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What (and why) you need to know about digital estate planning

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Although your clients have physical addresses, some of them really live in the cloud. Their financial accounts and transactions, part or all of their social lives, communications, photo and video archives — almost every activity is conducted and stored online. If they could upload their consciousness to the Web, at least a few of them probably would hit the submit button.

Clients’ digital presence will vary, of course, but it’s likely that most of your retirement planning clients go online. Many of these activities will take place on password-protected sites, which naturally raises the question of gaining access to the client’s accounts if he or she becomes incapacitated or dies.

That’s not a new issue: Providing heirs or executors access to financial accounts with a power of attorney or other authorization is standard estate planning. But online accounts require additional planning, because each site’s terms of service can differ significantly from others. The terms govern access to users’ accounts and those terms can effectively block third parties. A lack of uniform federal and state-level regulations compounds the dilemma. William Bissett, CFP with Secrest Blakey & Associates in Charlotte, North Carolina, points out that the federal legislation that covers access to digital assets was passed in 1986 and is arguably outdated. Consequently, digital access is a problem that will grow in magnitude as the Web and online services integrate themselves more tightly into clients’ lives.

Who’s in charge here?

The issue gained national attention in late 2004, when the family of a Marine killed in Falluja tried to access his Yahoo email account. According to a report published on at the time, Yahoo’s terms of service “…require the company not to disclose private email communications for its users. Yahoo will turn over the account to family members only after they go through the courts to verify their identity and relationship with the deceased. After 90 days of inactivity, Yahoo deletes the account.”

Yahoo provided the emails several months later after a probate court ordered them to do so. The case raised awareness, but the access problem still persists and there is no universal federal or state-level remedy. “Some states have enacted laws, but they’re a mishmash of different provisions that were developed independently of each other for the most part,” says Andy Blair, an estate planning and tax attorney with Manning, Fulton & Skinner in Raleigh, North Carolina.

But the digital asset problem goes beyond email. Kelly Pedersen, CFP with Caissa Wealth Strategies in Bloomington, Minnesota observes that online accounts can be linked to financial accounts for payments and funds transfers. If the estate’s administrator cannot close the linked accounts or fails to do so, the linked financial accounts could be vulnerable. Should hackers gain access to the decedent’s eBay or PayPal accounts, for example, they could spend those funds. If the account is linked to a checking account, they could wreak havoc, she adds.


Regulatory efforts

The Uniform Law Commission in Chicago, Illinois developed the Uniform Fiduciary Access to Digital Access Act (UFADAA) in 2014 in an effort to create a national standard. The Act has encountered opposition, however, says Blair, and he believes Delaware is the only state that has enacted a slightly modified version of the Act. Part of that opposition has come from the larger email providers due to concerns over privacy. Various federal statutes protect email communications, he explains, and providers worry that giving executors and other parties unfettered access to email accounts could make them liable for federal law violations.

The more recently proposed Privacy Expectation Afterlife and Choices Act (PEAC) is another piece of legislation that Blair is monitoring. He explains that PEAC’s provisions require that an estate’s executor or administrator go to court and get a court order to gain account access. “It is very specific in requesting that certain specific procedures and instructions be delineated in the judge’s act indemnifying the communications provider against any liability and things like that,” Blair notes. “It’s just much more restrictive.”

Bissett, who has researched digital access extensively, explains that the challenge with PEAC is that while it does give the decedent’s personal representative access, that permission must be clearly stated in the estate documents. “If it’s not, then the personal representative doesn’t get to see the contents of the accounts,” he says. “All they get to do is see the envelope information, who sent it, stamp, basic information — that’s what PEAC does. So, it gives you kind of what you want, access to the content, but only if you plan in advance.”

The problem with that requirement is that most Americans don’t plan their estates, Bissett notes. An estimated 55 percent of adults don’t have wills; among those with wills, it’s unlikely that many know about or have included PEAC-compliant permissions. “[PEAC] does a very good job from the privacy perspective,” he maintains. “The issue is, it ends up penalizing everybody that doesn’t plan. So, the only people that are going to plan are the top 1 percent who the rest of the population hates because they update their estate documents every three to five years.”

Clients can’t always rely on state-level regulations for clarification, either. According to the site, as of mid-June, 19 states have passed or are considering digital assets legislation. Given the lack of a national statute, advisors must review the states’ laws, if any, that apply to their clients.

See also: How to review a will: a 12-point checklist

Steps to take

Despite the regulatory jumble, advisors still can help clients organize their digital affairs. Bissett believes clients’ first step is to insert language into their estate planning documents giving their personal representative access to the contents of their digital accounts. A second step is to rank online accounts in terms of their importance, explain why each account is important, and if the client is willing, have them provide the username and passwords for the accounts.

Pedersen has adopted a similar approach. Her firm works with a local attorney to insert language into estate documents that gives the client’s personal representative power over the deceased’s digital assets. “What we’re trying to do is give that person specific authority via the will or the revocable trust so that they can supersede those (online services’) terms and conditions,” she says.

Organization aids

Clients can also use online services to organize their online lives. Filing sites like Dropbox or Evernote are one option; services specifically created for estate planning purposes are another. Bissett created; other repository and planning sites include and

Steve Stanganelli, CFP with Clear View Wealth Advisors, LLC in Amesbury, Massachusetts, uses Everplans and believes these services can help clients. “Having a place you can use as a repository for all the necessary documents, whether it’s the will or the trusts or the powers of attorney, comes in very handy,” he says. It’s also valuable to have a central repository for online credentials, particularly for family members who often are geographically scattered during a stressful period. There is a potential snag, though: Clients must upload the documents. That takes time, commitment and access to a scanner, in some cases. Stanganelli recognizes that he can’t force clients to complete the task, but he does ask about its status during review meetings.

Having the information available is the critical first step, but Pedersen cautions that the person responsible for managing the client’s post-mortem digital assets must be reliable. “You can put all the best-laid plans on paper, but unless you’ve named the correct person in your life to carry out these details, the best-laid plans could go unplayed,” she notes. “So, I’m trying to coach my clients to really think about who they’re naming in their wills as their personal representative, because it’s not a popularity contest. You want someone that’s going to act upon your wishes and really do it. Otherwise, your digital estate could live on forever.”

Another option is for advisors to store clients’ documents internally. W.J. Rossi, CFP with Koss Olinger in Gainesville, Florida, says that his firm provides that service. Clients give their “trusted person” authorization for Koss Olinger to release the requested document upon request. He cites an example of how that approach can save time. A client had an accident and his wife needed a copy of their power of attorney for health care while he was at the hospital. She contacted her advisor, who sent an electronic copy of the document. “That saved them a lot of hassle so that she could help make medical decisions on his behalf,” says Rossi. “They had that document within minutes instead of days.”