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Financial Planning > Trusts and Estates

Why So Many Estate Plans Are Out of Date: Jamie Hopkins

By John Manganaro

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More clients are calling on financial advisors to assist with estate and legacy planning issues, and while that presents an opportunity for deeper connections and added value, there are also some big risks and potential complications to consider.

In fact, in the experience of Jamie Hopkins, the financial planning expert and attorney heading Bryn Mawr Trust’s private wealth management business, there is one area in particular in which most people’s estate plans are woefully out of date — even when they are working with skilled advisors and attorneys.

Specifically, few people are planning adequately for the ownership transition of valuable digital assets, which can range from social media profiles, digital artwork and personal websites to online-only businesses and cryptocurrencies. When it comes to such planning, all the usual complexities of traditional estate planning are present, but they are deepened by the evolving and often murky rules of the digital world.

Hopkins made this case in a video posted recently to his profile on LinkedIn, during which he urged advisors and their clients to think carefully about the challenges that come with the access, ownership and transferability of digital assets.

What’s the Digital Estate Planning Issue?

Most Americans own some form of digital assets, Hopkins said, and their digital property tends to expand and evolve rapidly over time. For example, even taking to LinkedIn and posting a short commentary video involves the creation of a digital asset, although its monetary value is debatable. And then there are more substantial digital creations to consider, such as lucrative social media profiles or a successful online vendor.

Despite this, most trust documents, powers of attorney and wills have not been updated since the creation nearly a decade ago of a set of rules created under RUFADAA, or the Revised Uniform Fiduciary Access to Digital Asset Act.

“The reality is that this law started coming into existence about a decade-plus ago,” Hopkins noted, “and it’s been passed, or a version of it, in most states.”

RUFADAA requires estate planning documents, including wills and powers of attorney, to be very specific with the language used in giving various parties access to or ownership of such digital assets upon the original owner’s death.

“This is something that is out of a lot of people’s minds,” Hopkins warned. “We don’t think about it when creating our estate, but the reality is that there is a lot of risk with not doing this properly.”

The Complexity Challenge

As Hopkins observed, digital assets in themselves can be very complex when it comes to seemingly simple questions about ownership, asset location and valuation.

“Think about websites and businesses built online,” Hopkins said. To begin with, simply defining the “location” of these assets can be murky, with questions to be asked about where taxes might be due to more direct issues about passwords and user names.

Even the question of ownership can be fraught, Hopkins warned.

“Who owns these? That actually comes down to an interesting question,” Hopkins warned.

There are some cases in which people find that they might, under the law, have only a lifetime lease on an asset they created. This could apply, for example, to a far-reaching social media account or other platform-based “asset” that generates meaningful income for the original creator.

Business continuity is another big question, Hopkins said, as are the risks of fraud and theft.

If people own and operate a website personally, can they transfer that to a business they might also own upon death? Or to a trust? Things can get really mixed and messy, especially in the small business context, Hopkins warned.

Mind the Terms of Service

To help clients think through these issues, Hopkins said, a good place to start is by reviewing terms of service agreements that apply to potentially valuable digital assets to be passed to an heir or a charity upon death.

“These are those things you click right through when setting up something and you don’t read them,” Hopkins explained. “These often set the terms of transferability of your digital assets. … Those often are binding contracts that set forth whether or not we actually have ownership.”

Hopkins closed the video with the following 10-step checklist for crafting a proper digital estate plan:

  1. Start by identifying any digital assets of value and documenting what they are.
  2. Locate these assets and understand where they sit online. What are the websites?
  3. Track and securely document all important access information, such as log-ins and passwords.
  4. Determine potential valuations.
  5. Prioritize the range of owned digital assets. For example, a private profile will not matter as much as a high-traffic commerce website.
  6. Next, determine actual ownership according to terms of service and applicable laws and regulations.
  7. Come up with a disposition plan. If an asset can transfer, does the client even want to leave it to someone? Or maybe the client wants an executor to shut it down or delete certain assets upon death.
  8. Update all legal documents as needed according to state and federal law.
  9. Inform all interested parties, including heirs and businesses.
  10. Make a plan to regularly revisit and update this work over time.

Pictured: Jamie Hopkins

John Manganaro

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