By Jonathan D. Morton

The proliferation of digital assets raises new questions about how to plan for the transfer of those assets. Law typically trails technology, and in the case of digital assets, the law is woefully behind. In Illinois, for example, there is no law opining on the transfer of digital assets, which are governed by complex “Terms of Service Agreements” that nobody reads. Thus, the question exists: what happens with my digital assets when I die?

What is a “Digital Asset?”

Proposed Illinois legislation defines a “digital asset” as:

An electronic record in which an individual has a right or interest, not including the underlying asset or liability unless the asset or liability is itself a record that is electronic. All digital assets, however defined, are accessed by a tangible device, such as a computer, smartphone, tablet, or server.

Practically speaking, digital assets are email accounts, social media accounts, digital files, digital currency, music, apps, and other electronically-stored records. Digital assets such as websites, music, code, or digital currency can have tangible, monetary value, while other digital assets, such as social media accounts, may have more personal value. For example, Pokemon Go added over $7 billion to Nintendo’s market capitalization almost overnight, and there is currently over $10 billion of bitcoin outstanding.

Creation of the UFADAA

The issue with planning for digital assets is two-fold: terms of service agreements typically prevent the account holder from transferring or allowing additional access to the underlying account, and federal law criminalizes the unauthorized access of digital material. Terms of service agreements (TOSAs) are the long, mundane text boxes that are “agreed” to anytime a user sets up an online account. TOSAs almost uniformly prevent access by anyone other than the user, and also prevent the transfer of the underlying digital asset.

For example, Facebook does not allow you to share your password or “let anyone else access your account” or “transfer your account.” While in a practical sense the prohibition may seem unenforceable, the Federal Computer Fraud Use and Abuse Act criminalizes “unauthorized access” of computer hardware and stored data. Further, the Federal Stored Communications Act prevents disclosure of the content of electronic communications to third parties.

In response, a uniform law was drafted, the Uniform Fiduciary Access to Digital Assets Act (UFADAA). UFADAA aims to circumvent the prohibition on transfers and difficulty in account access by providing that fiduciaries (e.g. trustee, guardian, executor) may access the accounts of the principal. For example, the principal under a power of attorney must expressly state in the power that the agent shall have access to all digital assets, including the content of the digital asset. If, on the other hand, the account holder is incapacitated or deceased and does not provide affirmative approval for fiduciary access, UFADAA provides that the fiduciary will only have access to a “catalogue” of the digital assets, meaning that the fiduciary will know of the asset’s existence, but will not be allowed access to the content.

UFADAA provides a three-tiered approach to determine access. The highest level of access is an “online tool.” An “online tool” is an express grant of authority that exists within the digital asset itself. For example, Facebook allows for a “legacy contact,” whom the primary account holder appoints to access their account to download content (i.e. pictures) and close the account, if necessary. In the absence of an online tool, the second level of authority is the grant of authority under estate planning documents. The grant of authority under the documents would circumvent a TOSA prohibition on account access or transfer. The third level of authority is the default level, discussed above, in which the fiduciary only has access to a catalogue of digital assets.

Status of UFADAA in Illinois

Illinois has yet to adopt UFADAA. The bill, which has bi-partisan support, was approved by the Illinois Senate and was sent to the House floor for approval, but was sent back to committee on

May 31, 2016. It is generally expected that the House will eventually pass the bill and that the governor will sign UFADAA into law. When adopted, UFADAA will be effective with regard to all existing estate planning documents. Thus, even before the bill is adopted, it is still necessary to account for digital assets in estate planning documents.

Planning for digital assets is a hot topic in the estate planning community. As the law currently stands, planning is difficult. It appears, however, that in the near future we may have additional guidance on how to plan for, and distribute, digital assets.

Although Illinois has yet to adopt UFADAA, it is still necessary to account for digital assets in estate planning documents.