Plan ahead: protect your #digitalfootprint.

• Author: Klein, Sasha A.
• Position: Tax Law

As the world turns paperless, digital assets have become the new norm. There are over 2.4 billion users of the Internet worldwide, up 566 percent since 2000. (2) Among Americans, 85 percent of adults and 95 percent of teenagers use the Internet. (3) Of those Americans, two-thirds of them engage in social media, e.g., Facebook, LinkedIn, or Twitter, which absorbs more than 25 percent of all time spent online. More than 50 percent of American seniors are online. (4) And, a surprising 92 percent of children under the age of two have a digital presence. (5)

Despite the fact that the world's digital footprint is extensive, planning for digital assets is limited. Further, digital assets are constantly changing and growing. Unfortunately, such growth is outpacing existing state and federal laws governing digital assets. Moreover, online service providers each have their own terms of service (TOS) agreements, and they are not uniform. Surrounded by an unpredictable and evolving legal landscape, it is important for clients to be aware of potential issues that may arise with respect to their digital footprint and to plan accordingly.

What are Digital Assets?

Digital assets are information created, generated, sent, communicated, received, or stored by electronic means on a system for the delivery of digital information or on a digital device. A digital asset, thus, is any item of text or media formatted into a binary source that includes the right to use it--think electronic record. (6)

Digital Assets: Real Value

According to a global survey conducted in 2014 by McAfee, the average person has digital assets worth approximately $35,000. (7) Even though digital assets may not be the most valuable assets for clients, they can be some of the most cherished, e.g., the family's digital photos, videos, personal blogs, information stored on social media sites, and email accounts. Nevertheless, some digital assets have substantial monetary value. For example, real estate in the virtual world "Entropia Universe" sold for $650,000; the domain name fun.com sold for approximately $10 million; and OkCoin, the largest Bitcoin exchange, transacted close to 1.9 million bitcoins (over $1 billion) in September 2014. (8) Like other property, digital assets need to be managed during life and protected after death or incapacity.

Obstacles to Access by Fiduciaries

In the modern world, digital assets have largely replaced tangible ones. Documents are stored in electronic files instead of in file cabinets. Photographs are uploaded to websites instead of printed on paper. Stacks of letters are now email folders. However, the laws governing fiduciary access to these digital assets are scarce and outdated. Even if a fiduciary can determine what digital assets are held by the account holder, the fiduciary may not be able to access the digital assets. The following are three obstacles facing a fiduciary:

* Passwords and Encryption--The initial hurdle for most fiduciaries is encryption. This safety buffer can usually be solved by knowing the password. But fiduciaries rarely have passwords, and without one, many online service providers will not grant access to the fiduciary, nor are they required by law to release contents or provide access. Service providers may, in certain circumstances, voluntarily provide some content to the fiduciary; however, such a decision is entirely within their discretion. Even in the rare event a fiduciary has the password, he or she still may want to pause before accessing the online account because such action could result in criminal liability.

* Federal and State Laws--All 50 states have criminal laws prohibiting unauthorized access to digital assets, but only seven states have enacted statutes governing digital assets. (9) Numerous other states have proposed legislation or are in the process of drafting legislation, including Florida. All seven of the existing state statutes grant a fiduciary access to digital assets and eliminate state criminal liability, but there is no uniformity with respect to how they treat digital assets (e.g., types of digital assets covered, whether death or incapacity is covered, and the rights and type of fiduciary covered).

Federal law is...