The rise of digital assets – encompassing everything from online accounts and social media profiles to cryptocurrency and cloud-based subscriptions – presents a novel challenge for estate planning. Traditionally, testamentary trusts were designed to manage tangible property like real estate, stocks, and bonds. Now, these trusts must adapt to accommodate intangible digital holdings, which often lack the physical form associated with traditional assets. A testamentary trust is created through a will and takes effect upon death, making pre-death access and management more complex. Approximately 70% of adults now have some form of digital asset, yet less than 20% have addressed them in their estate plans (Source: Estate Planning Magazine, 2023). This discrepancy highlights a growing need for clarity and specific provisions within testamentary trusts to ensure these assets are properly managed and distributed according to the testator’s wishes. A key consideration is the often-restrictive Terms of Service agreements that govern these accounts, which may prohibit access or transfer upon death.
What legal authority does a trustee have over digital assets?
Establishing clear legal authority is paramount. Many state laws, like the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA), aim to provide trustees with the legal right to access and manage digital assets, but it isn’t universally adopted, and even when it is, interpretations can vary. RUFADAA generally prioritizes the account owner’s instructions – meaning, if the testator explicitly outlined how their digital assets should be handled in their will or through separate digital asset instructions, those wishes should be followed. However, even with RUFADAA, a trustee may still face hurdles from platform-specific terms of service. It is crucial for estate planning attorneys, like those at Steve Bliss Law, to draft trust provisions that specifically address digital assets, granting the trustee broad, yet defined, authority to manage them. This includes the ability to create, access, manage, and ultimately distribute these assets, as well as the authority to consent to the platform’s terms of service on behalf of the estate. Without such explicit authority, a trustee could face legal challenges or be unable to access valuable digital holdings.
Can a testamentary trust really manage something with no physical form?
Managing intangible assets requires a shift in thinking for both estate planners and trustees. While a traditional trust might oversee the sale of a property, a testamentary trust dealing with digital assets may need to handle ongoing subscriptions, maintain social media accounts (perhaps as a memorial), or manage cryptocurrency wallets. This often requires creating a detailed “digital asset inventory” – a comprehensive list of all online accounts, usernames, passwords, and instructions for accessing and managing them. Steve Bliss Law emphasizes the importance of secure storage for this inventory, recommending encrypted digital vaults or securely stored physical documents. The inventory should also specify the desired outcome for each asset – whether it should be transferred to a beneficiary, closed, or maintained. For cloud-based subscriptions, the trustee might need to transfer ownership of the account, change the billing information, or simply cancel the subscription. The trustee’s duties extend to ensuring the security of these assets, protecting against hacking, and complying with relevant data privacy laws.
What happens if a platform’s terms of service prohibit access after death?
This is a frequent and significant challenge. Many platforms, like Facebook or Google, have terms of service that explicitly prohibit access to an account after the account holder’s death, or severely restrict it. While RUFADAA attempts to override these restrictions in some cases, it’s not always successful, and platforms often prioritize their own terms. One strategy is to utilize “legacy contacts” – individuals designated by the account holder to manage their accounts after death. However, legacy contacts typically have limited authority and may only be able to memorialize the account or download data. A proactive approach involves documenting the testator’s wishes regarding each platform and attempting to negotiate with the platform provider before death. For example, a client once expressed a strong desire to have their online gaming account maintained as a memorial for their grandchildren. We documented this wish in their trust and, upon their passing, successfully negotiated with the gaming company to preserve the account for a specified period. It’s also vital to understand that simply changing a password does not transfer ownership or grant access to the account.
What about cryptocurrency within a testamentary trust?
Cryptocurrency presents unique complexities. Unlike traditional assets, cryptocurrency is not held by a central institution, making it more difficult to locate and control. The trustee must have a thorough understanding of how to access and manage cryptocurrency wallets, private keys, and exchanges. Security is paramount, as cryptocurrency wallets are vulnerable to hacking and theft. Steve Bliss Law often recommends using multi-signature wallets, requiring multiple approvals for any transaction, and storing private keys offline in a secure location. The trustee must also be aware of tax implications associated with cryptocurrency, as it is treated as property for tax purposes. A key challenge is ensuring the trustee has the technical expertise to manage these assets effectively. If they lack that expertise, it may be necessary to appoint a co-trustee or engage a specialist to assist with cryptocurrency management.
How can a trustee prove they have the right to access these accounts?
Providing adequate proof of authority is critical. Simply stating they are the trustee is rarely sufficient. Platforms typically require documentation such as a copy of the trust document, a death certificate, and a court order granting the trustee authority to access the account. Some platforms may also require a sworn affidavit or other legal documentation. Steve Bliss Law prepares “digital asset access letters” for our clients, which summarize the trustee’s authority and provide the necessary documentation to present to platform providers. It’s also essential to maintain a clear audit trail of all access attempts and transactions. This includes documenting the date, time, and purpose of each access attempt, as well as any communications with platform providers. A thorough record-keeping system can help protect the trustee from liability and ensure transparency in the administration of the trust.
What if the testator didn’t create a digital asset inventory?
This is a common scenario, and it significantly complicates the trustee’s job. Without a clear inventory, the trustee must undertake a diligent search to locate all of the testator’s digital assets. This may involve reviewing bank statements, email accounts, social media profiles, and other online records. It’s often a time-consuming and challenging process, and it may not be possible to locate all of the assets. One client, a retired professor, was meticulous about his physical belongings but completely disregarded his digital footprint. After his passing, his family discovered numerous online accounts with unclaimed funds and valuable digital content. It took months to locate and secure these assets, and some were ultimately lost due to inactivity. This highlights the importance of proactive estate planning and the creation of a comprehensive digital asset inventory.
Can a testamentary trust handle ongoing cloud subscriptions?
Yes, but it requires careful planning. Cloud subscriptions, such as streaming services or software licenses, can be transferred to beneficiaries or maintained for their use. The trustee must ensure that the billing information is updated and that the subscriptions are properly managed. Some platforms may allow for account transfer, while others may require the creation of a new account. It’s also important to consider the terms of the subscription agreement, as some may prohibit transfer or cancellation after death. A well-drafted trust should outline the trustee’s authority to manage these subscriptions and provide clear instructions for their disposition. The trustee must also be mindful of data privacy concerns and ensure that the beneficiary’s personal information is protected.
What if the testator wanted their social media accounts deleted?
Respecting the testator’s wishes is paramount. Most social media platforms have procedures for deleting a deceased user’s account. The trustee must provide a death certificate and other documentation to verify their authority to request deletion. It’s also important to notify the platform of the testator’s wishes and follow their specific instructions. However, some platforms may require a court order before granting deletion. A well-drafted trust should clearly state the testator’s wishes regarding their social media accounts and authorize the trustee to take the necessary steps to fulfill those wishes. The trustee must also be mindful of any legal or ethical obligations related to preserving or deleting online content.
About Steven F. Bliss Esq. at San Diego Probate Law:
Secure Your Family’s Future with San Diego’s Trusted Trust Attorney. Minimize estate taxes with stress-free Probate. We craft wills, trusts, & customized plans to ensure your wishes are met and loved ones protected.
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Feel free to ask Attorney Steve Bliss about: “How do I transfer my business into a trust?” or “How long does the probate process take in San Diego County?” and even “Should I name a bank or institution as trustee?” Or any other related questions that you may have about Trusts or my trust law practice.