the way. After years of battling against one another and killing each other’s proposals, representatives from the Uniform Law Commission (lobbying on behalf of the “little guy”) and lawyers for several of the big electronic communications services (think firms like Facebook) came together and worked out a compromise known as the Revised Uniform Fiduciary Access to Digital Assets Act, or RUFADAA for short.