1
ESTATE PLANNING FOR CYBER PROPERTY –
ELECTRONIC COMMUNICATIONS,
CRYPTOCURRENCY, NON-FUNGIBLE TOKENS,
AND THE METAVERSE
Gerry W. Beyer
*
and Kerri Nipp
**
I. I
NTRODUCTION .................................................................................... 6
II. T
YPES OF DIGITAL ASSETS .................................................................. 6
A. Personal ..................................................................................... 7
B. Social Media .............................................................................. 7
C. Financial Accounts .................................................................... 8
D. Business Accounts ..................................................................... 8
E. Domain Names or Blogs ............................................................ 8
F. Loyalty Program Benefits .......................................................... 9
III. I
MPORTANCE OF PLANNING FOR DIGITAL ASSETS .............................. 9
A. To Make Things Easier on Executors and Family Members ..... 9
B. To Prevent Identity Theft ......................................................... 10
C. To Prevent Financial Losses to the Estate .............................. 11
1. Bill Payment and Online Sales.......................................... 11
2. Domain Names .................................................................. 11
3. Encrypted Files ................................................................. 13
4. Virtual Property ................................................................ 13
D. To Avoid Losing the Deceased’s Personal Story ..................... 13
E. To Prevent Unwanted Secrets from Being Discovered ........... 14
F. To Prepare for an Increasingly Information-Drenched
Culture ..................................................................................... 14
IV. O
BSTACLES TO PLANNING FOR DIGITAL ASSETS .............................. 15
A. User Agreements ..................................................................... 15
1. Terms of Service Agreements ............................................ 15
2. Ownership ......................................................................... 16
B. Federal Law ............................................................................ 16
1. Stored Communications Act .............................................. 16
a. In re Facebook, Inc. (Daftary Case) ........................... 17
b. Ajemian v. Yahoo! ..................................................... 17
2. Computer Fraud and Abuse Act ........................................ 18
3. Interface with User Agreements ........................................ 18
C. Safety Concerns ....................................................................... 19
D. Hassle ...................................................................................... 20
* Governor Preston E. Smith Regents Professor of Law, Texas Tech University School of Law
** Principal, Fiduciary Counsel, Bessemer Trust
2 ESTATE PLANNING AND COMMUNITY PROPERTY LAW JOURNAL [Vol. 16:1
E. Uncertain Reliability of Online Afterlife Management
Companies ............................................................................... 20
F. Overstatement of the Abilities of Online Afterlife
Management Companies ......................................................... 20
V. B
RIEF HISTORY OF FIDUCIARY ACCESS TO DIGITAL ASSETS ........... 21
A. Early State Law ....................................................................... 21
1. First Generation ................................................................ 21
2. Second Generation ............................................................ 22
3. Third Generation .............................................................. 22
B. First Attempt at a Uniform Act ................................................ 23
C. Privacy Expectation Afterlife and Choices Act ....................... 24
VI. R
EVISED UNIFORM FIDUCIARY ACCESS TO DIGITAL ASSETS ACT ... 25
A. Definitions ............................................................................... 26
1. Catalogue of Electronic Communication .......................... 26
2. Content of an Electronic Communication ......................... 26
3. Digital Asset ...................................................................... 27
4. Online Tool ....................................................................... 27
B. Applicability ............................................................................ 29
C. Priority of Instructions ............................................................ 29
D. Disclosure Procedures ............................................................ 30
1. Personal Representatives of Estates ................................. 30
a. Contents ...................................................................... 30
b. Catalogue and Other Digital Assets ........................... 31
c. Practical Problems ..................................................... 31
d. Advice ......................................................................... 32
2. Agents Under Powers of Attorney ..................................... 33
a. Contents ...................................................................... 33
b. Catalogue and Other Digital Assets ........................... 33
3. Trustees ............................................................................. 33
a. Trustee Is Original User ............................................. 33
b. Trustee Is Not Original User ...................................... 34
4. Guardians (Conservators) ................................................ 34
E. Custodian’s Response to Request to Disclose Digital
Assets ....................................................................................... 35
1. Timing ............................................................................... 35
2. Notice to User of Request ................................................. 35
3. Method of Custodian’s Disclosure .................................... 35
4. Failure to Disclose ............................................................ 36
5. Custodian Protection ........................................................ 36
F. Duty and Authority .................................................................. 37
VII. P
LANNING SUGGESTIONS .................................................................. 37
A. Take Advantage of Online Tools ............................................. 38
B. Back-Up to Tangible Media .................................................... 38
C. Prepare Comprehensive Inventory of Digital Estate .............. 39
1. Creation ............................................................................ 39
2023] ESTATE PLANNING FOR CYBER PROPERTY 3
2. Storage .............................................................................. 39
D. Provide Immediate Access to Digital Assets ........................... 40
E. Authorize Agent to Access Digital Assets ................................ 40
F. Address Digital Assets in a Will .............................................. 41
1. Disposition of Digital Assets ............................................. 41
2. Personal Representative Access to Digital Assets ............ 42
3. Other Digital Asset Concerns ........................................... 42
G. Place Digital Assets in a Trust ................................................ 43
H. Use Online Afterlife Company ................................................. 44
VIII. C
RYPTOCURRENCY ............................................................................ 46
A. Basics of Cryptocurrency ........................................................ 46
B. Benefits of Cryptocurrency ...................................................... 49
1. Security ............................................................................. 49
2. Privacy .............................................................................. 50
3. Shorter Transfer Delay, Lower Cost, and Finality of
Transfer ............................................................................. 51
C. Risks of Cryptocurrency .......................................................... 52
1. No Recovery Without Private Key or Seed Phrase ........... 52
2. Value Fluctuation .............................................................. 53
3. No Regulation ................................................................... 54
D. Prudent Investment and Fiduciary Concerns .......................... 55
E. Taxation and Classification of Cryptocurrency ...................... 55
F. Recommendations .................................................................... 58
IX. N
ON-FUNGIBLE TOKENS ................................................................... 60
A. What Is a Non-fungible Token? ............................................... 60
B. What Do NFTs Represent? ...................................................... 60
C. How Does a Person Create a NFT? ........................................ 61
D. Why Does a Person Create a NFT? ........................................ 61
E. I Am Still Confused. Are There Old-School Analogies That
May Help Me Understand NFTs? ........................................... 61
F. What Is the Value of a NFT? ................................................... 62
G. What Are Some Examples of Notable NFTs? .......................... 62
H. Other Than Collectibles, What Are Some Other Possible
Uses of NFTs? ......................................................................... 63
I. What Is the First Step I Need to Take Regarding NFTs When
Working with an Estate Planning Client? ............................... 63
J. What Type of Records Should a Client Keep About NFTs? .... 63
K. Is There a Special Concern If the Client Purchases a NFT
with Cryptocurrency? .............................................................. 63
L. Should the Client Consider Holding NFTs in a Business
Entity? ..................................................................................... 64
M. How Should the Client Protect the Information Needed to
Access NFTs? .......................................................................... 64
N. How Should a Client’s Will Address NFTs? ........................... 64
4 ESTATE PLANNING AND COMMUNITY PROPERTY LAW JOURNAL [Vol. 16:1
O. I Am a Personal Representative of a Decedent’s Estate. Can
I Access the Decedent’s NFTs? ............................................... 65
P. I Am a Personal Representative of a Decedent’s Estate. Is
There Anything Special Regarding NFTs About Which I
Should Be Immediately Concerned?........................................ 65
Q. I Am a Trustee. Can I Retain NFTs in a Trust or Invest in
NFTs? ...................................................................................... 65
R. Are There Any Religious-Based Considerations I Need to Keep
in Mind with Respect to NFTs? ............................................... 66
S. If I Plan on Advising Clients About NFTs, Is There Anything
Else You Would Recommend That I Do?................................. 66
T. If My Client Mints NFTs, Are There Any Additional Special
Warnings I Should Provide the Client? ................................... 67
U. Why Should a Charitable Organization Consider Accepting
NFT and Cryptocurrency Donations? ..................................... 67
V. Due to Their Volatile Nature, Is It Risky for Charitable
Organizations to Accept Crypto Assets? ................................. 68
W. How Can a Charitable Organization Accept Crypto
Donations? .............................................................................. 68
X. Are There Any Additional Considerations for Organizations
Wanting to Hold on to Crypto Donations? .............................. 69
Y. Are There Any Specific Reporting Requirements for Crypto
Donations? .............................................................................. 69
Z. How Are Crypto Assets Treated for Accounting Purposes? .... 69
AA. Do Crypto Assets Pose Any ESG Concerns for My
Organization? .......................................................................... 70
BB. Why Should My Client Consider Donating Crypto Assets? .... 70
CC. How Can My Client Receive a Charitable Contribution
Deduction from a Crypto Donation? ....................................... 71
DD. What Type of Crypto Assets Can Be Donated? ....................... 71
EE. What Are Some Future Issues I May Be Asked to Address
About NFTs? ............................................................................ 72
X. M
ETAVERSE ASSETS ......................................................................... 72
A. What Is the Metaverse? ........................................................... 72
B. What Are Some Early Uses of the Metaverse? ........................ 72
C. How Is the Metaverse Expanding Today? ............................... 72
D. Other Than Gaming Assets, What Is a Common Type of
Metaverse Property? ............................................................... 73
E. How Do I Address Metaverse Assets in a Client’s Estate? ..... 73
F. How Do I Address Metaverse Assets Held in Trust? ............... 74
XI. F
UTURE REFORM AREAS ................................................................... 74
A. Providers Gather User’s Actual Preferences .......................... 74
B. Congress Amends Federal Law ............................................... 75
C. States Enact RUFADAA .......................................................... 75
XII. C
ONCLUSION ..................................................................................... 76
2023] ESTATE PLANNING FOR CYBER PROPERTY 5
A
PPENDIX A – DIGITAL ESTATE INFORMATION SAMPLE FORM ................. 77
A
PPENDIX B – SAMPLE DOCUMENT LANGUAGE ........................................ 82
A
PPENDIX C – SAMPLE REQUEST LETTER TO DIGITAL ASSET
C
USTODIAN ......................................................................................... 88
A
PPENDIX D – A PRIMER FOR PROBATE JUDGES ........................................ 90
A
PPENDIX E – SUMMARY OF STATE STATUTES .......................................... 94
6 ESTATE PLANNING AND COMMUNITY PROPERTY LAW JOURNAL [Vol. 16:1
I.
INTRODUCTION
For hundreds of years, we have viewed personal property as falling into
two major categories—tangible (items you can see or hold) and intangible
(items that lack physicality).
1
Recently, a new subdivision of personal
property has emerged that many label as “digital assets.”
2
There is no real
consensus about the property category in which digital assets belong.
3
Some
experts say they are intellectual property, some say they are intangible
property, and still others say they can easily be transformed from one form
of personal property to another with the click of a “print” button.
4
Digital assets may represent a sizeable portion of a client’s estate.
5
A
survey conducted by McAfee, Inc. revealed that the average perceived value
of digital assets for a person living in the United States is $54,722.
6
This Article aims to educate estate planning professionals on the
importance of planning for the disposition and administration of digital assets
so that fiduciaries can locate, access, protect, and properly dispose of them.
7
The operation of the Revised Uniform Fiduciary Access to Digital Assets
Act, now enacted in at least forty-five states, is explained in detail.
8
Several
planning techniques that may be employed are discussed, and the appendices
include sample forms clients may use to organize their digital assets, as well
as sample language that can be used in estate planning documents, court
orders, and request letters to digital asset custodians.
9
The Article also
includes coverage of cryptocurrency and non-fungible tokens (NFTs).
10
II.
TYPES OF DIGITAL ASSETS
The Revised Uniform Fiduciary Access to Digital Assets Act
(RUFADAA) defines “digital asset” as “an electronic record in which an
individual has a right or interest; the term does not include an underlying
asset or liability unless the asset or liability is itself an electronic record.”
11
For purposes of this definition, “electronic” means “relating to technology
1. Gerry W. Beyer & Kerri G. Nipp, Cyber Estate Planning and Administration, SOC. SCI. RSCH.
NETWORK 1, 1, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2166422 (Mar. 30, 2022) [https://
perma.cc/V627-TJUN].
2. Id.
3. Id.
4. Id.
5. Id.
6. Id.; McAfee Reveals Average Internet User Has More Than $37,000 In Under-Protected ‘Digital
Assets’, C
HANNEL ASIA (Sept. 28, 2011), https://www.channelasia.tech/mediareleases/13079/mcafee-
reveals-average-internet-user-has-more/ [https://perma.cc/QJ35-U24E].
7. Beyer & Nipp, supra note 1, at 1.
8. Id.
9. Id.
10. Id.
11. Id.; R
EVISED UNIF. FIDUCIARY ACCESS TO DIGIT. ASSETS ACT § 2 (UNIF. L. COMM’N 2015).
2023] ESTATE PLANNING FOR CYBER PROPERTY 7
having electrical, digital, magnetic, wireless, optical, electro-magnetic, or
similar capabilities,” and “record” means “information that is inscribed on a
tangible medium or that is stored in an electronic or other medium and is
retrievable in perceivable form.”
12
Digital assets can be classified in numerous different ways, and the
types of property and accounts are constantly changing.
13
A decade ago, who
could have imagined the ubiquity of Facebook?
14
Who can imagine what will
replace it in the next few decades?
15
People may accumulate different
categories of digital assets: personal, social media, financial, and business.
16
Although there is some overlap, of course, clients may need to make different
plans for each type of digital asset.
17
A. Personal
The first category includes personal assets stored on a computer, tablet,
smart phone, or other digital device, as well as uploaded onto a website or on
a cloud storage account.
18
These can include treasured photographs or videos
stored on an individual’s hard drive or a photo sharing site such as Tinybeans
or Flickr.
19
Other examples include emails, texts, documents, music playlists,
medical records, tax documents, personal blogs, digital books, online gaming
or gambling assets, avatars, and recordings from home security systems.
20
The list of what a client could potentially own or control is, almost literally,
infinite.
21
B. Social Media
Social media assets involve interactions with other people with accounts
through providers such as Facebook, LinkedIn, X, YouTube, Instagram,
Reddit, Tumblr, and Pinterest.
22
These sites are used not only for messaging
and social interaction, but they also can serve as storage for documents,
photos, videos, and other electronic files.
23
12. Beyer & Nipp, supra note 1, at 1; REVISED UNIF. FIDUCIARY ACCESS TO DIGIT. ASSETS ACT § 2
(U
NIF. L. COMM’N 2015).
13. Beyer & Nipp, supra note 1, at 1.
14. Id.
15. Id.
16. Id.
17. Id.
18. Id.
19. Id.
20. Id. at 1–2.
21. Id. at 2.
22. Id.
23. Id.
8 ESTATE PLANNING AND COMMUNITY PROPERTY LAW JOURNAL [Vol. 16:1
C. Financial Accounts
The most obvious example of financial digital assets are virtual
currencies, which are becoming more prevalent and are addressed in more
detail in Part VIII below.
24
Though some bank and investment accounts have no connection to
brick-and-mortar buildings, most retain some connection to a physical
space.
25
They are, however, increasingly designed to be accessed via the
internet with few, if any, paper records or monthly statements.
26
For example,
an individual can maintain an Amazon.com account, have an eBay account,
be registered with PayPal, and subscribe to online magazines and other media
providers.
27
Many people make extensive arrangements to pay bills online such as
income taxes, mortgages, car loans, credit cards, water, gas, telephone, cell
phone, cable, and trash disposal.
28
These individuals may not receive
traditional paper statements via the United States Postal Service regarding
these accounts.
29
D. Business Accounts
An individual engaged in any type of commercial practice is likely to
store some information on computers.
30
Businesses collect data such as
customer orders and preferences, home and shipping addresses, credit card
data, bank account numbers, and even personal information such as
birthdates and the names of family members and friends.
31
Physicians store
patient information; eBay sellers have an established presence and
reputation.
32
Lawyers might store client files or use a Dropbox.com-type
service that allows a legal team spread across the United States to access
litigation documents through shared folders.
33
E. Domain Names or Blogs
A domain name or blog can be valuable, yet access and renewal may
only be possible through a password or email.
34
24. Id.; see infra Part VII.
25. Beyer & Nipp, supra note 1, at 2.
26. Id.
27. Id.
28. Id.
29. Id.
30. Id.
31. Id.
32. Id.
33. Id.
34. Id.
2023] ESTATE PLANNING FOR CYBER PROPERTY 9
F. Loyalty Program Benefits
In today’s highly competitive business environment, there are numerous
options for customers to make the most of their travel and spending habits,
especially if they are loyal to particular providers.
35
Airlines have created
programs in which frequent flyers accumulate “miles” or “points” they may
use towards free or discounted trips.
36
Some credit card companies offer users
an opportunity to earn “cash back” on their purchases or accumulate points
which the cardholder may then use for discounted merchandise, travel, or
services.
37
Retail stores often allow shoppers to accumulate benefits
including discounts and credit vouchers.
38
Some members of these programs
accumulate a staggering amount of points or miles and then die without
having “spent” them.
39
For example, there are reports that “members of
frequent-flyer programs are holding at least 3.5 trillion in unused miles.”
40
The rules of the loyalty program to which the client belongs play the
key role in determining whether the accrued points may be transferred.
41
Many customer loyalty programs do not allow transfer of accrued points
upon death, but, as long as the beneficiary knows the online login information
of the member, it may be possible for the remaining benefits to be transferred
or redeemed.
42
However, some loyalty programs may view this redemption
method as fraudulent or require that certain paperwork be filed before
authorizing the redemption of remaining benefits.
43
III.
IMPORTANCE OF PLANNING FOR DIGITAL ASSETS
A. To Make Things Easier on Executors and Family Members
When individuals are prudent about their online lives they have many
different usernames and passwords for their digital assets.
44
Each digital asset
may require a different means of access—simply logging onto someone’s
computer generally requires a password, perhaps a different password for
operating system access, and then each of the different files on the computer
may require its own password.
45
Each online account is likely to have its own
35. Id.
36. Id.
37. Id.
38. Id.
39. Id.
40. Id.; Managing Your Frequent-Flyer Miles, GROCO, https://groco.com/article/managing-your-
frequent-flyer-miles/ (last visited Nov. 20, 2023) [https://perma.cc/ZB5Y-7K4C].
41. Beyer & Nipp, supra note 1, at 2.
42. Id.
43. Id.
44. Id. at 3.
45. Id.
10 ESTATE PLANNING AND COMMUNITY PROPERTY LAW JOURNAL [Vol. 16:1
username, password, and security questions and answers.
46
Some devices and
apps have biometric verification, such as fingerprint scanning, iris
recognition, or face recognition.
47
This is the only way to secure identities,
but this devotion to protecting sensitive personal information can wreak
havoc on families and fiduciaries upon incapacity or death.
48
Consider the well-publicized “Ellsworth case.”
49
After Lance Cpl. Justin
Ellsworth was killed in 2004 while serving with the United States Marine
Corps in Afghanistan, his parents began a legal battle with Yahoo! to gain
access to messages stored in his email account.
50
However, the family
remained disappointed when the data CD provided by Yahoo! contained only
received emails and none their late son had written.
51
Had Justin provided
guidance to his family members regarding his digital assets, his family may
have been able to avoid the expense and trouble of going to court, and they
also might have gained access to all the emails they desired to have, rather
than just some.
52
In addition, many individuals no longer receive paper statements or
bills, instead receiving everything via email or by logging on to a service
provider’s online account.
53
Without instructions from a client, locating,
collecting, and monitoring these assets will be a burdensome task for the
client’s family members and fiduciaries.
54
Despite legislation addressing fiduciaries’ ability to access and manage
digital assets (discussed below), the rights of executors, agents, guardians,
and beneficiaries regarding digital assets are still unclear.
55
The more clients
plan in advance for digital assets, the better chance their fiduciaries will have
to be able to efficiently access and administer such assets.
56
B. To Prevent Identity Theft
In addition to needing access to online accounts for personal reasons
and closing probate, family members need this information quickly so that a
deceased’s identity is not stolen.
57
Until authorities update their databases
regarding a new death, criminals can open credit cards, apply for jobs, and
46. Id.
47. Id.
48. Id.
49. Id.
50. Id.; see Stefanie Olsen, Yahoo releases e-mail of deceased Marine, ZDNET (Apr. 21, 2005,
12:39 PM), https://www.zdnet.com/article/yahoo-releases-e-mail-of-deceased-marine/ [https://perma.cc/
V6RG-H5LJ].
51. Beyer & Nipp, supra note 1, at 3; Olsen, supra note 50.
52. Beyer & Nipp, supra note 1, at 3; Olsen, supra note 50.
53. Beyer & Nipp, supra note 1, at 3.
54. Id.
55. Id.; see infra Part VI.
56. Beyer & Nipp, supra note 1, at 3.
57. Id.
2023] ESTATE PLANNING FOR CYBER PROPERTY 11
get state identification cards under a dead person’s name.
58
A fraud
prevention firm by the name of ID Analytics conducted a study in 2012 and
found that approximately 2.5 million deceased Americans have their identity
stolen each year.
59
Criminals know that they have a window of opportunity
when someone passes away, so they search through obituaries and other
death databases to locate new victims.
60
C. To Prevent Financial Losses to the Estate
1. Bill Payment and Online Sales
Electronic bills for utilities, loans, insurance, and other expenses need
to be discovered quickly and paid to prevent cancellations.
61
This concern is
augmented further if the deceased or incapacitated individual conducted an
online business and is the only person with access to incoming orders, the
servers, corporate bank accounts, and employee payroll accounts.
62
2. Domain Names
The decedent may have registered one or more domain names that have
commercial value.
63
If registration of these domain names is not kept current,
they can easily be lost to someone waiting to snag the name upon a lapsed
registration.
64
Here is list of some of the most expensive domain names that
have been sold in recent years:
1. Voice.com $30 million 2019
65
2. 360.co
m
$17 million 2015
66
3. NFTs.com $15 million 2022
67
58. Id.
59. Id.; see Martha C. White, Grave Robbing: 2.5 Million Dead People Get Their Identities Stolen
Every Year, T
IME (Apr. 24, 2012), https://business.time.com/2012/04/24/grave-robbing-2-5-million-
dead-people-get-their-identities-stolen-every-year/ [https://perma.cc/2SM7-WNY4].
60. Beyer & Nipp, supra note 1, at 3.
61. Id.
62. Id.
63. Id. at 4.
64. Id.
65. Id.; Andrew Allemann, Record breaker: Voice.com domain name sells for staggering $30
million, D
OMAIN NAME WIRE (June 18, 2019), https://domainnamewire.com/2019/06/18/record-breaker-
voice-com-domain-name-sells-for-staggering-30-million/ [https://perma.cc/TC69-38KM].
66. Beyer & Nipp, supra note 1, at 4; Doug Young, Qihoo Eyes 360 Brand With Record Domain
Buy, F
ORBES (Feb. 6, 2015, 7:45 AM), https://www.forbes.com/sites/dougyoung/2015/02/06/qihoo-eyes-
360-brand-with-record-domain-buy/?sh=3eaba7c94016 [https://perma.cc/P7P7-QS7D].
67. Beyer & Nipp, supra note 1, at 4; Andrew Allemann, NFTs.com domain sells for whopping $15
million, D
OMAIN NAME WIRE (Aug. 3, 2022), https://domainnamewire.com/2022/08/03/nfts-com-
domain-sells-for-whopping-15-million/ [https://perma.cc/A6WQ-T3CC].
12 ESTATE PLANNING AND COMMUNITY PROPERTY LAW JOURNAL [Vol. 16:1
4. Sex.com $13 million 2010
68
5. Hotels.com $11 million 2001
69
6. Tesla.com $11 million 2016
70
7. AI.com $11 million 2023
71
8. Fund.co
m
$10 million 2008
72
9. Connect.com $10 million 2022
73
10. Porno.co
m
$8.8 million 2015
74
11. Fb.com $8.5 million 2010
75
12. HealthInsurance.com $8.13 million 2019
76
13. We.com $8 million 2014
77
14. iCloud.com $6 million 2011
78
15. Casino.com $5.5 million 2003
79
16. Slots.com $5.5 million 2010
80
68. Beyer & Nipp, supra note 1, at 4; Andrew Allemann, Sex.com is for sale (again), DOMAIN NAME
WIRE (Jan. 18, 2023), https://domainnamewire.com/2023/01/18/sex-com-is-for-sale-again/ [https://perma
.cc/2335-38N4].
69. Beyer & Nipp, supra note 1, at 4; Elliot Silver, BBC: Hotels.com Domain Name Original Bought
for $11 Million, D
OMAININVESTING.COM (Nov. 2, 2012), https://domaininvesting.com/bbc-hotels-com-
domain-name-originally-bought-for-11-million/ [https://perma.cc/L7Y7-64DE].
70. Beyer & Nipp, supra note 1, at 4; Elliot Silver, Elon Musk on What it Took to Acquire Tesla.com,
D
OMAININVESTING.COM (Dec. 9, 2018), https://domaininvesting.com/elon-musk-on-what-it-took-to-
acquire-tesla-com/ [https://perma.cc/UC2X-BP54].
71. Beyer & Nipp, supra note 1, at 4; Nickie Louise, OpenAI buys AI.com for $11 million, making
it one of the top 10 most expensive domains ever sold, T
ECH STARTUPS (Mar. 1, 2023),
https://techstartups.com/2023/03/01/openai-buys-ai-com-for-11-million-making-it-one-of-the-top-10-
most-expensive-domains-ever-sold/ [https://perma.cc/6VUS-WECG].
72. Beyer & Nipp, supra note 1, at 4; Elliot Silver, Fund.com Sold via Media Options,
D
OMAININVESTING.COM (Jan. 11, 2019), https://domaininvesting.com/fund-com-sold-via-media-options/
[https://perma.cc/W33J-8549].
73. Beyer & Nipp, supra note 1, at 4; Andrew Allemann, Hubspot acquired connect.com domain
for $10 million, D
OMAIN NAME WIRE (Aug. 7, 2022), https://domainnamewire.com/2022/08/07/hubspot-
acquired-connect-com-domain-for-10-million/ [https://perma.cc/4TJ9-NHPX].
74. Beyer & Nipp, supra note 1, at 4; Michael Berkens, Rick Schwartz Sells Porno.Com For
$8,888,888: The 4th Highest Reported Domain Sale Of All Time, T
HE DOMAINS (Feb. 2, 2015),
https://www.thedomains.com/2015/02/02/rick-schwartz-sells-porno-com-for-8888888-the-4th-highest-
reported-domain-sale-of-all-time/ [https://perma.cc/RKY6-UYYM].
75. Beyer & Nipp, supra note 1, at 4; Ben Parr, Facebook Paid $8.5 Million to Acquire Fb.com,
M
ASHABLE (Jan. 12, 2011), https://mashable.com/archive/facebook-paid-8-5-million-to-acquire-fb-com
[https://perma.cc/S7JU-UPNU].
76. Beyer & Nipp, supra note 1, at 4; Elliot Silver, Benefytt Technologies Inc. Talks About
HealthInsurance.com, D
OMAININVESTING.COM (Mar. 10, 2020), https://domaininvesting.com/benefytt-
technologies-inc-talks-about-healthinsurance-com/ [https://perma.cc/N6CA-NTUS].
77. Beyer & Nipp, supra note 1, at 4; Joe Styler, The top 25 most expensive domain names,
G
ODADDY (July 14, 2022), https://www.godaddy.com/resources/skills/the-top-20-most-expensive-
domain-names [https://perma.cc/ZHR2-6GBA].
78. Beyer & Nipp, supra note 1, at 4; Styler, supra note 77.
79. Beyer & Nipp, supra note 1, at 4; Styler, supra note 77.
80. Beyer & Nipp, supra note 1, at 4; Styler, supra note 77.
2023] ESTATE PLANNING FOR CYBER PROPERTY 13
17. AsSeenOnTv.com $5.1 million 2000
81
18. Toys.com $5.1 million 2009
82
19. Clothes.com $4.9 million 2008
83
20. Medicare.com $4.8 million 2014
84
3. Encrypted Files
Some digital assets of value may be lost if they cannot be decrypted.
85
Consider the case of Leonard Bernstein who died in 1990 leaving the
manuscript for his memoir entitled Blue Ink on his computer in a
password-protected file.
86
To this day, as far as these authors can ascertain,
no one has been able to break the password and access what may be a very
interesting and valuable document.
87
4. Virtual Property
The decedent may have accumulated valuable virtual property for use
in online games.
88
If monthly usage or subscription fees apply and are not
paid, this virtual property could be lost.
89
Your client may also have the potential of winning large prizes in video
game tournaments.
90
In 2017, reports indicate that over $100 million in
gaming prizes were awarded.
91
D. To Avoid Losing the Deceased’s Personal Story
Many digital assets are not inherently valuable but are valuable to family
members who extract meaning from what the deceased leaves behind.
92
Historically, people kept special pictures, letters, and journals in shoeboxes
or albums for future heirs.
93
Today, this material is stored on computers or
81. Beyer & Nipp, supra note 1, at 4; Joe Uddeme, Most Expensive Domain Names: 25 of the
Highest Domains Ever Sold, N
AMEEXPERTS.COM, https://nameexperts.com/blog/25-of-the-most-
expensive-domain-names-ever-sold/ (last visited Oct. 20, 2023) [https://perma.cc/VQ7Y-S3WR].
82. Beyer & Nipp, supra note 1, at 4; Uddeme, supra note 81.
83. Beyer & Nipp, supra note 1, at 4; Uddeme, supra note 81.
84. Beyer & Nipp, supra note 1, at 4; Uddeme, supra note 81.
85. Beyer & Nipp, supra note 1, at 4.
86. Id.
87. Id.
88. Id.
89. Id.
90. Id.
91. Id.
92. Id.
93. Id.
14 ESTATE PLANNING AND COMMUNITY PROPERTY LAW JOURNAL [Vol. 16:1
online and is often never printed.
94
Personal blogs and X (previously known
as Twitter) feeds have replaced physical diaries, and emails and texts have
replaced letters.
95
Without alerting family members that these assets exist,
and without telling them how to get access to them, the story of the life of the
deceased may be lost forever.
96
This is not only a tragedy for family members
but also possibly for future historians who are losing pieces of history in the
digital abyss.
97
For more active online lives, this concern may also involve preventing
spam from infiltrating a loved one’s website or blog site.
98
Comments from
friends and family are normally welcomed, but it is jarring to discover the
comment thread gradually infiltrated with links for “cheap Ugg boots.”
99
“It’s
like finding a flier for a dry cleaner stuck among flowers on a grave, except
that it is much harder to remove.”
100
In the alternative, family members may
decide to delete the deceased’s website against the deceased’s wishes simply
because those wishes were not expressed to the family.
101
E. To Prevent Unwanted Secrets from Being Discovered
Sometimes people do not want their loved ones discovering private
emails, documents, or other electronic material.
102
They may contain hurtful
secrets, politically incorrect jokes and stories, or personal rantings.
103
Decedents may have a collection of adult recreational material (porn) which
they would not want others to know had been accumulated.
104
A professional,
such as an attorney or physician, is likely to have files containing confidential
client information.
105
Without designating appropriate people to take care of
electronically stored materials, the wrong person may come across this type
of information and use it in an inappropriate or embarrassing manner.
106
F. To Prepare for an Increasingly Information-Drenched Culture
Although the principal concern today appears to be the disposition of
social media and email contents, the importance of planning for digital assets
94. Id.
95. Id.
96. Id.
97. Id. at 4–5.
98. Id. at 5.
99. Id.; Rob Walker, Cyberspace When You’re Dead, N.Y.
TIMES MAG. (Jan. 5, 2011),
https://www.nytimes.com/2011/01/09/magazine/09Immortality-t.html [https://perma.cc/3X8F-29V2].
100. Beyer & Nipp, supra note 1, at 5; Walker, supra note 99.
101. Beyer & Nipp, supra note 1, at 5.
102. Id.
103. Id.
104. Id.
105. Id.
106. Id.
2023] ESTATE PLANNING FOR CYBER PROPERTY 15
will increase each day.
107
Online information will continue to spread out
across a growing array of flash drives, iPhones, and cloud accounts, and it
will be more difficult to locate and accumulate.
108
As people invest more
information about their activities, health, and collective experiences into
digital media the legacies of digital lives grow increasingly important.
109
If a
foundation for planning for these assets is not set today, we may re-learn the
lesson that the Rosetta Stone once taught us: there is no present tense that can
long survive the fall and rise of languages and modes of recordkeeping.
110
IV.
OBSTACLES TO PLANNING FOR DIGITAL ASSETS
Including digital assets in estate plans is a relatively new phenomenon,
and there are several obstacles that make it difficult to plan for them.
111
Some
of the problem areas include user agreements, federal law, safety issues
involved with passwords, the hassle of updating this information, the
uncertainty surrounding online afterlife management companies, and the fact
that some online afterlife management companies overstate their abilities.
112
A. User Agreements
1. Terms of Service Agreements
When an individual signs up for a new online account or service, the
process typically requires an agreement to the provider’s terms of service.
113
Service providers may have policies on what will happen on the death of an
account holder, but individuals rarely read the terms of service carefully, if
at all.
114
Nonetheless, the user is at least theoretically made aware of these
policies before being able to access any service.
115
Anyone who has signed
up for an online service has probably clicked on a box next to an “I agree”
statement near the bottom of a web page or pop-up window signifying
consent to the provider’s terms of service agreement (TOSA).
116
The terms
of these “clickwrap” agreements are typically upheld by the courts.
117
107. Id.
108. Id.
109. Id.
110. Id. (noting the meaning of the Rosetta Stone’s hieroglyphs detailing the accomplishments of
Ptolemy V were lost for fifteen centuries when society neglected to safeguard the path to deciphering the
writings; a Napoleonic soldier eventually discovered the triptych, enabling society to recover its writings).
111. Id.
112. Id.
113. Id.
114. Id.
115. Id.
116. Id.
117. Id.
16 ESTATE PLANNING AND COMMUNITY PROPERTY LAW JOURNAL [Vol. 16:1
For example, at the end of its TOSA, Yahoo! explicitly states that an
account cannot be transferred: “[A]ll Yahoo accounts are non-transferable,
and any rights to them terminate upon the account holder’s death.”
118
2. Ownership
A problem may also arise if the client does not actually own the digital
asset but merely has a license to use that asset while alive.
119
It is unlikely a
person can transfer to heirs or beneficiaries music, movies, and books they
have purchased in electronic form, although they may transfer “old school”
physical records (vinyl), CDs, DVDs, books, etc. without difficulty.
120
It has
been reported that actor Bruce Willis wants to leave his large iTunes music
collection to his children, but Apple’s user agreement prohibits him from
doing so.
121
Apple’s terms and conditions grant the user a license to use their
services but expressly prohibit transfers, making it clear that services “are
licensed, not sold, to you,” and that Apple “grants to you a nontransferable
license.”
122
B. Federal Law
There are two primary federal laws that are relevant in the discussion
regarding a fiduciary’s access to digital assets: (1) the Stored
Communications Act, a federal privacy law, and (2) the Computer Fraud and
Abuse Act, a federal criminal law.
123
1. Stored Communications Act
The Stored Communications Act (SCA) was enacted in 1986 as part of
the Electronic Communications Privacy Act (ECPA).
124
It regulates access to
and disclosure of stored electronic communications and was an effort by
Congress to deal with the consequences of online communications upon
Fourth Amendment privacy protections.
125
The SCA provides for criminal
penalties to be imposed on anyone who “intentionally accesses without
authorization a facility through which an electronic communication service
is provided” or “intentionally exceeds an authorization to access that facility”
118. See id. at 5–6; Yahoo Terms of Service, YAHOO!, https://legal.yahoo.com/us/en/yahoo/terms/
otos/index.html (Oct. 6, 2023) [https://perma.cc/K3EY-TEKC].
119. Beyer & Nipp, supra note 1, at 6.
120. Id.
121. Id.
122. Id.; Apple Media Services Terms and Conditions, A
PPLE, https://www.apple.com/legal/internet-
services/itunes/us/terms.html (Sept. 18, 2023) [https://perma.cc/MNS2-GNCN].
123. Beyer & Nipp, supra note 1, at 6.
124. Id.; 18 U.S.C. §§ 2701–2713.
125. Beyer & Nipp, supra note 1, at 6; 18 U.S.C. §§ 2701–2713.
2023] ESTATE PLANNING FOR CYBER PROPERTY 17
and “thereby obtains, alters, or prevents authorized access to a wire or
electronic communication while it is in electronic storage in such system.”
126
In addition, the SCA prohibits an electronic communication service
provider or a remote computing service provider from knowingly divulging
the contents of a communication that is stored by, carried through, or
maintained on that service unless disclosure is made “with the lawful consent
of the originator or an addressee or intended recipient of such
communication, or the subscriber in the case of remote computing
service.”
127
a. In re Facebook, Inc. (Daftary Case)
The Federal District Court for the Northern District of California
applied the SCA in the Daftary Case where the personal representative of a
decedent’s estate attempted to compel Facebook to turn over contents of the
decedent’s account under the belief that the account held evidence the
decedent did not commit suicide and was instead murdered.
128
The court
noted that under the SCA, lawful consent to disclosure may permit a
custodian to disclose electronic communications, but it does not require such
disclosure, and therefore, Facebook could not be compelled to turn over the
contents.
129
The court specifically declined to decide whether the personal
representatives could provide sufficient “lawful consent” under the SCA, but
it also noted that Facebook could determine on its own that the personal
representative had standing to consent to disclosure and provide the requested
materials voluntarily.
130
b. Ajemian v. Yahoo!
On October 16, 2017, the Supreme Judicial Court of Massachusetts
became the first court to answer the question of whether a personal
representative of a deceased individual may grant “lawful consent” on behalf
of the deceased individual for purposes of the SCA.
131
In a tremendous win
for fiduciaries, the court answered the question in the affirmative, firmly
repudiating the position of service providers that the SCA prohibits such
disclosure.
132
However, the court’s decision echoed the Daftary court’s
sentiment that even with lawful consent from a personal representative, the
SCA does not require Yahoo! to disclose the decedent’s email account
126. Beyer & Nipp, supra note 1, at 6; 18 U.S.C. § 2701(a).
127. Beyer & Nipp, supra note 1, at 6; 18 U.S.C. § 2702(b)(3).
128. Beyer & Nipp, supra note 1, at 6; In re Facebook, Inc., 923 F. Supp. 2d 1204, 1205 (N.D. Cal.
2012).
129. Beyer & Nipp, supra note 1, at 6; In re Facebook, Inc., 923 F. Supp. 2d at 1206.
130. Beyer & Nipp, supra note 1, at 6; In re Facebook, Inc., 923 F. Supp. 2d at 1206.
131. Beyer & Nipp, supra note 1, at 7; Ajemian v. Yahoo!, Inc., 84 N.E.3d 169, 773–74 (2017).
132. Beyer & Nipp, supra note 1, at 7; Ajemian, 84 N.E.3d at 773–74.
18 ESTATE PLANNING AND COMMUNITY PROPERTY LAW JOURNAL [Vol. 16:1
content to the personal representatives; it merely holds that the SCA permits
the disclosure.
133
The court remanded one portion of the case to the probate court to
determine whether the Yahoo! TOSA prevents disclosure.
134
It is anticipated
that the probate court, on remand, will issue an order mandating that Yahoo!
disclose the contents of the account now that the Supreme Judicial Court has
confirmed that the personal representatives may provide Yahoo! with lawful
consent under the SCA.
135
The United States Supreme Court denied Yahoo!’s
petition for a writ of certiorari on March 26, 2018.
136
2. Computer Fraud and Abuse Act
The Computer Fraud and Abuse Act (CFAA) was also enacted by
Congress in 1986.
137
It states that anyone who “intentionally accesses a
computer without authorization or exceeds authorized access” has committed
a crime.
138
A basic violation of the CFAA is a misdemeanor but can become
a felony if done for profit or in furtherance of another crime or tort.
139
The United States Department of Justice (DOJ) asserts that the CFAA
allows the government to charge an individual with a crime for violating the
CFAA if such individual violates the access rules of a service provider’s
TOSA.
140
“This position was stated by Richard Downing, Deputy Chief of
the DOJ’s Computer Crime and Intellectual Property Section, Criminal
Division, in testimony presented on November 15, 2011, before the U.S.
House Committee on Judiciary, Subcommittee on Crime, Terrorism, and
National Security.”
141
However, Mr. Downing also made it clear that the DOJ
is not interested in prosecuting minor violations.
142
3. Interface with User Agreements
Note that both federal statutes described above provide an exception—
if an individual has lawful consent or authorization to access an electronic
communication (SCA) or a computer (CFAA), that individual is not
133. Beyer & Nipp, supra note 1, at 7; Ajemian, 84 N.E.3d at 773–74.
134. Beyer & Nipp, supra note 1, at 7; Ajemian, 84 N.E.3d at 773–74.
135. Beyer & Nipp, supra note 1, at 7.
136. Id.
137. Beyer & Nipp, supra note 1, at 7; 18 U.S.C. § 1030(a).
138. Beyer & Nipp, supra note 1, at 7; see 18 U.S.C. § 1030.
139. Beyer & Nipp, supra note 1, at 7; see 18 U.S.C. § 1030.
140. Beyer & Nipp, supra note 1, at 7.
141. Beyer & Nipp, supra note 1, at 7; Jim Lamm, Two New Cases on Using Computers “Without
Authorization” under the Computer Fraud and Abuse Act, D
IGIT. PASSING (July 18, 2016),
http://www.digitalpassing.com/2016/07/18/new-cases-using-computers-without-authorization-under-
computer-fraud-abuse-act/ [https://perma.cc/36LN-QDFQ].
142. Beyer & Nipp, supra note 1, at 7.
2023] ESTATE PLANNING FOR CYBER PROPERTY 19
committing a crime.
143
However, the issue is that most service providers’
TOSAs prohibit users from granting anyone else access to their accounts.
144
If the user does not have the ability to give lawful consent, then the person
accessing the account is by default exceeding authorized access.
145
Compounding the issue, many providers retain the right to change their
TOSAs at any time and without notice to the user.
146
Therefore, a fiduciary’s
access to an account may be a permitted act one day but become a criminal
act the next just because a service provider makes a change to its TOSA.
147
Neither the SCA nor the CFAA was intended to address fiduciaries’
access to digital assets, but it is easy to see why the statutes have a significant
chilling effect on fiduciaries attempting to access certain digital assets.
148
These statutes are complicated, and their application to emails and social
networking sites has sparked additional confusion.
149
There have been
infinite technological advances since 1986, yet Congress has not updated the
statutes to conform to modern technology.
150
The American College of Trust and Estate Counsel (ACTEC) has
drafted language that would fix both statutes for estate planning purposes.
151
The revisions are simple and include adding a definition to both the SCA and
the CFAA, as well as adding one additional sentence to the SCA.
152
The problem of fiduciary access possibly being in violation of the law
is also an issue in other nations, such as the United Kingdom, where using a
deceased’s username and password could result in the person who gains
access violating the Computer Misuse Act of 1990.
153
C. Safety Concerns
Clients may be hesitant to place all of their usernames, passwords, and
other information in one place.
154
We have all been warned, “Never write
down your passwords.”
155
This document could fall into the hands of the
wrong person, leaving your client exposed.
156
With an online afterlife
143. Id.
144. Id.
145. Id.
146. Id.
147. Id.
148. Id.
149. Id.
150. Id.
151. Id.
152. Id. at 7–8.
153. Id. at 8; The Newsroom, Aileen Entwistle: Safeguarding your online legacy after you’ve gone,
T
HE SCOTSMAN: BUS. (Mar. 30, 2013, 1:10 PM), https://www.scotsman.com/business/aileen-entwistle-
safeguarding-your-online-legacy-after-youve-gone-1582460 [https://perma.cc/8FB4-TD9P].
154. Beyer & Nipp, supra note 1, at 8.
155. Id.
156. Beyer & Nipp, supra note 1, at 8.
20 ESTATE PLANNING AND COMMUNITY PROPERTY LAW JOURNAL [Vol. 16:1
management company or an online password vault, clients may worry that
the security system could be breached, leaving them completely exposed.
157
D. Hassle
Planning for digital assets is an unwanted burden.
158
Digital asset
information is constantly changing and may be stored on a variety of devices
(e.g., desktop computers, laptop computers, smart phones, cameras, iPads,
CDs, DVDs, and flash drives).
159
A client may routinely open new email
accounts, new social networking or gaming accounts, or change
passwords.
160
Documents with this information must be revised, and accounts
at online afterlife management companies must be frequently updated.
161
For
clients who wish to keep this information in a document, advise them to
update the document quarterly and save it to a USB flash drive or on the
cloud, making sure that a family member, friend, or attorney knows where to
locate it.
162
E. Uncertain Reliability of Online Afterlife Management Companies
Afterlife management companies come and go; their life is dependent
upon the whims and attention spans of their creators and creditors.
163
Lack of
sustained existence of all of these companies makes it hard, if not impossible,
to determine whether this market will remain viable.
164
Clients may not want
to spend money to save digital asset information when they are unsure about
the reliability of the companies.
165
F. Overstatement of the Abilities of Online Afterlife Management
Companies
Some of these companies claim they can distribute digital assets to
beneficiaries upon your client’s death.
166
Clients need to understand that
these companies cannot do this legally; the client needs a will to transfer
assets, no matter what kind.
167
Using these companies to store information to
make the probate process easier could be an effective technique, but these
157. Id.
158. Id.
159. Id.
160. Id.
161. Id.
162. Id.
163. Id.
164. Id.
165. Id.
166. Id.
167. Id.
2023] ESTATE PLANNING FOR CYBER PROPERTY 21
companies cannot be used to avoid probate altogether.
168
David Shulman, an
estate planner in Florida, stated that he “would relish the opportunity to
represent the surviving spouse of a decedent whose eBay business was ‘given
away’ by Legacy Locker to an online friend in Timbuktu.”
169
V.
BRIEF HISTORY OF FIDUCIARY ACCESS TO DIGITAL ASSETS
The rights of executors, administrators, agents, trustees, and guardians
to access digital assets of the decedent, principal, beneficiary, or ward has
seen rapid development since California first touched on the issue in 2002.
170
This section briefly discusses prior legislation to help place the current
majority law, RUFADAA, into perspective.
171
A. Early State Law
States began to recognize the need to plan for digital assets and to
provide clarity in this area of the law as early as 2002.
172
This legislation took
a variety of forms and can be divided into different “generations.”
173
1. First Generation
The first-generation statutes only covered email accounts.
174
They did
not contain provisions enabling or permitting access to any other type of
digital asset.
175
California. The first and most primitive first-generation statute was
enacted by California in 2002.
176
It simply provided, “Unless otherwise
permitted by law or contract, any provider of electronic mail service shall
provide each customer with notice at least 30 days before permanently
terminating the customer’s electronic mail address.”
177
In 2016, California
enacted the decedent’s estates and trusts provisions of RUFADAA.
178
Connecticut. Connecticut was one of the first states to address
executors’ rights to digital assets in 2005 with Senate Bill 262, requiring
168. Id.
169. Id.; David Shulman, Estate Planning for Your Digital Life, or, Why Legacy Locker Is a Big Fat
Lawsuit Waiting to Happen, G
INSBERG SHULMAN ATT’YS AT L. (Mar. 20, 2009), https://www.ginsberg
shulman.com/blog/estate-planning-for-your-digital-life-or-why-legacy-locker-is-a-big-fat-lawsuit-waitin
g-to-happen/ [https://perma.cc/9LKG-969L].
170. Beyer & Nipp, supra note 1, at 8.
171. Id.
172. Id. at 9.
173. Id.
174. Id.
175. Id.
176. Id.
177. Id.; C
AL. BUS. & PROF. CODE § 17538.35 (West 2010).
178. Beyer & Nipp, supra note 1, at 9.
22 ESTATE PLANNING AND COMMUNITY PROPERTY LAW JOURNAL [Vol. 16:1
“electronic mail providers” to allow executors and administrators “access to
or copies of the contents of the electronic mail account” of the deceased upon
a showing of the death certificate and a certified copy of the certificate of
appointment as executor or administrator or by court order.
179
The bill
specifically defined “electronic mail service providers” as “sending or
receiving electronic mail” on behalf of end-users.
180
In 2016, Connecticut
enacted RUFADAA.
181
Rhode Island. In 2007, Rhode Island passed the Access to Decedents’
Electronic Mail Accounts Act, requiring “electronic mail service providers”
to provide executors and administrators “access to or copies of the contents
of the electronic mail account” of the deceased upon showing of the death
certificate and certificate of appointment as executor or administrator or by
court order.
182
In 2019, Rhode Island enacted RUFADAA.
183
2. Second Generation
Indiana. Perhaps in acknowledgement of changing technological times
and the need to address more than just email accounts, Indiana enacted a
second-generation statute in 2007, which required custodians of records
“stored electronically” regarding or for Indiana-domiciled decedents to
release such records upon request to the personal decedent’s personal
representative.
184
3. Third Generation
Third-generation legislation (enacted in Oklahoma, Idaho, Nevada, and
Louisiana) acknowledged the changes to the digital asset landscape and
expressly recognized social networking and microblogging as digital
assets.
185
Oklahoma. In 2010, Oklahoma enacted legislation with a fairly broad
scope, giving executors and administrators “the power . . . to take control of,
conduct, continue, or terminate any accounts of a deceased person on any
social networking website, any microblogging or short message service
website or any e-mail service websites.”
186
Idaho. On March 26, 2012, Idaho amended its Uniform Probate Code
to enable personal representatives and conservators to “[t]ake control of,
179. Id.; S.B. 262, 2005 Leg., Reg. Sess. (Conn. 2005) (codified at CONN. GEN. STAT. § 45a-334a
(2012)).
180. Beyer & Nipp, supra note 1, at 9.
181. Id.
182. Id.; 33 R.I.
GEN. LAWS § 33-27-3 (2012).
183. Beyer & Nipp, supra note 1, at 9.
184. Id.; I
ND. CODE § 29-1-13-1.1 (2016).
185. Beyer & Nipp, supra note 1, at 9.
186. Id.; O
KLA. STAT. tit. 58, § 269 (2012).
2023] ESTATE PLANNING FOR CYBER PROPERTY 23
conduct, continue or terminate any accounts of the decedent on any social
networking website, any microblogging or short message service website or
any e-mail service website.”
187
Nevada. In 2013, Nevada enacted Nevada 2013 Session Laws chapter
325 authorizing a personal representative to direct the termination of, but not
access to, email, social networking, and similar accounts.
188
Nevada adopted
RUFADAA in 2017.
189
Louisiana. In 2014, Louisiana granted succession representatives the
right to obtain access or possession of a decedent’s digital accounts within
thirty days after receipt of letters.
190
The statute attempts to trump contrary
provisions of service agreements by deeming the succession representative
to be an authorized user who has the decedent’s lawful consent to access and
possess the accounts.
191
B. First Attempt at a Uniform Act
As the years passed, state legislation became increasingly
comprehensive, but the laws also became more and more different from one
another.
192
The conflicting laws were compounding the issues as questions
arose regarding which state’s law should apply.
193
The National Conference
of Commissioners on Uniform State Laws (NCCUSL) recognized the need
for a uniform act to address fiduciary access to digital assets and to provide
uniformity among the states.
194
Many states that were considering legislation
stopped in their tracks when the NCCUSL announced it would be drafting a
uniform act in 2012.
195
In the beginning, the NCCUSL was working with representatives of
Facebook and industry trade associations to develop the model act, but they
parted ways and each started working on a separate model act.
196
The
NCCUSL was the first to introduce its act, which it approved as the Uniform
Fiduciary Access to Digital Assets Act (UFADAA) on July 29, 2014.
197
The
goal of UFADAA was to resolve as many of the impediments to fiduciary
access to and management of digital assets as possible by reinforcing the
notion that the fiduciary steps into the shoes of the accountholder and should
187. Beyer & Nipp, supra note 1, at 9; S.B. 1044, 61st Leg., Reg. Sess. (Idaho 2011).
188. Beyer & Nipp, supra note 1, at 9; N
EV. REV .STAT. § 1524 (2013).
189. Beyer & Nipp, supra note 1, at 9.
190. Beyer & Nipp, supra note 1, at 10; L
A. CIV. CODE ANN. art. 3191 (2023).
191. Beyer & Nipp, supra note 1, at 10; L
A. CIV. CODE ANN. art. 3191.
192. Beyer & Nipp, supra note 1, at 10.
193. Id.
194. Id.
195. Id.
196. Id.
197. Id.
24 ESTATE PLANNING AND COMMUNITY PROPERTY LAW JOURNAL [Vol. 16:1
be able to do everything with the account that the accountholder could have
done.
198
Delaware was the only state to enact a version of UFADAA.
199
Delaware’s version of the law was based off of a draft version of the model
act prior to it being finalized, but the NCCUSL considered it “close enough”
and designated it an enactment of the model act.
200
After Delaware’s
enactment, twenty-six other states introduced the act, but it froze in all states
due to massive opposition from the technology industry and privacy
advocates.
201
Various online service providers, civil liberties
organizations, and state bar sections voiced their concerns about UFADAA
to state legislators and governors.
202
Their primary concerns were that
UFADAA resulted in an invasion of privacy, conflicted with the SCA, and
included an improper override of the service providers’ TOSAs.
203
C. Privacy Expectation Afterlife and Choices Act
In response to UFADAA, NetChoice, an association of internet
companies that includes Google and Facebook, released its model act entitled
the Privacy Expectation Afterlife and Choices Act (PEAC).
204
[PEAC required] companies to disclose contents only when a court finds
that the user is deceased, and that the account in question has been clearly
linked to the deceased. Additionally, the request for disclosure must be
“narrowly tailored to effect the purpose of the administration of the estate,”
and the executor demonstrates that the information is necessary to resolve
the fiscal administration of the estate. And even then, the amount of
information is further restricted to the year preceding the date of death. This
is stringent guidance meant to protect the privacy of those who
communicated with the user while also ensuring that their loved ones can
access important financial statements that may be delivered to the
account.
205
A modified version of PEAC was enacted in Virginia, effective as of
July 1, 2015.
206
Virginia’s version of PEAC was later repealed and replaced
198. Id.
199. Id.; see D
EL. CODE ANN. tit. 12, §§ 5001–5007 (2015).
200. Beyer & Nipp, supra note 1, at 10.
201. Id.
202. Id.
203. Id.
204. Id.
205. Alethea Lange, Everybody Dies: What is Your Digital Legacy?, C
TR. FOR DEMOCRACY & TECH.:
PRIV. & DATA (Jan. 23, 2015), https://cdt.org/insights/everybody-dies-what-is-your-digital-legacy/
[https://perma.cc/HM9C-L7H9].
206. Beyer & Nipp, supra note 1, at 10.
2023] ESTATE PLANNING FOR CYBER PROPERTY 25
by RUFADAA.
207
It was introduced in California and Oregon, and New York
introduced a bill that incorporated some provisions from PEAC.
208
None of
these bills were enacted, and PEAC flatlined as well, primarily due to its
inadequacies (it only addressed personal representatives of estates and did
not address other fiduciaries) and the fact that it was unworkable for
fiduciaries (e.g., requiring personal representatives to get a court order if
access was needed).
209
VI.
REVISED UNIFORM FIDUCIARY ACCESS TO DIGITAL ASSETS ACT
In response to the overwhelming failure of both model acts, service
providers and the NCCUSL entered negotiations to find a compromise.
210
The result was the NCCUSL approving the Revised Uniform Fiduciary
Access to Digital Assets Act (RUFADAA) at its July 2015 Annual
Conference.
211
This revision is a substantial rewrite with significant changes
in presumptions and procedures.
212
Unlike the original UFADAA, which granted fiduciaries presumptive
authority to access digital assets, RUFADAA places great emphasis upon
whether the deceased or incapacitated user expressly consented to the
disclosure of the content of the digital assets, either through what
RUFADAA refers to as an “online tool” or an express grant of authority in
the user’s estate planning documents or power of attorney. Hence,
RUFADAA respects the concept of “lawful consent” under the SCA, and,
unlike UFADAA, does not attempt to impute such lawful consent to the
fiduciary.
213
As of December 3, 2023, RUFADAA has been enacted in forty-five
states, the District of Columbia, and the United States Virgin Islands:
Alabama, Alaska, Arizona, Arkansas, Colorado, Connecticut, Florida,
Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Maine,
Maryland, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska,
Nevada, New Hampshire, New Jersey, New Mexico, New York, North
Carolina, North Dakota, Ohio, Oregon, Pennsylvania, Rhode Island, South
Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia,
Washington, West Virginia, Wisconsin, and Wyoming.
214
207. Id.
208. Id.
209. Id. at 10–11.
210. Id. at 11.
211. Id.
212. Id.
213. Michael D. Walker, The New Uniform Digital Assets Law: Estate Planning and Administration
in the Information Age, 52 R
EAL PROP., TR. & EST. L. J. 51, 59 (2017).
214. Beyer & Nipp, supra note 1, at 11.
26 ESTATE PLANNING AND COMMUNITY PROPERTY LAW JOURNAL [Vol. 16:1
California enacted the decedent’s estates and trusts provisions of
RUFADAA in 2016.
215
NCCUSL, however, does not consider this legislation
sufficiently complete to be treated as a RUFADAA enactment because it does
not cover powers of attorney or conservatorships where the principal or
conservatee is still alive.
216
As of December 3, 2023, RUFADAA was pending in Massachusetts.
217
A. Definitions
Section 2 of RUFADAA defines key terms, the most important of which
include:
1. Catalogue of Electronic Communication
The “catalogue” includes “information that identifies each person with
which a user has had an electronic communication, the time and date of the
communication, and the electronic address of the person.”
218
For emails, this
would include a list of when emails were sent or received and the email
addresses involved, but it would not include any of the text of the email or
the subject line.
219
2. Content of an Electronic Communication
The “content” includes “information concerning the substance or
meaning of the communication which: (A) has been sent or received by a
user; (B) is in electronic storage by a custodian . . . ; and (C) is not readily
accessible to the public.”
220
This would include the actual substance or text
of an electronic message that is not accessible to the public.
221
If the
electronic message was accessible by the public, it would not be subject to
the federal privacy protections under the SCA and would not be defined as
“content” pursuant to RUFADAA.
222
An example of an electronic
215. Id.
216. Id.
217. See id.; Fiduciary Access to Digital Assets Act, Revised, U
NIF. L. COMM’N, https://www.uniform
laws.org/committees/community-home?CommunityKey=f7237fc4-74c2-4728-81c6-b39a91ecdf22 (last
visited Sept. 22, 2023) [https://perma.cc/P45T-E32K].
218. Beyer & Nipp, supra note 1, at 11; R
EVISED UNIF. FIDUCIARY ACCESS TO DIGIT. ASSETS ACT
§ 2(4) (UNIF. L. COMM’N 2015).
219. Beyer & Nipp, supra note 1, at 11; see R
EVISED UNIF. FIDUCIARY ACCESS TO DIGIT. ASSETS
ACT § 2(4) (UNIF. L. COMM’N 2015).
220. Beyer & Nipp, supra note 1, at 11; R
EVISED UNIF. FIDUCIARY ACCESS TO DIGIT. ASSETS ACT
§ 2(6) (UNIF. L. COMM’N 2015).
221. Beyer & Nipp, supra note 1, at 11; see R
EVISED UNIF. FIDUCIARY ACCESS TO DIGIT. ASSETS
ACT § 2(6) (UNIF. L. COMM’N 2015).
222. Beyer & Nipp, supra note 1, at 11; see R
EVISED UNIF. FIDUCIARY ACCESS TO DIGIT. ASSETS
ACT § 2(6) (UNIF. L. COMM’N 2015).
2023] ESTATE PLANNING FOR CYBER PROPERTY 27
communication that would not fall under this definition is a “tweet” by a X
user that is accessible to the general public.
223
3. Digital Asset
A “digital asset” is defined in RUFADAA as “an electronic record in
which an individual has a right or interest.”
224
A digital asset “does not
include an underlying asset or liability unless the asset or liability is itself an
electronic record.”
225
“Electronic” means “relating to technology having
electrical, digital, magnetic, wireless, optical, electromagnetic, or similar
capabilities,” and “record” means “information that is inscribed on a tangible
medium or that is stored in an electronic or other medium and is retrievable
in perceivable form.”
226
The term “digital asset” is very broad and encompasses all electronically
stored information, including (a) information stored on a user’s computer and
other digital devices, (b) content uploaded onto websites, (c) rights in digital
property, and (d) records that are either the catalogue or the content of an
electronic communication.
227
4. Online Tool
An “online tool” is “an electronic service provided by a custodian that
allows the user, in an agreement distinct from the TOSA between the
custodian and user, to provide directions for disclosure or nondisclosure of
digital assets to a third person.”
228
This “third person” is referred to as the
“designated recipient” in RUFADAA to clarify that such a named person is
not required to be the fiduciary and is not to be held to the same legal standard
of conduct as a fiduciary.
229
223. Beyer & Nipp, supra note 1, at 11–12; see REVISED UNIF. FIDUCIARY ACCESS TO DIGIT. ASSETS
ACT § 2(6) (UNIF. L. COMM’N 2015).
224. Beyer & Nipp, supra note 1, at 12; R
EVISED UNIF. FIDUCIARY ACCESS TO DIGIT. ASSETS ACT
§ 2(10) (UNIF. L. COMM’N 2015).
225. Beyer & Nipp, supra note 1, at 12; R
EVISED UNIF. FIDUCIARY ACCESS TO DIGIT. ASSETS ACT
§ 2(10) (UNIF. L. COMM’N 2015).
226. Beyer & Nipp, supra note 1, at 12; R
EVISED UNIF. FIDUCIARY ACCESS TO DIGIT. ASSETS ACT
§ 2(11), (22) (UNIF. L. COMM’N 2015).
227. Beyer & Nipp, supra note 1, at 12; R
EVISED UNIF. FIDUCIARY ACCESS TO DIGIT. ASSETS ACT
§ 2 cmt. (UNIF. L. COMM’N 2015).
228. Beyer & Nipp, supra note 1, at 12; R
EVISED UNIF. FIDUCIARY ACCESS TO DIGIT. ASSETS ACT
§ 2 (16) (UNIF. L. COMM’N 2015).
229. Beyer & Nipp, supra note 1, at 12; R
EVISED UNIF. FIDUCIARY ACCESS TO DIGIT. ASSETS ACT
§ 2 cmt. (UNIF. L. COMM’N 2015).
28 ESTATE PLANNING AND COMMUNITY PROPERTY LAW JOURNAL [Vol. 16:1
As of December 2023, not many service providers offer an online
tool.
230
The only three major providers with online tools are Facebook,
Google, and Apple.
231
Google created its Inactive Account Manager in April 2013, long before
any other service provider and long before the promulgation of
RUFADAA.
232
The Inactive Account Manager allows users to control what
happens to emails, photos, and other documents stored on Google sites such
as +1s, Blogger, Contacts and Circles, Drive, Gmail, Google+ Profiles, Pages
and Streams, Picasa Web Albums, Google Voice, and YouTube.
233
The user
sets a period of time after which the user’s account is deemed inactive.
234
Once the period of time runs, Google will notify the individuals that the user
specified and, if the user so indicated, share data with these users.
235
Alternatively, the user can request that Google delete all contents of the
account.
236
Facebook, the world’s most popular online social network, recognized
a need to allow a deceased person’s wall to provide a source of comfort in
2009.
237
In its earliest stages, Facebook’s deceased user policy allowed for
two solutions upon the death of a user: (1) memorialize the account or
(2) delete the account.
238
More options are currently available.
239
The most recent addition to Facebook’s deceased user policy is a true
online tool to designate a “Legacy Contact,” that is, a person designated by a
user to delete the account or look after the user’s account if it is
memorialized.
240
The actions a Legacy Contact can and cannot take are
detailed on Facebook’s website.
241
Apple has also recognized the need to allow access to a deceased
person’s account post-death.
242
Newer Apple iOS versions allow for the
implementation of Legacy Contacts, allowing someone access to your stored
data upon your death.
243
With Apple, the person only needs the access key
you generate when you choose them as the contact and your death
certificate.
244
Once Apple has these two items, they review the request by the
230. Beyer & Nipp, supra note 1, at 12.
231. Id.; How to add a Legacy Contact for your Apple ID, https://support.apple.com/en-us/102631
(last visited Dec. 19, 2023) [https://perma.cc/S5SC-QVNH].
232. Id.
233. Id.
234. Id.
235. Id.
236. Id.
237. Id.
238. Id.
239. Id.
240. Id.
241. Id.
242. How to add a Legacy Contact for your Apple ID, supra note 231.
243. Id.
244. Id.
2023] ESTATE PLANNING FOR CYBER PROPERTY 29
selected person.
245
Apple has also limited the timeframe the designated
person has to access the information to three years after access to the account
has been granted.
246
To add a Legacy Contact with Apple, a person needs (1) a device
running on the appropriate iOS, (2) two-factor authentication, and (3) to be
over age thirteen in the United States.
247
Apple also allows you to remove
your Legacy Contact at any time.
248
More companies will likely soon provide online tool options for users
to maintain control over the access to and disposition of their users’
accounts.
249
B. Applicability
Section 3 of RUFADAA addresses access to digital assets for four
different types of fiduciaries: (1) an agent appointed pursuant to a power of
attorney, (2) a personal representative of a decedent’s estate, (3) a
conservator or guardian, and (4) a trustee of a trust.
250
Once enacted by a
state, RUFADAA applies to these fiduciaries, regardless of whether they
were appointed before, on, or after the effective date of the Act.
251
However,
RUFADAA “does not apply to a digital asset of an employer used by an
employee in the ordinary course of the employer’s business.”
252
For example,
a law firm with an internal email communication system is not subject to the
Act and would not be required to turn over a deceased attorney’s emails to
the executor of such attorney’s estate.
253
C. Priority of Instructions
Section 4 of RUFADAA clarifies the priority given to conflicting
instructions from a user.
254
First priority is given to online tools.
255
If the
online tool allows the user to modify the instructions specified using the
online tool at any given time, the instructions provided using the online tool
will take first priority.
256
245. Id.
246. Id.
247. Id.
248. Id.
249. Id.
250. Id.
251. Id. at 12–13.
252. Id. at 13; R
EVISED UNIF. FIDUCIARY ACCESS TO DIGIT. ASSETS ACT § 3(c) (UNIF. L. COMM’N
2015).
253. Beyer & Nipp, supra note 1, at 13.
254. Id.
255. Id.
256. Id.
30 ESTATE PLANNING AND COMMUNITY PROPERTY LAW JOURNAL [Vol. 16:1
Second priority is given to the user’s instructions in the user’s power of
attorney, will, trust, or other record.
257
If the user has not provided instructions through an online tool or written
record, then the service provider’s TOSA will govern the rights of the user’s
fiduciaries.
258
If the TOSA does not address fiduciaries’ rights (as is often the
case), then RUFADAA’s default rules will be the only remaining option for
the fiduciary.
259
D. Disclosure Procedures
1. Personal Representatives of Estates
Sections 7 and 8 of RUFADAA address disclosure of digital assets to a
personal representative of a deceased user’s estate, with Section 7 focusing
on the disclosure of content within electronic communications and Section 8
concentrating on the disclosure of all other digital assets.
260
a. Contents
If a deceased user consented in the user’s will, or a court issues a
disclosure order, a custodian must disclose the content of an electronic
communication to the personal representative of a deceased user’s estate if
the representative provides:
a written request for disclosure;
a certified copy of the deceased user’s death certificate;
a certified copy of letters testamentary or letters of appointment
proving the representative’s authority; and
a copy of the documentation (typically, the will) in which the user
consented to the disclosure of the content of electronic
communications specifically (if not so provided pursuant to an online
tool).
261
In addition, the custodian may request additional information such as:
information necessary to identify the user’s account;
evidence linking such account to the user; and
a finding by the court that the account actually belonged to the
decedent, the disclosure of the contents would not violate the SCA
257. Id.
258. Id.
259. Id.
260. Id.
261. Id.
2023] ESTATE PLANNING FOR CYBER PROPERTY 31
and other federal laws, the user consented to disclosure, disclosure
is permitted by RUFADAA, and disclosure is reasonably necessary
for estate administration.
262
A sample letter to the custodian of a decedent’s digital asset is included in
Appendix C.
263
b. Catalogue and Other Digital Assets
The requirements for a personal representative to gain access to a
decedent’s catalogue and digital assets other than the content of electronic
communications are less stringent.
264
Unless prohibited by the user or court
order, the personal representative is granted access to the catalogue and
digital assets other than the content by default (upon providing the custodian
with the specified required documentation, which is the same as is required
to access contents under Section 7 except there is no requirement that the
decedent’s will be produced or that the decedent specifically consented to
disclosure).
265
While Section 8 also includes a custodian’s ability to request a court
order, it does not include a reference “to compliance with the SCA because
such non-content disclosures are not prohibited by the SCA.”
266
c. Practical Problems
The ability of a custodian to request a court order under any
circumstance makes access burdensome for personal representatives as well
as the courts.
267
One of this Article’s authors has heard from representatives
of Google and Facebook that they will always require a court order.
268
They
want the security of a court order before releasing any information due to fear
of liability for improper disclosure.
269
The case In re Estate of Serrano is instructive.
270
A husband requested
authority to access his deceased spouse’s Google email, contacts, and
calendar in order to “be able to inform friends of his passing” and “close any
unfinished business, etc.”
271
New York recently enacted its own version of
RUFADAA, so Google, presumably pursuant to such law, requested a
262. Id.
263. See infra Appendix C.
264. Beyer & Nipp, supra note 1, at 13.
265. Id. at 13–14.
266. Id. at 14; Walker, supra note 213, at 63.
267. Beyer & Nipp, supra note 1, at 14.
268. Id.
269. Id.
270. Id.; In re Est. of Serrano, 54 N.Y.S.3d 564, 565 (N.Y. Surr. Ct. 2017).
271. Beyer & Nipp, supra note 1, at 14; In re Est. of Serrano, 54 N.Y.S.3d at 565.
32 ESTATE PLANNING AND COMMUNITY PROPERTY LAW JOURNAL [Vol. 16:1
finding by the court before making any disclosures to the surviving spouse.
272
The court ordered Google to disclose the contacts and calendar information,
finding that such items were not contents of electronic communications
pursuant to the SCA.
273
However, the court stated,
Authority to request from Google disclosure of the content of the decedent’s
email communications—to the extent petitioner requests such authority—
is denied without prejudice to an application by the voluntary
administrator . . . establishing that disclosure of that electronic information
is reasonably necessary for the administration of the estate.
274
While this is not necessarily an unfavorable result for the surviving spouse,
it does indicate that custodians may exercise their rights pursuant to
RUFADAA to request court orders on a regular basis, which (in these
authors’ opinions) goes against the spirit of RUFADAA.
275
Another problem is evident from the Daftary Case discussed above.
276
Courts are likely to be hesitant to make the determination that personal
representatives, by sole virtue of having been appointed as fiduciary, can
offer “lawful consent” pursuant to the SCA to receive the content of
electronic communications.
277
d. Advice
These concerns emphasize the need for a user to expressly consent to
disclosure in the user’s estate planning documents or through an online
tool.
278
Sample will language is provided in Appendix B.
279
Because of the likelihood that a custodian will require a court order
before granting access, include the appropriate language in the earliest
possible pleading in the administration of a deceased user’s estate.
280
Sample
language is provided in Appendix B.
281
272. Beyer & Nipp, supra note 1, at 14; In re Est. of Serrano, 54 N.Y.S.3d at 565.
273. Beyer & Nipp, supra note 1, at 14; In re Est. of Serrano, 54 N.Y.S.3d at 566.
274. Beyer & Nipp, supra note 1, at 14; In re Est. of Serrano, 54 N.Y.S.3d at 566.
275. Beyer & Nipp, supra note 1, at 14.
276. Id.
277. Id.; see In re Est. of Serrano, 54 N.Y.S.3d at 566.
278. Beyer & Nipp, supra note 1, at 14.
279. See infra Appendix B.
280. Beyer & Nipp, supra note 1, at 14.
281. See infra Appendix B.
2023] ESTATE PLANNING FOR CYBER PROPERTY 33
2. Agents Under Powers of Attorney
a. Contents
The rules for agents under powers of attorney are similar to those for
personal representatives of decedents’ estates.
282
Upon receiving the
specified required documentation (a request in written or electronic form, the
original or a copy of the power of attorney containing the express consent to
disclose, and a certification under penalty of perjury that the power of
attorney remains in effect), a custodian must disclose to the agent under a
power of attorney the contents of electronic communications of the principal
user if the user’s power of attorney expressly grants the agent authority over
such content (unless a court or the user directs otherwise).
283
Sample power
of attorney language is provided in Appendix B.
284
b. Catalogue and Other Digital Assets
Upon receiving the specified required documentation (the same as
discussed above for access to contents), a custodian must disclose to the agent
under a power of attorney (who has been granted specific authority over
digital assets or general authority to act on behalf of the user) the catalogue
and digital assets other than the content of the principal user unless otherwise
ordered by the court, provided in the power of attorney, or directed by the
principal.
285
3. Trustees
Sections 11, 12, and 13 of RUFADAA address a trustee’s ability to
access digital assets, and there are two separate rules depending upon the
origination of the digital asset.
286
a. Trustee Is Original User
If the trustee is the original user, meaning that the trustee, in their
capacity as the trustee, opened an online account or procured a digital asset,
the custodian must provide the trustee with all content, catalogues, and digital
assets of the trust.
287
282. Beyer & Nipp, supra note 1, at 14.
283. Id.
284. See infra Appendix B.
285. Beyer & Nipp, supra note 1, at 14–15.
286. Id. at 15.
287. Id.; R
EVISED UNIF. FIDUCIARY ACCESS TO DIGIT. ASSETS ACT § 11 (UNIF. L. COMM’N 2015).
34 ESTATE PLANNING AND COMMUNITY PROPERTY LAW JOURNAL [Vol. 16:1
b. Trustee Is Not Original User
If the trustee is not the original user (for example, a settlor has a digital
asset and then transfers it to a trust, either during life or at death), then
different rules apply based on whether the trustee is requesting the content or
non-content material.
288
A custodian (upon receiving the specified required
documentation, including a certified copy of the trust agreement that grants
disclosure of the content specifically and a certification by the trustee under
penalty of perjury that the trust exists and the trustee is currently serving as
the trustee) must disclose to a trustee the content of electronic
communications unless otherwise directed by the user, provided for in the
trust agreement, or ordered by the court.
289
When the trustee is not the original user, a custodian (upon receiving the
specified required documentation) must disclose to a trustee the catalogue
and all digital assets other than the content unless otherwise directed by the
user, provided for in the trust agreement, or ordered by the court.
290
In both cases, the custodian may request additional information such as
a number, username, address, or other unique subscriber or account identifier
assigned by the custodian to identify the trust’s account or evidence which
links the account to the trust.
291
4. Guardians (Conservators)
The last type of fiduciary covered by RUFADAA is a guardian
(conservator) of a protected person.
292
Because a protected person is likely to
retain a right to privacy in personal communications, access to digital assets
is not automatically granted to a guardian by virtue of the fact that the person
is appointed as a guardian.
293
If there is a hearing on the matter, a court may grant a guardian complete
access to the ward’s digital assets, that is, the contents of electronic
communications, the catalogue of electronic communications, and other
digital assets in which the ward has a right or interest.
294
Without a hearing, a guardian may obtain access to the catalogue and
digital assets other than the content of electronic communications, but a court
order is still required, along with other specified required documentation
288. Beyer & Nipp, supra note 1, at 15.
289. Id.; R
EVISED UNIF. FIDUCIARY ACCESS TO DIGIT. ASSETS ACT § 12 (UNIF. L. COMM’N 2015).
290. Beyer & Nipp, supra note 1, at 15; R
EVISED UNIF. FIDUCIARY ACCESS TO DIGIT. ASSETS ACT
§ 13 (U
NIF. L. COMM’N 2015).
291. Beyer & Nipp, supra note 1, at 15.
292. Id.
293. Id.; R
EVISED UNIF. FIDUCIARY ACCESS TO DIGIT. ASSETS ACT § 14 cmt. (UNIF. L. COMM’N
2015).
294. Beyer & Nipp, supra note 1, at 15; R
EVISED UNIF. FIDUCIARY ACCESS TO DIGIT. ASSETS ACT
§ 14(a) (U
NIF. L. COMM’N 2015).
2023] ESTATE PLANNING FOR CYBER PROPERTY 35
including a certified copy of the court order that granted the guardian
authority over the ward’s digital assets, to access the content of electronic
communication.
295
A guardian may also request that an account be terminated or suspended
for good cause upon providing the custodian with a copy of the court order
giving the guardian general authority over the protected person’s property.
296
E. Custodian’s Response to Request to Disclose Digital Assets
1. Timing
The custodian must comply with a request to disclose no later than sixty
days after receipt of a proper request along with the required
documentation.
297
2. Notice to User of Request
The custodian may, but is not required to, notify the user, e.g., the
principal or ward, that a fiduciary made a disclosure request.
298
The custodian
may properly deny a disclosure request if the custodian is aware of any
unlawful access to the account following the receipt of the request.
299
3. Method of Custodian’s Disclosure
When a custodian discloses digital assets pursuant to the terms of
RUFADAA, the custodian may, at its sole discretion:
grant the fiduciary full access to the user’s account;
limit access to what is sufficient for the fiduciary’s performance of
designated tasks;
provide the fiduciary with a paper or digital copy of a digital asset;
assess a reasonable administrative charge for disclosing digital
assets;
withhold an asset deleted by a user; and
295. Beyer & Nipp, supra note 1, at 15; REVISED UNIF. FIDUCIARY ACCESS TO DIGIT. ASSETS ACT
§ 14(b) (U
NIF. L. COMM’N 2015).
296. Beyer & Nipp, supra note 1, at 16; R
EVISED UNIF. FIDUCIARY ACCESS TO DIGIT. ASSETS ACT
§ 14(c) (U
NIF. L. COMM’N 2015).
297. Beyer & Nipp, supra note 1, at 16; R
EVISED UNIF. FIDUCIARY ACCESS TO DIGIT. ASSETS ACT
§ 16(a) (U
NIF. L. COMM’N 2015).
298. Beyer & Nipp, supra note 1, at 16; R
EVISED UNIF. FIDUCIARY ACCESS TO DIGIT. ASSETS ACT
§ 16(c) (U
NIF. L. COMM’N 2015).
299. Beyer & Nipp, supra note 1, at 16; R
EVISED UNIF. FIDUCIARY ACCESS TO DIGIT. ASSETS ACT
§ 16(d) (U
NIF. L. COMM’N 2015).
36 ESTATE PLANNING AND COMMUNITY PROPERTY LAW JOURNAL [Vol. 16:1
make the determination that a request imposes an undue burden on
the custodian, and if necessary, petition the court for an order.
300
The NCCUSL acknowledges that each custodian has a different
business model, and some may prefer one method for disclosure over
another.
301
An example of the type of situation the NCCUSL is preemptively
addressing by allowing the custodian to claim that a request imposes an
undue burden is where a fiduciary requests disclosure of “any email
pertaining to financial matters,” which would require the custodian to sift
through all emails and determine which ones were relevant or irrelevant.
302
In such event, the custodian may decline the fiduciary’s request, and either
the fiduciary or the custodian may request guidance from a court.
303
4. Failure to Disclose
A custodian incurs no penalty for failing to disclose within sixty days of
a proper request.
304
If the custodian does not disclose, the fiduciary may apply to the court
for an order directing compliance.
305
The order must state that compliance is
not in violation of 18 U.S.C. § 2702.
306
The decedent’s estate, principal,
ward, or trust bears all the expenses of seeking and obtaining the court order
such as attorney fees and court costs.
307
5. Custodian Protection
A custodian is immune from liability for disclosing or failing to disclose
if done in good faith.
308
However, a custodian is likely to be liable if it fails
to comply with a valid court order.
309
300. Beyer & Nipp, supra note 1, at 16; REVISED UNIF. FIDUCIARY ACCESS TO DIGIT. ASSETS ACT
§ 6 (U
NIF. L. COMM’N 2015).
301. Beyer & Nipp, supra note 1, at 16; R
EVISED UNIF. FIDUCIARY ACCESS TO DIGIT. ASSETS ACT
§ 6(a) cmt. (U
NIF. L. COMM’N 2015).
302. Beyer & Nipp, supra note 1, at 16; R
EVISED UNIF. FIDUCIARY ACCESS TO DIGIT. ASSETS ACT
§ 6 cmt. (U
NIF. L. COMM’N 2015).
303. Beyer & Nipp, supra note 1, at 16.
304. Id.
305. Id.; R
EVISED UNIF. FIDUCIARY ACCESS TO DIGIT. ASSETS ACT § 16(a) (UNIF. L. COMM’N 2015).
306. Beyer & Nipp, supra note 1, at 16; R
EVISED UNIF. FIDUCIARY ACCESS TO DIGIT. ASSETS ACT
§ 16(b) (U
NIF. L. COMM’N 2015).
307. Beyer & Nipp, supra note 1, at 16.
308. Id.; R
EVISED UNIF. FIDUCIARY ACCESS TO DIGIT. ASSETS ACT § 16(f) (UNIF. L. COMM’N 2015).
309. Beyer & Nipp, supra note 1, at 16; R
EVISED UNIF. FIDUCIARY ACCESS TO DIGIT. ASSETS ACT
§ 16 cmt. (U
NIF. L. COMM’N 2015).
2023] ESTATE PLANNING FOR CYBER PROPERTY 37
F. Duty and Authority
Section 15 specifies the nature, extent, and limitation of the fiduciary’s
authority over digital assets.
310
Among other things, it specifically states that
fiduciaries managing digital assets are subject to the fiduciary duties of care,
loyalty, and confidentiality.
311
It also specifies that a fiduciary acting within
the scope of the fiduciary’s duties is an authorized user for purposes of
applicable computer fraud and unauthorized computer access laws.
312
VII.
PLANNING SUGGESTIONS
Legal uncertainty reinforces the importance of planning to increase the
likelihood that an individual’s wishes concerning the disposition of digital
assets will actually be carried out.
313
Even individuals who believe it is
important to plan for digital assets are not taking steps to plan for them.
314
Despite the fact that states have been addressing the issues surrounding
fiduciary access to digital assets for over a decade, many attorneys opted to
wait and see what would happen in their states before attempting to help their
clients plan for digital assets.
315
If the desire to help clients is not enough to
motivate attorneys to begin addressing these issues, perhaps the fear of
violating the rules of professional conduct will.
316
The American Bar
Association’s (ABA) Model Rule 1.1 states, “A lawyer shall provide
competent representation to a client.”
317
The ABA added a new comment 8
to Model Rule 1.1 that states, “To maintain the requisite knowledge and skill,
a lawyer should keep abreast of changes in the law and its practice, including
the benefits and risks associated with relevant technology.”
318
Attorneys
should be aware of the challenges digital assets impose on clients and their
appointed fiduciaries, and these challenges need to be discussed with clients
as part of competent representation.
319
We all know the old adage that
310. Beyer & Nipp, supra note 1, at 16; REVISED UNIF. FIDUCIARY ACCESS TO DIGIT. ASSETS ACT
§ 15 cmt. (U
NIF. L. COMM’N 2015).
311. Beyer & Nipp, supra note 1, at 16; R
EVISED UNIF. FIDUCIARY ACCESS TO DIGIT. ASSETS ACT
§ 15 (U
NIF. L. COMM’N 2015).
312. Beyer & Nipp, supra note 1, at 16; R
EVISED UNIF. FIDUCIARY ACCESS TO DIGIT. ASSETS ACT
§ 15 (U
NIF. L. COMM’N 2015).
313. Beyer & Nipp, supra note 1, at 16.
314. Id. at 16–17; see Tina Di Vito & Marlena Pospiech, Estate planning in the 21st century: New
considerations in a changing society, BMO
RET. INST. 1, 3 (Apr. 2012), https://www.bmo.com/en-
us/pdf/BMO-Retirement-Institute-Report-Estate-Planning-04-2012.pdf [https://perma.cc/F7W3-V5LE]
(reporting that 57% of survey respondents who believed it was very or somewhat important to plan for
digital assets had not made such plans).
315. Beyer & Nipp, supra note 1, at 17.
316. Id.
317. Id.; MODEL RULES OF PRO. CONDUCT r. 1.1 (AM. BAR. ASS’N 2020).
318. Beyer & Nipp, supra note 1, at 17; MODEL RULES OF PRO. CONDUCT r. 1.1 cmt. 8 (AM. BAR.
ASS’N 2020).
319. Beyer & Nipp, supra note 1, at 17.
38 ESTATE PLANNING AND COMMUNITY PROPERTY LAW JOURNAL [Vol. 16:1
“ignorance of the law is no excuse.”
320
The ABA is telling us that “ignorance
of technology is no excuse.”
321
With almost all states enacting RUFADAA, and with RUFADAA’s
emphasis on respecting an accountholder’s intent as evidenced through
online tools and planning documents, the best advice we can give to clients
is to be proactive, make their wishes known, and stop dismissing digital
assets as something inconsequential.
322
A. Take Advantage of Online Tools
As previously mentioned, most service providers do not currently
provide their users an online tool option such as Google’s Inactive Account
Manager, Facebook’s Legacy Contact, and Apple’s Legacy Contact.
323
However, because so many states are enacting RUFADAA, combined with
the fact that RUFADAA allows the service providers to maintain control over
fiduciary access to and management of their users’ accounts by creating an
online tool option, we will most likely start to see more service providers
creating online tools.
324
Clients should utilize the online tool option whenever it is available.
325
In a state that has enacted RUFADAA, if the client has the ability to change
their directions pursuant to the online tool at any time, the client’s
instructions using the online tool will trump any other document or
agreement and will be the controlling instructions for that account.
326
B. Back-Up to Tangible Media
Clients should consider making copies of materials stored on internet
sites or “inside” of devices on to tangible media of some type such as a CD,
DVD, portable hard drive, or flash drive.
327
The client can store these
materials in a safe place, such as a safe deposit box, and then leave them
directly to named beneficiaries in the client’s will.
328
Of course, this plan
requires constant updating and may remove a level of security if the files on
320. Id.; Leviticus 5:17.
321. Beyer & Nipp, supra note 1, at 17; see MODEL RULES OF PRO. CONDUCT r. 1.1 cmt. 8 (AM. BAR.
ASS’N 2020).
322. Beyer & Nipp, supra note 1, at 17.
323. Id.
324. Id.
325. Id.
326. Id.
327. Id.
328. Id.
2023] ESTATE PLANNING FOR CYBER PROPERTY 39
these media are unencrypted.
329
However, for some files, such as many years
of vacation and family photos, this technique may be effective.
330
C. Prepare Comprehensive Inventory of Digital Estate
1. Creation
Each client should prepare a comprehensive audit of their digital world,
including a list of how and where digital assets are held, along with
usernames, passwords, answers to “secret” questions, and what they would
want to happen to each account in the event of disability or death.
331
Sample
forms are included in Appendix A.
332
Such an inventory will help fiduciaries
locate and collect digital assets.
333
Once this inventory is created, it is just as
important for clients to make sure they keep it updated when they change
passwords, open new accounts, etc.
334
Lawyers can motivate clients to create
such a digital inventory by informing them of what happens in the absence
of planning, the default system of patchwork laws and patchy service
provider policies, and the choices for opting out of the default systems.
335
2. Storage
As addressed earlier, there is a safety concern involved with this
approach to planning.
336
Careful storage of the inventory document is
essential.
337
Giving a family member or friend this information while alive
and well can backfire on your clients.
338
For example, if a client gives his
daughter his online banking information to pay his bills while he is sick,
siblings may accuse her of misusing the funds.
339
Further, a dishonest family
member would be able to steal your client’s money undetected.
340
If you decide that a separate document with digital asset information is
the best route for your client, this document could be kept with your client’s
will and durable power of attorney in a safe place.
341
The document can be
delivered to the client’s executor upon the client’s death or to the client’s
329. Id.
330. Id.
331. Id.
332. See infra Appendix A.
333. Beyer & Nipp, supra note 1, at 17.
334. Id.
335. Id.
336. Id. at 18.
337. Id.
338. Id.
339. Id.
340. Id.
341. Id.
40 ESTATE PLANNING AND COMMUNITY PROPERTY LAW JOURNAL [Vol. 16:1
agent upon the client’s incapacity.
342
Clients can take extra steps to protect
this information, such as by encrypting this document and keeping the
passcode in a separate location as a further safeguard.
343
Another option is to
create two documents, one with part of the needed information, such as
usernames, and one with the rest of the information, such as passwords.
344
The documents can be stored in different locations or given to different
individuals.
345
A newer option is to use an online password storage service such as
1Password or LastPass.
346
Your client would then need to pass along only
one password to a personal representative or agent.
347
However, this makes
this one password extremely powerful as now just one “key” unlocks the door
to your client’s entire digital world.
348
Warning: Giving someone else the client’s username and password
may be against the TOSA.
349
Accordingly, if someone uses your client’s
access information, it may be deemed a state or federal crime because it
exceeds the access to that information that is stated in the user agreement.
350
D. Provide Immediate Access to Digital Assets
Your client may be willing to provide family members and friends
immediate access to some digital assets while still alive.
351
Your client may
store family photographs and videos on websites which permit multiple
individuals to have access, such as Flickr, GoogleDocs, DropBox, Shutterfly,
and DropShot.
352
Your client could create a family YouTube channel by
using a password to privately protect the videos.
353
E. Authorize Agent to Access Digital Assets
If your state has adopted RUFADAA, a broadly drafted power of
attorney should provide the agent with power over the client’s catalogue and
digital assets other than the content of electronic communications, but it will
not provide power over the content unless the power of attorney specifically
provides that the agent should have access to the content.
354
The power of
342. Id.
343. Id.
344. Id.
345. Id.
346. Id.
347. Id.
348. Id.
349. Id.
350. Id.
351. Id.
352. Id.
353. Id.
354. Id.
2023] ESTATE PLANNING FOR CYBER PROPERTY 41
attorney document must specifically reference access to the content of
electronic communications.
355
Sample language is included in Appendix B
that should give the agent access all to digital assets and their contents.
356
Some statutory power of attorney forms have been amended to make it
easy for a principal to authorize the agent to access digital assets and their
contents.
357
Also note that if you have a very private client who does not want an
agent to have access to any digital assets, this should be specifically stated in
the client’s power of attorney.
358
Otherwise, the agent might be granted
access.
359
F. Address Digital Assets in a Will
Keep in mind that a will becomes public record once admitted to
probate, so placing security codes and passwords within it is not
recommended.
360
Further, amending a will each time a testator changes a
password would be cumbersome and expensive.
361
While a will is not an
appropriate place for passwords and security codes, there are several places
within a will where it might make sense to address digital assets.
362
1. Disposition of Digital Assets
Many of the digital assets that we “buy” and think we “own” are not
transferable upon death or are simply licenses to use the digital asset during
life.
363
However, some digital assets may be transferable, so wishes with
regard to disposition should be made clear just in case those wishes can be
followed.
364
If a transferable digital asset is not specifically gifted, it will pass
via the residuary clause which could cause the asset to pass in undivided
shares to multiple beneficiaries, leading to considerable difficulty with
management and division.
365
Furthermore, at least one commentator has focused “on the troubling
implications of contracts limiting the right to devise digital assets” and
“argues that users of digital assets, in light of our theories and methodologies
used to define property, have property interests that allow a user to determine
355. Id.
356. See infra Appendix B.
357. Beyer & Nipp, supra note 1, at 18.
358. Id.
359. Id.
360. Id.
361. Id.
362. Id. at 18–19.
363. Id. at 19.
364. Id.
365. Id.
42 ESTATE PLANNING AND COMMUNITY PROPERTY LAW JOURNAL [Vol. 16:1
how an account should be treated upon his or her death.”
366
It is possible that
users may one day have more control over the disposition of their digital
assets than they do today.
367
It is also important to note that if the ownership of the digital asset upon
death is governed by the TOSA, the asset may actually be of the non-probate
variety.
368
Thus, like a multiple-party bank account or life insurance policy,
the digital asset may pass outside of the probate process.
369
2. Personal Representative Access to Digital Assets
Digital assets should also be addressed in a will in the personal
representative’s powers section, which is where RUFADAA comes into
play.
370
If your state has enacted RUFADAA, the fiduciary should be able to
get access to the catalogue and digital assets other than the content of
electronic communications without any special language in the will, but the
fiduciary will only be able to access the content if the will (or other record)
specifically grants the fiduciary access to such content.
371
All wills should
now include provisions making it clear whether the testator intends for the
fiduciary to have access to some or all digital assets.
372
A growing trend is to recommend that the testator include the email
addresses of the accounts to which the testator wants to grant access.
373
This
helps courts and providers to associate the email addresses with the testator
because many people use email addresses that are not obviously connected
to the person’s names.
374
Appendix B includes sample provisions that may be used in a will (or
adapted for use in a revocable trust).
375
Appendix B also includes a sample
“Authorization and Consent for Release of Electronically Stored
Information” that should qualify as an “other record” under RUFADAA.
376
3. Other Digital Asset Concerns
It may be prudent to address digital assets in the definitions section of a
will.
377
A broad definition of digital assets is preferable, such as the
366. Id.; Natalie M. Banta, Property Interests in Digital Assets: The Rise of Digital Feudalism, 38
C
ARDOZO L. REV. 1099, 1102 (2017).
367. Beyer & Nipp, supra note 1, at 19.
368. Id.
369. Id.
370. Id.
371. Id.
372. Id.
373. Id.
374. Id.
375. See infra Appendix B.
376. Id.
377. Beyer & Nipp, supra note 1, at 19.
2023] ESTATE PLANNING FOR CYBER PROPERTY 43
compilation of RUFADAA definitions provided at the beginning of this
outline.
378
There are other things clients can do in their wills.
379
For example, you
could specifically reference within the will that there is a digital asset
inventory that lists usernames and passwords and provides the fiduciary with
the testator’s desires for each account.
380
This would alert the fiduciary that
such a resource is available and needs to be located.
381
If a client has substantial digital assets or thinks that someone with
special skills needs to be appointed to manage the digital assets, the client
may consider appointing a separate fiduciary to handle just the digital assets
or request that the personal representative hire a digital asset manager to
help.
382
G. Place Digital Assets in a Trust
One of the most innovative solutions for dealing with digital assets is to
create a revocable trust to hold the assets.
383
A trust may be a more desirable
place for account information than a will because it would not become part
of the public record and is easier to amend than a will.
384
Recall that under RUFADAA, if the user originates an account within a
trust, the trustee should have complete access to the catalogue and all digital
assets, including the content of electronic communications.
385
If the account
is not originated within a trust, and assuming the asset is transferable, the user
could transfer it into a trust, and then RUFADAA Sections 12 and 13 would
be applicable to the trustee’s management authority.
386
The trust agreement
could provide the trustee with detailed instructions regarding management
and disposition.
387
Furthermore, it is possible that by placing the assets in a trust, a user
might enable licenses to survive beyond the death of the user if the trust owns
these accounts and assets instead of an individual, defeating a TOSA that
specifies otherwise.
388
When a person accumulates more digital assets,
designating these assets as trust assets may be as simple as adding the word
“trustee” after the owner’s last name.
389
378. Id.
379. Id.
380. Id.
381. Id.
382. Id.
383. Id.
384. Id. at 20.
385. Id.
386. Id.
387. Id.
388. Id.
389. Id.
44 ESTATE PLANNING AND COMMUNITY PROPERTY LAW JOURNAL [Vol. 16:1
However, creating a separate revocable trust for digital assets may be
overkill for many individuals and only be practical for those with digital
assets of substantial value.
390
H. Use Online Afterlife Company
Entrepreneurs recognizing the need for digital estate planning have
created companies that offer services to assist in planning for digital assets.
391
These companies offer a variety of services to assist clients in storing
information about digital assets as well as notes and emails that clients wish
to send post-mortem.
392
As an estate planning attorney, you may find this
additional service to be valuable and recommend one to your clients.
393
A non-exclusive list of the different companies and the services they
offer is set forth below in alphabetical order.
394
The authors are not
recommending any of these companies, and no endorsement should be
implied because of a company’s inclusion or exclusion from this list.
395
You
must use due diligence in investigating and selecting a digital afterlife
company.
396
For example, in the over than six years the authors have been
maintaining this list, over one-third of the companies have gone out of
business or merged with another similar firm.
397
Name Services Offered
AfterSteps Provides users with a step-by-step
guide in planning their estate,
financial, funeral, and legacy plans,
which will be transferred to the
users’ designated beneficiares upon
passing.
398
Dead Man’s Switch Enables users to write emails and
designate recipients.
399
Once user
fails to respond to three emails,
Dead Man’s Switch releases the
emails to the recipients.
400
390. Id.
391. Id.
392. Id.
393. Id.
394. Id.
395. Id.
396. Id.
397. Id.
398. A
FTERSTEPS, www.aftersteps.com (last visited Sept. 22, 2023) [https://perma.cc/4LKX-ZA69].
399. D
EAD MAN’S SWITCH, www.deadmansswitch.net (last visited Sept. 22, 2023) [https://perma.cc
/879S-AFEB].
400. Id.
2023] ESTATE PLANNING FOR CYBER PROPERTY 45
Name Services Offered
MyWishes Helps users organize online lives,
download data from social media
sites, and prepare for death on
social media sites.
401
My Wonderful Life Enables users to plan their funeral,
leave letters, instructions,
information, and photographs for
pre-designated recipients.
402
Parting Wishes Enables users to draft online estate
planning documents, design online
memorials, create web pages about
their lives, prepare final messages,
document funeral wishes, and
designate Keyholders to distribute
this information.
403
SecureSafe (formerly DataInherit,
Entrustet, and others)
Provides users with online storage
for passwords and digital
documents.
404
True Key Auto-saves and enters passwords,
accessible as an app and on a
computer.
405
YouDeparted (formerly
AssetLock)
Enables users to upload documents,
final letters, final wishes,
instructions, important locations,
and secret information to an online
safe deposit box.
406
Once the user
dies, YouDeparted will release pre-
designated information to the pre-
designated recipients.
407
401. MYWISHES, www.mywishes.co.uk (last visited Sept. 22, 2023) [https://perma.cc/366V-JVGB].
402. M
Y WONDERFUL LIFE, www.mywonderfullife.com (last visited Sept. 22, 2023) [https://perma.
cc/85S7-MCVP].
403. P
ARTINGWISHES.COM, www.partingwishes.com (last visited Sept. 22, 2023) [https://perma.cc
/CAY7-LFFY].
404. S
ECURESAFE, www.securesafe.com (last visited Sept. 22, 2023) [https://perma.cc/K6PK-
9BW8].
405. M
CAFEE: TRUE KEY, www.truekey.com (last visited Sept. 22, 2023) [https://perma.cc/XDZ2-
HHKA].
406. Y
OU DEPARTED, www.youdeparted.com (last visited Sept. 22, 2023) [https://perma.cc/2GCN-
4H2U] .
407. Id.
46 ESTATE PLANNING AND COMMUNITY PROPERTY LAW JOURNAL [Vol. 16:1
VIII.
CRYPTOCURRENCY
Less than a decade ago, if an estate planner asked clients whether they
owned any cryptocurrency, the most likely response would be, “You mean,
money to buy a crypt?”
408
Now, due to the widespread media coverage of
Bitcoin, the most famous of all cryptocurrencies, most clients will have some
basic idea about what the estate planner is inquiring.
409
The use of cryptocurrency is increasing at a rapid pace.
410
As of April
2023, there were approximately 19 million Bitcoins in circulation worth over
$1 trillion.
411
Although only a few cryptocurrencies in addition to Bitcoin are
well-known outside the cryptocurrency community (e.g., XRP, Ethereum,
EOS, and Stellar), over 2,300 different virtual currencies are actively
traded.
412
These other cryptocurrencies are sometimes referred to as altcoins,
meaning that they are an alternative to Bitcoin.
413
A recent survey revealed that 25% of individuals between the ages of
twenty-four and thirty-eight who either had $50,000 of investable assets or
earned $100,000 or more per year own cryptocurrency.
414
A growing number
of mainstream businesses already accept Bitcoin such as Microsoft, Subway,
KFC Canada, many Etsy vendors, Overstock.com, Whole Foods, Dish
Network, AT&T, and Expedia.
415
In addition, some law firms are already
accepting Bitcoin in payment of legal services.
416
This section starts by building a basic foundation about virtual
currencies and how they operate.
417
The section then reviews the estate
planning and administration issues that arise with owning cryptocurrency and
concludes with recommendations for how to address virtual currency in your
practice.
418
A. Basics of Cryptocurrency
Before looking at cryptocurrency in detail, it is helpful to place this
specialized asset into proper context.
419
The overarching category under
discussion is called “digital currency.”
420
Digital currency refers to all
monetary assets in digital form, whether the money it represents is actually a
408. Beyer & Nipp, supra note 1, at 21.
409. Id.
410. Id.
411. Id.
412. Id.
413. Id.
414. Id.
415. Id.
416. Id.
417. Id.
418. Id.
419. Id.
420. Id.
2023] ESTATE PLANNING FOR CYBER PROPERTY 47
nation’s currency (e.g., dollars, euros, or yen) or whether it is privately
issued.
421
“Virtual currency” is not connected to a nation’s actual currency,
and is instead “an electronic representation of monetary value that may be
issued, managed and controlled by private issuers, developers, or the
founding organization.”
422
In other words, you cannot hold virtual currency
in your hand like you can with hard currency.
423
Virtual currency is nothing
more than ones and zeros stored on computer media.
424
“Cryptocurrency” is
virtual currency which uses sophisticated cryptography to make certain that
transactions are secure and authentic.
425
The discussion below is admittedly simple and omits sophisticated
high-level computer discussion.
426
Nonetheless, the discussion should
provide the estate planner with a basic understanding of the workings of
cryptocurrency.
427
A cryptocurrency is “born” through a computer process called
“mining.”
428
The “parent” of the virtual currency creates complex
mathematical equations which the parent expects other people (the miners)
to solve using high-powered computers.
429
As a reward for solving these
equations, the miners receive a virtual coin which they may then use to
purchase real-world assets, assuming they can find someone willing to accept
it.
430
As more coins are mined, it becomes harder (that is, more processing
power is needed over a longer period of time) to mine each subsequent coin
until a cap is reached either because one was provided by the parent or mining
is no longer a cost-effective way of obtaining a coin.
431
These virtual coins rely on blockchain technology for security and
validity.
432
A “blockchain” is a distributed database often referred to as the
“ledger,” that is, a list of transactions and their details such as the number of
coins added or subtracted along with the date and time of the transaction,
which is held by individuals who agree to share the database with all other
users of the same database of virtual currency.
433
The database is then
continuously updated and synchronized.
434
This results in all users having the
421. Id.
422. Id.; Jake Frankenfield, Virtual Currency: Definition, Types, Advantages & Disadvantages,
I
NVESTOPEDIA, https://www.investopedia.com/terms/v/virtual-currency.asp (Aug. 15, 2023) [https://
perma.cc/5MGV-BSBN].
423. Beyer & Nipp, supra note 1, at 21.
424. Id.
425. Id.
426. Id.
427. Id. at 21–22.
428. Id. at 22.
429. Id.
430. Id.
431. Id.
432. Id.
433. Id.
434. Id.
48 ESTATE PLANNING AND COMMUNITY PROPERTY LAW JOURNAL [Vol. 16:1
complete record of the virtual currency instead of having only one central
computer or entity that processes all transactions.
435
Each transaction or
“block” is added to the chain along with a timestamp and link to the previous
block.
436
These transactions immediately revise all of the other copies of the
database.
437
The owner of cryptocurrency has a very long and complex password
called a “private key” to access the portion of the blockchain containing the
owner’s coins.
438
This private key is mandatory to access the owner’s virtual
currency.
439
To transfer virtual currency from one person to another person
as payment for goods or services (or perhaps as a gift), the owner uses their
private key to authorize the transaction and then sends a message to the
recipient containing a “public key” which is mathematically related to the
location of the owner’s virtual currency so that the recipient can receive the
transfer.
440
Complex software running on many different computers then
verifies the transaction.
441
If the transaction is determined to be valid by
enough computers, it becomes the next block in the chain.
442
“To prevent
people from generating counterfeit currency, the math required to verify a
transaction takes so much computing power that no one user or group could
do it.”
443
In fact, one writer claims it would take the world’s most powerful
supercomputer over a trillion years to determine the owner’s private key from
the public key.
444
There are two primary ways that various cryptocurrency networks go
about verifying the transactions that occur on their blockchains.
445
The first
way, which is deemed more secure but less efficient, is done in a process
referred to as “proof of work.”
446
This is the scenario where a miner receives
a reward for verifying transactions on the ledger.
447
More than one miner will
verify the same transaction, and often a transaction will be verified several
times.
448
This system ensures the open-access security of the blockchain, but
435. Id.
436. Id.
437. Id.
438. Id.
439. Id.
440. Id.
441. Id.
442. Id.
443. Alexander George, So You Want To Get Started in Cryptocurrency, P
OPULAR MECHS. (Mar. 13,
2018), https://www.popularmechanics.com/technology/security/a18930173/start-bitcoin-cryptocurrency/
[https://perma.cc/Z45Z-JWHH].
444. Beyer & Nipp, supra note 1, at 22; Prypto, Bitcoin Public and Private Keys, F
OR DUMMIES,
https://www.dummies.com/article/business-careers-money/personal-finance/cryptocurrency/bitcoin-
public-private-keys-223627/ (July 1, 2021) [https://perma.cc/2BNZ-N9WP].
445. Beyer & Nipp, supra note 1, at 22.
446. Id.
447. Id.
448. Id.
2023] ESTATE PLANNING FOR CYBER PROPERTY 49
can be costly in terms of computing power.
449
The other type of verification
process is known as “proof of stake.”
450
This system attempts to conserve
resources by using a preference-based model to choose who will verify the
next transaction based on the amount of that user’s ownership, or “stake,” in
the cryptocurrency.
451
Most cryptocurrency owners do not need to concern themselves with
these details.
452
Businesses called “cryptocurrency exchanges” have sprung
up which handle the complex details making it easy for a person to buy, sell,
and transfer their virtual coins such as Coinbase and Uphold.
453
For example,
these exchanges hold the private and public keys and generate the messages
necessary to effectuate transfers.
454
Cryptocurrency resides in “wallets” that can be stored in many different
ways, such as on an exchange accessed over the internet, software on a
computer, tablet, or cell phone, or on a dedicated flash drive.
455
To be able to
retrieve cryptocurrency and transfer it, you must have the private key or “seed
phrase,” that is, a list of random words which allows the person to recover
the wallet containing the virtual currency.
456
A seed phrase would look
something like this: “warlock implode lawyer drink love close cactus river
street double water most.”
457
These words are tied to the private key through
a complex computation process.
458
The seed phrase needs to be kept secure
at all times.
459
Otherwise, anyone with knowledge of the phrase could access
the currency.
460
If the wallet resides on a commercial exchange, the
cryptocurrency may be accessible by a person who knows the username,
password, answers to security questions, and has the ability to satisfy other
verification steps.
461
B. Benefits of Cryptocurrency
1. Security
Because of the high level of encryption, cryptocurrency is extremely
safe from being used by an unauthorized person unless the owner is careless
449. Id.
450. Id.
451. Id.
452. Id.
453. Id.
454. Id. at 22–23.
455. Id. at 23.
456. Id.
457. Id.
458. Id.
459. Id.
460. Id.
461. Id.
50 ESTATE PLANNING AND COMMUNITY PROPERTY LAW JOURNAL [Vol. 16:1
in protecting their private key or seed phrase.
462
In addition, because the
ledger is stored on many computers all over the world, it is very safe against
hacking and other cyberattacks.
463
However, this security is necessarily reliant upon the integrity of the
exchange upon which the cryptocurrency is being used.
464
If the exchange is
compromised, then the security of the private key is also compromised.
465
This particular type of security breach is what leads to many of the hackings
that critics of cryptocurrency point to when discussing its relative insecurity
in terms of actually ensuring ownership of one’s cryptocurrency.
466
It is
important for those handling estates with cryptocurrency assets to understand
the distinction between the security that is gained from the blockchain
verification technology itself as compared to the security of the exchange.
467
Even further, it is important to remain cognizant that real humans, and
not computers, are the ones who will make the decisions in terms of how
various blockchains will be regulated and how big questions regarding
network security will be approached.
468
For instance, after an exploitation of
code during a round of capital raising for Ethereum, a large amount of ether
(the primary trading unit) was “siphoned” from the capital fund.
469
Instead of
treating the ether as stolen and simply moving forward, the creator of the
platform, via a software update, basically reset the entire system to the point
on the chain prior to the exploitation.
470
While the move created what is
known as a “fork” in the cryptocurrency and dissatisfied some holders, it also
led to a philosophical discussion about the intervention.
471
Most importantly,
for the purposes of the estate planner, this example highlights the limits of
the security provided by these assets.
472
2. Privacy
Cryptocurrency is virtually untraceable and sometimes gets a “bad rap”
as being used by people involved in illegal activities such as drugs, gun-
running, murder for hire, and prostitution.
473
Of course, the same could be
said of traditional hold-in-your-hand cash which is also normally untraceable
462. Id.
463. Id.
464. Id.
465. Id.
466. Id.
467. Id.
468. Id.
469. Id.
470. Id.
471. Id.
472. Id.
473. Id.
2023] ESTATE PLANNING FOR CYBER PROPERTY 51
absent the recording of serial numbers, being marked with invisible ink, or
containing traceable electronic devices.
474
Many individuals do not wish for their financial transactions to be public
for reasons that do not involve covering up unseemly activities.
475
Instead,
they believe that it is no one’s business how much they own, what they buy,
and what they sell.
476
Perhaps they merely want to avoid the endless
advertisements that appear after making a purchase on a traditional website
which collects a considerable amount of private data.
477
However, those who interact with testators or other clients who wish to
preserve their privacy through the use of cryptocurrency in their estate
planning should be cautioned that while the blockchain itself is close to
anonymous, exchanges themselves can be forced to divulge information
about their users.
478
Less than two years ago, the Internal Revenue Service
(IRS) won a court case against a popular cryptocurrency exchange,
mandating that the exchange divulge information on almost 15,000 users
who, over the period of 2013–2015, engaged in individual transactions
valued at over $20,000 at the time of the exchange.
479
While in this action the
court did eventually limit the initial scope of the government’s information
request, the larger takeaway for estate planners is that transactions over
cryptocurrency exchanges are not as anonymous as popularly perceived.
480
Further, during the litigation the IRS revealed that less than one thousand
taxpayers reported cryptocurrency gain or loss in 2014 and 2015, so
stepped-up enforcement is expected to continue.
481
3. Shorter Transfer Delay, Lower Cost, and Finality of Transfer
Transferring hard currencies takes time (often many days or up to a
week or more), involves many intermediary steps (e.g., customer, customer’s
bank, intermediary banks, business’s bank, and business), and incurs transfer
fees.
482
On the other hand, transfers of cryptocurrencies may occur
immediately or within a few minutes and, unless an exchange is used, without
a transfer cost.
483
Even if an exchange is involved, the cost is often
considerably less than traditional banking fees.
484
474. Id.
475. Id.
476. Id.
477. Id.
478. Id. at 24.
479. Id.
480. Id.
481. Id.
482. Id.
483. Id.
484. Id.
52 ESTATE PLANNING AND COMMUNITY PROPERTY LAW JOURNAL [Vol. 16:1
An additional advantage is the finality of the transfer that
cryptocurrency’s peer-to-peer blockchain technology provides.
485
With other
electronic transactions which are denominated in government currency, there
are significant periods of time spent waiting for the transaction to close, and
any number of actors could stop, reverse, or undo the transaction.
486
On the
blockchain, once a transaction has been verified and added, there is no
practical way to go about reversing the transaction.
487
C. Risks of Cryptocurrency
1. No Recovery Without Private Key or Seed Phrase
If the owner of cryptocurrency forgets, misplaces, or loses the private
key and seed phrase, there is no way the owner can recover it.
488
There is no
“forgot password” link that the owner can use to recover the private key or
seed phrase.
489
If the cryptocurrency is stored on an exchange, there will be
a greater chance of being able to regain a lost password because the owner is
gaining access to the exchange rather than the cryptocurrency directly.
490
James Howells of Newport, Wales learned this lesson the hard way.
491
He chose to store his 7,500 Bitcoins on a hard drive in 2009 when they were
nearly worthless.
492
Several years later, he discarded the hard drive in the
trash which ended up in a landfill the size of a football field.
493
He searched
the landfill to no avail even after funding a more extensive search with an
Indiegogo account.
494
If he had those Bitcoins on October 30, 2019, they
would have been worth approximately $68 million.
495
Another example touches upon a likely estate planning scenario that
highlights the important distinction between the security of the
cryptocurrency’s blockchain itself and the security of an exchange.
496
Early
in 2019, a thirty-year-old owner of a cryptocurrency exchange died
unexpectedly while on an aid mission to India, and “a sworn affidavit [by his
wife] as she filed for credit protection . . . [stated he] held ‘sole responsibility
485. Id.
486. Id.
487. Id.
488. Id.
489. Id.
490. Id.
491. Id.
492. Id.
493. Id.
494. Id.
495. Id.
496. Id.
2023] ESTATE PLANNING FOR CYBER PROPERTY 53
for handling the funds and coins.’”
497
The owner’s digital key was necessary
to access the cryptocurrency assets held in what the company called “cold
wallets,” but that digital key was held on the decedent’s laptop.
498
In filing
for creditor protection, the company publicly acknowledged its efforts to
locate the key and free the assets had been unsuccessful.
499
This unfortunate
scenario could have been avoided with proper estate planning but serves to
highlight the drawbacks of the peer-to-peer privacy model.
500
2. Value Fluctuation
Cryptocurrency is not backed by any government and thus its value is
subject to tremendous fluctuation.
501
Even the most popular virtual currency,
Bitcoin, has seen huge value shifts.
502
For example, in 2010, one Bitcoin was
worth $.01 and had increased to $1,000 by January 1, 2017.
503
At the end of
2017, one Bitcoin was worth almost $20,000.
504
In November 2021, the value
of one Bitcoin was over $68,000 with value changing by several dollars every
second while in December of 2020, the price had dropped to below $7,000.
505
Some in the cryptocurrency industry have recognized the need for
greater stability in order to meet investors’ desires and have created
“stablecoins” to enjoy the privacy and security benefits of cryptocurrency
while minimizing the negative effects of holding or trading in what has
historically been a volatile, unstable market.
506
To alleviate the rapid swings,
some of these cryptocurrencies are physically pegged to a particular
currency, like the U.S. dollar, or to a certain commodity, like gold.
507
Other
stablecoins “achieve their price stability via collateralization (backing) or
through algorithmic mechanisms of buying and selling the reference asset or
its derivatives.”
508
In fact, the capital fund being raised by Ethereum during their large
cryptocurrency heist in 2016 was designed to be pegged against the U.S.
dollar and allow for up to 50% swings in valuation of the underlying
497. Id.; James Rogers, $190 million gone forever? Crypto boss dies with passwords needed to unlock
customer accounts, F
OX NEWS (Feb. 4, 2019, 3:42 PM), https://www.foxnews.com/tech/cryptocurrency-
exchange-chief-dies-with-passwords-needed-to-unlock-customers-190m-reports-say [https://perma.cc/
5GJV-RG8K].
498. Beyer & Nipp, supra note 1, at 25.
499. Id.
500. Id.
501. Id.
502. Id.
503. Id.
504. Id.
505. Id.; John Edwards, Bitcoin Price History, I
NVESTOPEDIA, https://www.investopedia.com/articles
/forex/121815/bitcoins-price-history.asp (Nov. 27, 2023) [https://perma.cc/L6XV-4UW4].
506. Id.
507. Id.
508. Adam Hayes, Stablecoins: Definition, How They Work, and Types, I
NVESTOPEDIA, https://www.
investopedia.com/terms/s/stablecoin.asp (July 6, 2023) [https://perma.cc/C7KJ-XZBY].
54 ESTATE PLANNING AND COMMUNITY PROPERTY LAW JOURNAL [Vol. 16:1
cryptocurrency asset before investors lost actual invested capital as
denominated in U.S. dollars.
509
3. No Regulation
Cryptocurrencies are not subject to any central authority, such as a
government or governmental entity, which can provide a type of security or
insurance from the value fluctuations discussed above, cheaters, scammers,
and other evil conduct.
510
If something “happens” to cryptocurrency, the
owner is out-of-luck without any recourse.
511
For example, “[in] February
2014, the then-largest bitcoin exchange, Mt. Gox, went bankrupt after
hackers stole some 850,000 bitcoins that at the time were worth roughly $450
million.”
512
However, defenders of cryptocurrency correctly point out that
the compromise of an exchange (or wallet) is not a threat to the actual security
of the blockchain’s encryption, and liken the situation to a bank robbery—
poor security at a bank does not inherently threaten the security of the
monetary system itself.
513
“For somebody to ‘hack’ into the Bitcoin network
and change the issuance schedule, they would be required to marshal
processing power larger than 17,000 times the power of the world’s top 500
supercomputers.”
514
It also appears that while cryptocurrencies are not under the direct
control of any government authority, not all coins are operationally the same
in terms of a purely decentralized approach to their blockchain source code—
thus, manipulations of the asset can take place, albeit in limited form.
515
However, as demonstrated by the unfortunate passing of the Canadian
exchange owner, there is no entity like the Federal Deposit Insurance
Corporation, or similar government body, to maintain stability and public
confidence through insuring the unlucky cryptocurrency investor, nor a
Federal Reserve Bank tasked with a mandate and power to moderate the U.S.
economy through currency stabilization efforts.
516
While some individuals
with cryptocurrency assets may believe the lack of regulation surrounding
their investment to be a net positive, it is important for estate planners to
acknowledge the inherent risks that come with a currency largely free of
government regulation by design.
517
509. Beyer & Nipp, supra note 1, at 25.
510. Id.
511. Id.
512. Id.
513. Id.
514. Saifedean Ammous, Can cryptocurrencies fulfil the functions of money?, C
OLUM. UNIV. (Aug.
2016), https://capitalism.columbia.edu/sites/default/files/content/docs/working%20papers/ammous_cryp
tocurrencies_and_the_functions_of_money.pdf [https://perma.cc/97FZ-U3ZH].
515. Beyer & Nipp, supra note 1, at 25.
516. Id. at 25–26.
517. Id.
2023] ESTATE PLANNING FOR CYBER PROPERTY 55
D. Prudent Investment and Fiduciary Concerns
Cryptocurrency is risky.
518
As one commentator stated, it is riskier than
gambling.
519
“In roulette, if you put $1 on every number, you’ll spend $38
and be guaranteed to get exactly $36 in return. You could buy $1 of every
cryptocurrency and they might all end up worthless.”
520
Under the prior prudent person rule, a trustee could not invest in
cryptocurrency absent express permission in the trust because of this risk.
521
However, under the Uniform Prudent Investor Act effective in most states,
trustees must make investment decisions “in the context of the trust portfolio
as a whole and as part of an overall investment strategy having risk and return
objectives reasonably suited to the trust.”
522
Accordingly, the trustee needs to
determine with respect to each trust, after considering all of the
circumstances, whether investment in cryptocurrency is allowed, or perhaps,
even required.
523
The authors’ anecdotal conversations with corporate
trustees reveal a tremendous hesitancy to invest in cryptocurrency without
express permission in the trust instrument from the settlor, a release by the
beneficiaries, or authorization in a court order.
524
E. Taxation and Classification of Cryptocurrency
Digital currencies have value, so legally they must be reported in the
valuation of an estate.
525
In 2014, the IRS indicated that cryptocurrency is
“property” rather than currency.
526
Accordingly, cryptocurrency is subject to
capital gains tax rules.
527
The fair market value of cryptocurrency is to be
calculated “by converting the virtual currency into U.S. dollars . . . at the
exchange rate, in a reasonable manner that is consistently applied.”
528
There
are sources that keep historical records of the value of a cryptocurrency as of
a certain date, such as Poloniex and Coinmarketcap.com.
529
These resources
enable users to access cryptocurrency records much like they can access
historical records of stock.
530
A fiduciary should be aware of these basic rules
as there are situations where it could be more advantageous to purchase with
518. Id.
519. Id.
520. George, supra note 443.
521. Beyer & Nipp, supra note 1, at 26.
522. U
NIF. PRUDENT INV. ACT § 2(b) (UNIF. L. COMM’N 1994).
523. Beyer & Nipp, supra note 1, at 26.
524. Id.
525. Id.
526. Id.
527. Id.
528. I.R.S. Notice 2014-21, 2014-16 I.R.B. 938.
529. Beyer & Nipp, supra note 1, at 26.
530. Id.
56 ESTATE PLANNING AND COMMUNITY PROPERTY LAW JOURNAL [Vol. 16:1
cash or with cryptocurrency depending on its impact on the taxpayer’s
basis.
531
Further, there is the potential for scenarios beneficial to the decedent’s
beneficiaries to arise due to this distinction.
532
Because the property is not
treated like a fiat currency, “certain planning techniques can maximize the
‘step-up’ in tax basis that occurs at death for certain assets. This planning
may later reduce the inheriting owner’s tax burden significantly if, for
example, the inheriting owner were to sell assets after the death of the original
owner.”
533
The basis of a bitcoin for a person acquiring it from a deceased
owner will be the fair market value as of the date of the owner’s death.
534
Taxpayers who are engaged in the mining of cryptocurrency must
compute their taxable gross income based on the fair market value of the
cryptocurrency on the date received.
535
The initial metaphysical quandary of
taxing digital mathematical creations is explained by characterizing mining
as the reception of existing virtual currency in exchange for computer
services.
536
Other employment tax issues include the assessment of the
self-employment tax against miners of cryptocurrency and the withholding
and reporting requirements of wages paid by an employer in the form of
cryptocurrency under the Federal Insurance Contributions Act (FICA) and
the Federal Unemployment Tax Act (FUTA).
537
A significant issue left unaddressed by the Notice 2014-21 is whether
the property classification applied to cryptocurrency falls under the tangible
or intangible property distinction.
538
Some commentators have recognized
that the Notice’s treatment of miners’ realized income from mining activity
inherently rejects a tangible personal property approach.
539
Another
commentator has acknowledged that cryptocurrency does have
characteristics making it amenable to a tangible personal property
characterization.
540
These distinctions are important, particularly in the
context of charitable deductibility and a transfer by a noncitizen nonresident
if the situs of the cryptocurrency is in the United States.
541
While multiple
professional interest groups, such as the American Institute of Certified
Public Accountants (AICPA) and the American Bar Association’s Tax
Section, have approached the IRS with requests for additional guidance, only
531. Id.
532. Id.
533. Susan von Herrmann et al., Dying and Private Keys, P
ERKINS COIE (Mar. 6, 2019),
https://www.virtualcurrencyreport.com/2019/03/dying-and-private-keys/ [https://perma.cc/7QD3-J4C6].
534. Beyer & Nipp, supra note 1, at 26.
535. Id.
536. Id. at 26–27.
537. Id. at 27.
538. Id.
539. Id.
540. Id.
541. Id.
2023] ESTATE PLANNING FOR CYBER PROPERTY 57
guidance on the relatively narrow treatment of “hard fork” and “airdrop”
occurrences has been issued as of late 2019.
542
The IRS describes a hard fork
as when “a distributed ledger undergoes . . . a permanent diversion from the
legacy or existing distributed ledger.”
543
It further suggests that an airdrop, or
distribution of new cryptocurrency units to existing holders at the time of the
fork, often follows the hard fork event, though it does not need to.
544
However, as the interest group letters make clear, there are still many issues
to resolve regarding the taxation of cryptocurrency.
545
Additional considerations apply for states which feature an income tax
and, if the cryptocurrency is considered tangible, sales taxes imposed on the
sale of tangible personal property within the taxing state.
546
For internet sales
tax purposes, “the location of a cryptocurrency wallet within a state may be
a sufficient nexus for that state to tax sales of cryptocurrency” that occur for
a particular wallet.
547
The question of whether cryptocurrency can be classified as a “security”
such to come under the jurisdiction of the Securities and Exchange
Commission (SEC) is increasingly being answered in the affirmative.
548
In a
June 2018 speech, SEC Director of Corporate Finance William Hinman
expressed that while Bitcoin and Ether specifically were not securities, “if
there is a centralized third party, along with purchases with an expectation of
a return, then it is likely a security.”
549
Additionally, enforcement actions
have proceeded along similar lines, applying the Howey test for a general
determination of a security in an admittedly “highly fact-specific” inquiry.
550
It is more clear that cryptocurrency may be classified as a “commodity” for
the purposes of the Commodity Exchange Act (CEA) and be subject to the
jurisdiction of the Commodity Future Trading Commission (CFTC).
551
Citing the definition of commodity in the CEA, the CFTC noted it
encompassed a broad inclusion of “among other things, ‘all services, rights,
and interests in which contracts for future delivery are presently or in the
future dealt in.’”
552
Estate planners should seek advice from qualified
professionals if these complicated scenarios should arise in their practice.
553
542. Id.
543. Rev. Rul. 2019-24, 2019-44 I.R.B. 1004.
544. Id.; Beyer & Nipp, supra note 1, at 27.
545. Beyer & Nipp, supra note 1, at 27.
546. Id.
547. Benetta P. Jenson et al., New Kids on the Block(chain): Planning with Bitcoin and
Cryptocurrency, U
NIV. OF MIA. SCH. OF L. 1, 49 (Nov. 5, 2018), https://www.tulsaepf.org/assets/Counci
ls/Tulsa-OK/library/9-09-2019%20Tulsa%20Estate%20Planning%20Council%20Abigail%20Earthman
%20%20Heckerling%20Outline%20w%20Use%20Authorization.pdf [https://perma.cc/76QZ-CRV9].
548. Beyer & Nipp, supra note 1, at 27.
549. Jenson et al., supra note 547, at 42.
550. Id. at 43.
551. Id.
552. Id. at 52.
553. Beyer & Nipp, supra note 1, at 27.
58 ESTATE PLANNING AND COMMUNITY PROPERTY LAW JOURNAL [Vol. 16:1
F. Recommendations
As time marches by, an increasing number of your clients will own
cryptocurrency.
554
Only with proper planning, however, will the value of this
property be available to the client’s successors in interest.
555
Here is a
summary of the key steps an estate planner should take.
556
Early in the estate planning process via client intake forms,
questionnaires, or interview questions, ascertain whether your client
owns (or plans to acquire) cryptocurrency.
557
A cryptocurrency owning client needs to keep detailed records of the
date of each virtual currency purchase and the amount so that capital
gains income tax planning can be effectively accomplished such as
(1) selling and paying the tax (or taking a loss) now, (2) gifting with a
carry over basis, or (3) allowing it to pass at death to give the
beneficiary a stepped-up basis.
558
If the client owns cryptocurrency stored in a software wallet not
connected to an exchange, it is essential to make arrangements to
protect and then transfer the private key or seed phrase to the person
whom the client wishes to own the virtual currency after the client’s
death.
559
Storing the key or phrase in a safe deposit box is a frequently
used technique.
560
If the client owns cryptocurrency stored on an exchange, then
protection, storage, and transfer of the username, password, and
security question information is needed.
561
In addition, some
exchanges use two-factor authentication.
562
For example, after
entering the username and password on the exchange’s website log-in
page, the exchange sends a numerical code to the owner’s cell phone
which the user must then enter to access the owner’s account.
563
If this
is the case, the cell phone itself and how to access it must also be
protected.
564
If the client owns cryptocurrency stored on a hardware wallet (flash
drive), arrangements to reveal to the intended beneficiary both the
drive’s location and the keys, phrases, or codes needed to access it
554. Id.
555. Id. at 27–28.
556. Id. at 28.
557. Id.
558. Id.
559. Id.
560. Id.
561. Id.
562. Id.
563. Id.
564. Id.
2023] ESTATE PLANNING FOR CYBER PROPERTY 59
must be made.
565
As with software wallets, keeping the device and
phrase in a safe deposit box is often an effective protection method.
566
The estate planner needs to ascertain whether the client wishes to make
a specific gift of any cryptocurrency upon death (either to a person or
to a trust) or whether it is merely to become part of the decedent’s
general estate.
567
If a specific gift is intended, the gift provision needs
to be carefully drafted to transfer the cryptocurrency but not contain
the private key, seed phrase, passwords, or other access information.
568
Instead, the will should describe how the beneficiary (or trustee, if the
transfer is to a trust) may obtain this information such as on a flash
drive in a safe deposit box or from a trusted individual.
569
After a person has died, search diligently for the existence of digital
currency.
570
If the decedent used an exchange to purchase the
cryptocurrency, the exchange account will typically be linked to a
bank account or credit card, so the decedent’s bank records or emails
may provide a clue that the account exists.
571
Signs of cryptocurrency
can also be spotted on the decedent’s phone, tablet, or computer if a
mobile wallet or offline wallet was used.
572
Another, albeit much rarer
sign, would be a room filled with high-end computers which could
indicate the decedent was a miner.
573
If cryptocurrency is located, the executor or administrator will need to
deal with it appropriately.
574
The property is just like any other estate
asset.
575
It needs to be preserved as much as possible if it is subject to
a specific bequest in the decedent’s will.
576
If it is not, the personal
representative will need to decide whether to retain the cryptocurrency
or liquidate it for United States currency.
577
As discussed above, this
will require the executor or administrator to act as a reasonably prudent
investor.
578
For inventory and transfer tax purposes, the value of the
cryptocurrency is the fair market value at the date of death.
579
Several
websites maintain historical exchange rate records such as Poloniex,
565. Id.
566. Id.
567. Id.
568. Id.
569. Id.
570. Id.
571. Id.
572. Id.
573. Id.
574. Id.
575. Id.
576. Id.
577. Id.
578. Id. at 28–29.
579. Id. at 29.
60 ESTATE PLANNING AND COMMUNITY PROPERTY LAW JOURNAL [Vol. 16:1
Bittrex, and Coinmarketcap.com.
580
IX.
NON-FUNGIBLE TOKENS
Your client may own non-fungible tokens (NFTs) and ask you for estate
planning advice.
581
Would you be caught off-guard and give your client the
classic “deer in the headlights” look?
582
Obviously, that would not be
prudent.
583
To make sure this does not happen to you, this section uses a FAQ
approach to provide you with the background and information you need so
that you will understand NFTs and how to give your client sage advice on
how to handle them during the client’s lifetime and upon death.
584
A. What Is a Non-fungible Token?
A NFT is an electronic asset that is uniquely identified.
585
It is non-
fungible meaning that each NFT is distinguishable from all other NFTs; no
two are the same, like snowflakes.
586
It is a digital token rather than a physical
token like a casino chip or a coupon.
587
By comparison, cryptocurrency like
Bitcoins are fungible tokens in that every Bitcoin is the same as every other
Bitcoin.
588
B. What Do NFTs Represent?
NFTs may represent photographs, videos, music, artwork, online
gaming content, tweets, and other types of digital files.
589
They are electronic
representations (tokens) of this property compared to a physical token like a
casino chip that represents a specific number of physical dollars.
590
Unless specifically included, the NFT does not encompass the
underlying intellectual property, such as the copyright for the work the NFT
represents.
591
580. Id.
581. Id.
582. Id.
583. Id.
584. Id.
585. Id.
586. Id.
587. Id.
588. Id.
589. Id.
590. Id.
591. Id.
2023] ESTATE PLANNING FOR CYBER PROPERTY 61
C. How Does a Person Create a NFT?
The creation process of a NFT is called “minting.”
592
NFTs are minted
on a blockchain in a similar manner to cryptocurrency.
593
Currently,
Ethereum is the most popular platform, but other platforms may also be
used.
594
The creator, such as an artist, performer, or author links the NFT to
the specific item of digital property that it represents.
595
To enhance the value
of a NFT, the creator may promise to limit the number of NFTs created.
596
For example, the creator may decide to make only one NFT that represents
the digital property or limit creation to a specified, limited number (e.g., a
series of ten so purchasers would own 1 of 10, 2 of 10, etc.).
597
The minting
process is described in more detail in a later frequently asked question.
598
D. Why Does a Person Create a NFT?
A person creates a NFT in the hopes of selling the NFT to make a
profit.
599
Each NFT is unique; no two NFTs are the same.
600
They may not be
copied.
601
The name of an owner of a NFT is part of the public blockchain
record, and thus, anyone can verify ownership.
602
NFT creators may sell their
work on a global market as well as retain the right to receive royalties each
time the NFT is sold by using smart contract technology.
603
E. I Am Still Confused. Are There Old-School Analogies That May Help Me
Understand NFTs?
Yes, NFTs are digital counterparts of physical autographs, baseball
cards, stamps, coins, comic books, artworks, and other similar collectible
items.
604
592. Id.
593. Id.
594. Id.
595. Id.
596. Id.
597. Id.
598. Id.
599. Id.
600. Id.
601. Id.
602. Id.
603. Id.
604. Id. at 30.
62 ESTATE PLANNING AND COMMUNITY PROPERTY LAW JOURNAL [Vol. 16:1
F. What Is the Value of a NFT?
The value of a NFT depends on market forces (supply and demand)
because the NFT has no intrinsic value just like other collectible items.
605
For
example, one baseball card may have significant value because it is scarce
and highly sought after by collectors while another card has little or no value
because a huge number of the cards are available or the person depicted is
not famous.
606
G. What Are Some Examples of Notable NFTs?
The NFT of Beeple’s (Mike Winkelmann) Everydays: The First 5000
Days, a collage of 5,000 individual pieces created over a thirteen-year
period, sold for $69,346,250 by Christie’s on March 11, 2021.
607
This
is said to be the most expensive NFT ever sold and the first by a major
auction house.
608
In the online game CryptoKitties, a digital cat sold for $172,000.
609
The game is designed for players to buy, trade, and breed the digital
cats.
610
However, the cost is rarely this high.
611
In 2018, the average
price paid for a CryptoKitty was $60 with the median price being $9.
612
A NFT entitled Lebron James: Dunk From the Top sold for
$208,000.
613
Major League Baseball sold a digital copy of Lou Gehrig’s Luckiest
Man speech for $70,400 on July 4, 2021.
614
The swag bag at the recent Oscars included a NFT of Chadwick
Boseman, the actor who portrayed the Marvel superhero Black
Panther.
615
A NFT of the first tweet by Jack Dorsey, the co-founder of X, sold for
$2.9 million.
616
605. Id.
606. Id.
607. Id.
608. Id.
609. Id.
610. Id.
611. Id.
612. Id.
613. Id.
614. Id.
615. Id.
616. Id.
2023] ESTATE PLANNING FOR CYBER PROPERTY 63
H. Other Than Collectibles, What Are Some Other Possible Uses of NFTs?
NFTs could be used to secure and authenticate physical assets, both
personal and real property.
617
For example, Nike has patented a system for
using NFTs to protect against counterfeit shoes so subsequent purchasers of
high-end sneakers would be certain of their shoes’ authenticity.
618
There is also speculation that NFTs could operate as a highly secure
method of transferring title to real property and storing electronic wills and
other estate planning documents.
619
I. What Is the First Step I Need to Take Regarding NFTs when Working
with an Estate Planning Client?
It is essential for you to determine if your client owns or intends to
purchase NFTs.
620
You should include a question on your client intake
questionnaire or in your initial client interview.
621
If you do not know if your
client owns NFTs, you will not be able to help your client plan for them
properly.
622
J. What Type of Records Should a Client Keep About NFTs?
The client must keep careful records of the price paid for each NFT and
the price for which it is sold so the correct amount of capital gain or loss is
reported for tax purposes.
623
K. Is There a Special Concern If the Client Purchases a NFT with
Cryptocurrency?
Yes, many clients will purchase NFTs with cryptocurrency rather than
traditional money which will lead to an additional concern.
624
Cryptocurrency is property, not money.
625
Thus, if a client uses
cryptocurrency to purchase a NFT, a capital gain or loss will occur based on
the price the client paid for the cryptocurrency used to purchase the NFT.
626
This gain or loss must be reported for tax purposes.
627
617. Id.
618. Id.
619. Id.
620. Id. at 31.
621. Id.
622. Id.
623. Id.
624. Id.
625. Id.
626. Id.
627. Id.
64 ESTATE PLANNING AND COMMUNITY PROPERTY LAW JOURNAL [Vol. 16:1
L. Should the Client Consider Holding NFTs in a Business Entity?
Yes, the client may wish to hold the NFT in an entity such as a limited
liability company (LLC).
628
Potential advantages include (1) the ease of
transfer of LLC interests compared to transferring the NFT itself which
requires a blockchain transaction, (2) transfer tax discounts may be possible
as the LLC interests may be minority in nature or there may be a lack of
marketability, and (3) asset protection.
629
M. How Should the Client Protect the Information Needed to Access NFTs?
The private key or seed phrase required to access the digital wallet in
which the NFT is stored must be protected while the client is alive and then
transferred to the beneficiary upon the client’s death.
630
Just like
cryptocurrency, without the means of accessing the NFT, it will be lost
forever.
631
Some clients elect to keep this information in their safe deposit
boxes in old-school written form or on a flash drive or other digital media
which may also be encrypted to add another layer of protection.
632
Others
will engrave the information on a metal plate to assure it will survive fires,
floods, hurricanes, tornadoes, earthquakes, and other disasters.
633
Some
people will use complex methods such as dividing the seed phrase into
sections and storing them in different places so that only by bringing them all
together, like the Infinity Stones, can the NFT be accessed.
634
An even more
sophisticated method is Shamir Secret Sharing, where an algorithm is used
to divide the seed phrase into multiple seeds (e.g., five) and the client
indicates how many (e.g., three) need to come together to create the entire
seed phrase.
635
N. How Should a Client’s Will Address NFTs?
The client may make a specific gift of individual NFTs or a general gift
of all NFTs the client owns.
636
If NFTs are not specifically mentioned, they
will pass under the will’s residuary clause.
637
As discussed previously, it is
important to provide a method of transferring the NFT access information to
628. Id.
629. Id.
630. Id.
631. Id.
632. Id.
633. Id.
634. Id.
635. Id.
636. Id. at 31–32.
637. Id. at 32.
2023] ESTATE PLANNING FOR CYBER PROPERTY 65
the beneficiary outside of the will.
638
Access information should not be
included in the will because it becomes a public document once filed for
probate.
639
If the client’s NFT collection is extensive, the client may wish to
consider appointing a separate “digital executor” who has the responsibility
of dealing with digital assets for the benefit of the client’s estate.
640
Even if a
separate person is not appointed, the client may wish to direct the executor to
hire a person with the skills needed to prudently manage NFTs.
641
O. I Am a Personal Representative of a Decedent’s Estate. Can I Access the
Decedent’s NFTs?
Yes, a personal representative has the authority to access NFTs under
RUFADAA, which has been enacted in almost all states.
642
However, the
authority to access NFTs is worthless unless the personal representative has
the access information.
643
P. I Am a Personal Representative of a Decedent’s Estate. Is There
Anything Special Regarding NFTs About Which I Should Be Immediately
Concerned?
Yes, you should document the value of the NFT as of the date of the
decedent’s death.
644
The beneficiaries who receive NFTs are entitled to a
step-up in basis to the value of the NFT as of the date of the decedent’s death
rather than the decedent’s basis.
645
If the NFT has increased in value since
the time of purchase, being able to document the date of death value will
reduce the amount of capital gains taxes owed when the beneficiary sells the
NFT.
646
Q. I Am a Trustee. Can I Retain NFTs in a Trust or Invest in NFTs?
As mentioned previously, in almost all states, a trustee is bound by the
prudent investor standard, that is, investment decisions must be made “in the
context of the trust portfolio as a whole and as part of an overall investment
strategy having risk and return objectives reasonably suited to the trust.”
647
638. Id.
639. Id.
640. Id.
641. Id.
642. Id.
643. Id.
644. Id.
645. Id.
646. Id.
647. Id.; T
EX. PROP. CODE ANN. § 117.004(b).
66 ESTATE PLANNING AND COMMUNITY PROPERTY LAW JOURNAL [Vol. 16:1
The value of NFTs is extremely volatile and would likely be considered too
risky of an investment for a prudent investor.
648
Accordingly, a trustee should
be very hesitant to retain or invest in NFTs without express permission from
the settlor of the trust instrument, a written release by all beneficiaries, or
authorization in a valid court order.
649
R. Are There Any Religious-Based Considerations I Need to Keep in Mind
with Respect to NFTs?
Yes, some religions may frown upon its members investing in
cryptocurrency and perhaps NFTs as well.
650
For example, at least one
Islamic council ruled that using Bitcoin and other cryptocurrencies as a
means of payment is unlawful under Islamic law because they are deemed
gambling due to the price volatility.
651
S. If I Plan on Advising Clients About NFTs, Is There Anything Else You
Would Recommend That I Do?
Yes, I recommend that you create a digital wallet and create a NFT.
652
You will learn a great deal by going through the process yourself, and then
you will not be like a marriage counselor who has never been married giving
advice on how to maintain a successful marriage.
653
Here are the basic steps
you can take:
Locate a website or application that streamlines the NFT minting
process considering the ease of use and the cost (referred to as gas)
you will pay to compensate for the computing energy needed to
process and validate the NFT transaction.
654
Create an account with a
username and password.
655
Note that most apps link to the most
popular NFT blockchain, Ethereum.
656
Many of these platforms will
walk you through the process described below in a step-by-step
manner.
657
648. Beyer & Nipp, supra note 1, at 32.
649. Id.
650. Id.
651. Id.
652. Id.
653. Id.
654. Id.
655. Id.
656. Id.
657. Id. at 32–33.
2023] ESTATE PLANNING FOR CYBER PROPERTY 67
If you do not already have a digital wallet in which you can store NFTs,
create one and obtain the seed phrase (I used https://MetaMask.io
which you can access on your computer or via a phone app).
658
Link the app to the digital wallet using an extension to your internet
browser or smartphone app.
659
Take and save a picture on your computer or phone of something you
think is interesting, e.g., your office, favorite pet, a selfie, the view out
your window, etc.
660
Follow the steps in the app to upload the picture and mint a NFT linked
to the picture.
661
You can either keep the NFT in your wallet, transfer it to someone
else’s wallet, or list it for sale at a fixed price or as an auction item.
662
T. If My Client Mints NFTs, Are There Any Additional Special Warnings I
Should Provide the Client?
Yes, the client needs to be leery of creating NFTs that link to
copyrighted work without permission of the copyright holder.
663
“[U]nder
U.S. copyright law, the creator retains exclusive rights to reproduce and
distribute copies of, make derivatives of, and publicly perform and display
the copyrighted work.”
664
Thus, a client should not mint a NFT that is linked
to copyrighted property such as songs, videos, and artwork.
665
U. Why Should a Charitable Organization Consider Accepting NFT and
Cryptocurrency Donations?
NFT investors are disproportionately charitable, and the recent
significant appreciation of NFTs may lead many investors to consider
donations as a potential method of tax alleviation.
666
One platform for crypto
donations, The Giving Block, reported a total of $69 million in donations in
2021, a number that is projected to grow in the coming years.
667
Also,
organizations that operate internationally like UNICEF and the Red Cross
have found accepting crypto assets to be particularly useful.
668
Accepting
658. Id. at 33.
659. Id.
660. Id.
661. Id.
662. Id.
663. Id.
664. Richard Acello, Big Money: Nonfungible tokens are all the rage now. What are they, and what
should buyers watch for?, 107 A.B.A.
J. 25, 26 (2021).
665. Beyer & Nipp, supra note 1, at 33.
666. Id.
667. Id.
668. Id.
68 ESTATE PLANNING AND COMMUNITY PROPERTY LAW JOURNAL [Vol. 16:1
crypto donations allows organizations like these to easily transfer money
around the world quickly without paying wire fees.
669
V. Due to Their Volatile Nature, Is It Risky for Charitable Organizations to
Accept Crypto Assets?
The valuation of crypto assets is notoriously difficult, maybe
impossible.
670
Therefore, it is understandable that an organization may be
wary of accepting crypto donations.
671
It may be advisable to have a policy
in place that determines whether the organization will liquidate the asset
immediately, which is typically recommended, or hold on to the crypto for
investment.
672
If you do choose to keep donated crypto assets, guidelines for
when the organization will liquidate may also be helpful.
673
Most platforms
that assist with crypto donations will liquidate immediately, thus minimizing
any risk of value fluctuations.
674
W. How Can a Charitable Organization Accept Crypto Donations?
The first option is outsourcing the donations to a third-party platform.
675
This may be an attractive option for organizations who wish for a
“hassle-free” method for accepting crypto donations.
676
Companies such as
Bitpay, Engiven, or The Giving Block can integrate crypto donations directly
to a website and convert the donated crypto into United States dollars (USD),
with fees ranging from 1%–5%.
677
However, organizations with adequate
capacity and expertise may seek to manage crypto donations in-house.
678
Under this approach, an organization would need to establish an account with
a crypto exchange in which they would be able to accept donations directly
from donors.
679
The appeal of this approach is a lower trading cost and a
wider array of tokens that are able to be accepted; however, this approach
would require the organization to be more involved in the crypto donation
process and more technologically savvy.
680
Donors may also use a donor
advised fund (DAF) to donate crypto.
681
In this scenario, a DAF sponsor that
669. Id.
670. Id.
671. Id.
672. Id.
673. Id.
674. Id.
675. Id.
676. Id.
677. Id.
678. Id.
679. Id.
680. Id. at 33–34.
681. Id. at 34.
2023] ESTATE PLANNING FOR CYBER PROPERTY 69
accepts crypto donations will generally liquidate the asset prior to it reaching
your organization, making it no different than other donations.
682
X. Are There Any Additional Considerations for Organizations Wanting to
Hold on to Crypto Donations?
Aside from the previously mentioned volatility, another concern for
organizations is regulatory risk.
683
While lawmakers generally agree that the
crypto industry needs regulation, there is little agreement concerning what
that potential regulation may look like and what effect it may have on the
crypto industry.
684
Shifts in the regulatory environment could possibly
devalue crypto holdings or restrict their transferability.
685
Organizations
should consider their risk tolerance when considering holding these types of
assets.
686
Aside from liquidating donated crypto assets immediately,
organizations can lower risk by only accepting more established coins, such
as Bitcoin or Ethereum.
687
Y. Are There Any Specific Reporting Requirements for Crypto Donations?
The IRS has made clear that charitable organizations should treat
donations of crypto assets as noncash contributions.
688
Generally, an
organization can accept donations of crypto in the same manner as they
accept appreciated stock or other types of property.
689
Organizations must
also file Form 8282 if they sell, exchange, or otherwise dispose of their
cryptocurrency within three years after the date they originally received the
property.
690
Z. How Are Crypto Assets Treated for Accounting Purposes?
The United States Financial Accounting Standards Board has yet to
directly address how crypto assets are to be treated for accounting purposes,
despite numerous calls to do so.
691
For some nonauthoritative guidance, the
AICPA has released “Accounting for and auditing of digital assets,” which
may include some helpful guidance.
692
682. Id.
683. Id.
684. Id.
685. Id.
686. Id.
687. Id.
688. Id.
689. Id.
690. Id.
691. Id.
692. Id.
70 ESTATE PLANNING AND COMMUNITY PROPERTY LAW JOURNAL [Vol. 16:1
AA. Do Crypto Assets Pose Any ESG Concerns for My Organization?
A large externality associated with crypto assets is the large amount of
energy that is required for their production.
693
Bitcoin alone has an annual
energy consumption that is larger than countries like Argentina and is in
excess of Google, Apple, Facebook, and Microsoft combined.
694
Further, the
majority of this energy does not come from renewable sources.
695
There are
efforts in place to make crypto more efficient and consume far less energy;
however, your organization should consider whether crypto donations align
with your organizational mission.
696
Another concern with crypto assets is
their association with illicit activities.
697
Given their generally pseudonymous
nature, crypto is a favored medium of exchange amongst criminals and other
bad actors.
698
However, as crypto assets are gaining more widespread usage,
this association is declining.
699
BB. Why Should My Client Consider Donating Crypto Assets?
Aside from the general reasons why a client might otherwise donate to
charities, donating crypto can help to avoid the tax burden that the client
would otherwise experience from transferring appreciated crypto into
USD.
700
Crypto investors are required to recognize any capital gain or loss
that they realize upon a disposition of crypto, whether that is into USD or
another cryptocurrency.
701
A donor will not recognize gain or loss from a
donation of crypto, and they also may be entitled to a charitable contribution
deduction.
702
Because of this reality, donating crypto allows more funds to
reach charitable organizations than if crypto assets are first converted into
USD.
703
This also makes donations particularly enticing for crypto investors
with highly appreciated assets.
704
693. Id.
694. Id.
695. Id.
696. Id.
697. Id.
698. Id.
699. Id.
700. Id.
701. Id.
702. Id.
703. Id.
704. Id.
2023] ESTATE PLANNING FOR CYBER PROPERTY 71
CC. How Can My Client Receive a Charitable Contribution Deduction from
a Crypto Donation?
If the client is itemizing taxes, the client may be able to receive a fair
market value charitable deduction for the tax year in which the client made
the gift.
705
Donors seeking a deduction for their donation will need to obtain
a donation receipt, which is done automatically by many platforms.
706
If the
crypto asset was held for investment for more than one year, the client may
deduct the value of the gift up to 30% of the adjusted gross income (AGI) for
the year.
707
If held for one year or less, the client may deduct the lesser of
cost basis or fair market value at the time of the contribution up to 50% of
your AGI.
708
If the client is seeking to claim more than $500 on non-cash
donations, the client will need to file Form 8283.
709
To substantiate a
deduction of over $5,000, the donor will need to obtain a qualified
appraisal.
710
This requirement is currently difficult to meet for the burgeoning
crypto market, as qualified appraisers need to have two years of experience
in valuing the type of property being appraised.
711
While crypto investors
hope for a relaxing of this rule in the future, crypto appraisals currently are
expensive and difficult to find.
712
DD. What Type of Crypto Assets Can Be Donated?
Any crypto asset can be donated; however, platforms, organizations,
and DAF sponsors that accept crypto will generally specify the types of
cryptocurrencies and NFTs that they will accept for donations.
713
Given the
recent craze surrounding NFTs, some investors may be curious whether they
are able to donate their NFTs to charitable organizations.
714
Again, while
possible, most organizations will not have infrastructure in place to accept
and make use of NFTs.
715
Instead, it is recommended that donors auction
NFTs themselves and direct the payout to the charitable organization of your
choice.
716
This has become a popular option for NFT holders, and it allows
for organizations to receive charitable donations in a more liquid form.
717
705. Id. at 35
706. Id.
707. Id.
708. Id.
709. Id.
710. Id.
711. Id.
712. Id.
713. Id.
714. Id.
715. Id.
716. Id.
717. Id.
72 ESTATE PLANNING AND COMMUNITY PROPERTY LAW JOURNAL [Vol. 16:1
EE. What Are Some Future Issues I May Be Asked to Address About NFTs?
There are several potential issues regarding NFTs beyond those already
mentioned that may cause concern in the future.
718
One example is whether
NFTs could be subject to federal security laws.
719
Another example is
whether NFTs are commodities so that they would be subject to regulation
by the Commodity Futures Trading Commission.
720
X.
METAVERSE ASSETS
A. What Is the Metaverse?
The metaverse is a network of three-dimensional virtual worlds focused
on social connection.
721
Although this sounds like a very new concept, the
term was coined thirty years ago by Neal Stephenson in his novel Snow
Crash.
722
The book involved, among other things, virtual real estate and the
creation of 3-D avatars.
723
B. What Are Some Early Uses of the Metaverse?
For several decades, multiplayer online video games have created
virtual realities where players interact with their environments, other players,
and game-specific characters.
724
For years, players have accumulated virtual
property in these games which may have significant monetary value.
725
For
example, a planet for the Entropia Universe sold for $6 million in 2011 and
an asteroid space resort for the same game sold for $635,000 in 2010.
726
There are also reports of more “reasonable” prices for virtual items, such as
a virtual sword for use in Age of Wulin which was sold for $16,000.
727
C. How Is the Metaverse Expanding Today?
Technological advances now permit users to access the metaverse via
high-quality virtual reality headsets rather than a traditional gaming headset,
718. Id.
719. Id.
720. Id.
721. Gerry Beyer, Planning for Non-Fungible Tokens and Metaverse Assets, TI
TR. (2022),
https://www.ti-trust.com/wp-content/uploads/2023/02/4Q22-EPSB131E.pdf [https://perma.cc/PF9Y-
7X7F].
722. Id.
723. Id.
724. Id.
725. Id.
726. Id.
727. Id.
2023] ESTATE PLANNING FOR CYBER PROPERTY 73
computer, or television screen.
728
Virtual realities are expanding from being
game- or company-specific to being interactive and networked.
729
The lofty
goal is to have one place in which all virtual worlds may be accessed.
730
In
other words, instead of having compartmentalized virtual areas (e.g., walled
castles), a user may travel between them all (e.g., roads).
731
However, the
standardization necessary to travel between different virtual worlds with a
user’s virtual assets intact is extremely technically challenging and will
involve complex intellectual property issues.
732
Thus, it is likely to be a long
time before traveling between different companies’ virtual worlds will be
possible.
733
D. Other Than Gaming Assets, What Is a Common Type of Metaverse
Property?
Dozens of companies are now selling virtual versions of existing real
property.
734
For example, one of the authors purchased their home address on
Tiliaverse for about $100.
735
As with physical land, location is key.
736
For
example, the United States Capital’s purchase price as of November 1, 2022,
was $1,534.
737
E. How Do I Address Metaverse Assets in a Client’s Estate?
The first thing a prudent estate planner must do is to inquire whether
their clients own metaverse assets.
738
Only by recognizing that a client has
these assets can the estate planner take the steps needed to be sure these assets
are not lost upon the client’s death or disability.
739
Metaverse assets are typically represented by NFTs, and thus, the same
planning steps for NFTs apply, such as the preservation and transfer of
passwords and seed phrases.
740
Failure to make these plans may result in a
personal representative, heir, or beneficiary not having access to the asset,
and thus, the value would be lost.
741
728. Id.
729. Id.
730. Id.
731. Id.
732. Id.
733. Id.
734. Id.
735. Id.
736. Id.
737. Id.
738. Id.
739. Id.
740. Id.
741. Id.
74 ESTATE PLANNING AND COMMUNITY PROPERTY LAW JOURNAL [Vol. 16:1
Assuming the personal representative has the access information, the
representative may use RUFADAA to access the virtual property and take
appropriate steps to handle it in the estate.
742
The value of the metaverse
assets needs to be documented as of date of death so these assets are entitled
to the step-up in basis.
743
Unfortunately, obtaining a true market value of
these assets is very difficult for lack of a standardized market.
744
F. How Do I Address Metaverse Assets Held in Trust?
The owner of metaverse assets may transfer them to a trust.
745
How
should a trustee deal with these assets given the prudent investor standard
which requires investment decisions to be made “in the context of the trust
portfolio as a whole and as part of an overall investment strategy having risk
and return objectives reasonably suited to the trust”?
746
The value of
metaverse assets is extremely volatile.
747
Trustees should be very hesitant to
retain metaverse assets without the settlor’s express permission in the trust
instrument, a release signed by all trust beneficiaries, or a court approved
authorization.
748
XI.
FUTURE REFORM AREAS
A. Providers Gather User’s Actual Preferences
Although most service providers have a policy on what happens to the
accounts of deceased users, these policies are not prominently posted, and
many consumers may not be aware of them.
749
If they are part of the standard
terms of service, they may not appear on the initial screens as users quickly
click past them.
750
Rather than forcing these unread terms upon users, the service providers
should follow the lead of Google, Facebook, and Apple in developing online
tools, allowing users to indicate their desires for what should happen upon
the user’s death.
751
To ensure that more people make provisions, providers
should offer an easy method at the time a person signs up for a new service
for the person to designate the disposition of the account upon the owner’s
742. Id.
743. Id.
744. Id.
745. Id.
746. Id.; U
NIF. PRUDENT INV. ACT § 2(b) (UNIF. L. COMM’N 1994).
747. Beyer & Nipp, supra note 1, at 34.
748. Id.
749. Id.
750. Id.
751. Id.
2023] ESTATE PLANNING FOR CYBER PROPERTY 75
incapacity or death.
752
For accounts already in existence, service providers
should make the effort to reach out to users about their new online tool,
stressing the importance of entering the required data and making it easy for
them to do so.
753
B. Congress Amends Federal Law
Congress should amend the SCA and the CFAA to make certain that
fiduciary access, even if contrary to TOSAs, is not potentially subject to
federal criminal sanctions.
754
Federal law could require service providers to
respect state laws on fiduciary powers or even ensure that all users click
through an “informed consent” provision when they sign up for new
services.
755
C. States Enact RUFADAA
As previously mentioned, as of December 3, 2023, forty-five states, the
District of Columbia, and the United States Virgin Islands have enacted
RUFADAA.
756
These jurisdictions acted expediently to put into place
legislation that is a tremendous step in the right direction when it comes to
fiduciaries’ access to digital assets.
757
As of December 3, 2023, RUFADAA was pending in Massachusetts.
758
However, there are still four states that have not enacted RUFADAA in total
and where it was not pending as of December 3, 2023:
California. As previously mentioned, California enacted the decedent’s
estates and trusts provisions of RUFADAA in 2016 but has not yet enacted
the act in its entirety.
759
Delaware. Delaware still has the original “enactment” of UFADAA as
its current law but has not enacted RUFADAA.
760
Louisiana. Louisiana considered RUFADAA enactment in 2016, but it
was not enacted.
761
Louisiana still has its “third-generation” legislation in
place as summarized earlier.
762
752. Id.
753. Id.
754. Id.
755. Id. at 35–36.
756. Id. at 36.
757. Id.
758. Id.
759. Id.
760. Id.
761. Id.
762. Id.
76 ESTATE PLANNING AND COMMUNITY PROPERTY LAW JOURNAL [Vol. 16:1
Oklahoma. Oklahoma considered RUFADAA in 2020, but it was not
enacted.
763
Oklahoma still has its “third-generation” legislation in place as
summarized earlier.
764
XII.
CONCLUSION
Complications surround planning for digital assets, but all clients need
to understand the ramifications of failing to do so.
765
Estate planning
attorneys need to comprehend fully that this is not a trivial consideration and
that it is a developing area of law.
766
More cases will arise regarding TOSAs,
rights of beneficiaries, and the ramifications of applicable state and federal
laws.
767
The best thing clients can do at this time is to use the methods
available to them to make clear their desires with regard to digital assets.
768
763. Id.
764. Id.
765. Id.
766. Id.
767. Id.
768. Id.
2023] ESTATE PLANNING FOR CYBER PROPERTY 77
A
PPENDIX A – DIGITAL ESTATE INFORMATION SAMPLE FORM
769
D
IGITAL ESTATE INFORMATION FOR:
____________________
LOCATIONS OF HARD COPY FILES AND MEDIA BACKUP
Personal records =
Financial =
Home/apartment records =
Media backups =
DEFAULT INFORMATION
Usernames =
Passwords =
Secret questions:
Mother’s maiden name =
Grade school =
Street where grew up =
ELECTRONIC DEVICE ACCESS
Device
Website Username PIN Password
Computer – home
Computer – office
Operating System
Voice mail – home
Voice mail – work
Voice mail – cell
phone
Security system
Table
t
e-Reade
r
GPS
Route
r
DVR/TiVo
Television
769. See James D. Lamm, My Digital Audit: Passwords, Online Accounts, & Digital Property, DIGIT.
PASSING (2015), http://www.digitalpassing.com/wordpress/wp-content/uploads/2012/08/DigitalAudit.
pdf [https://perma.cc/2ZEN-QMZW] (providing another sample form).
Many clients have default information
which they use for many accounts. If
no specific access information is
provided, this at least provides a
starting point.
Some clients may also have a method
of assigning passwords. If so, the client
should provide this information.
The location of traditional
paper records as well as
where back ups of digital
information are stored is
very helpful.
78 ESTATE PLANNING AND COMMUNITY PROPERTY LAW JOURNAL [Vol. 16:1
EMAIL ACCOUNTS
Description
Email
address
Username PIN Password Disposition
Desires
Work
Home
School
DOMAIN NAMES
Website/Domain Name
Webhost Username or
Email
PIN Password
Personal
Business
ONLINE STORAGE
Name
Website Username or
Email
PIN Password
Dropbox
Google Drive
OneDrive
FINANCIAL SOFTWARE
Item
Website Username or Email PIN Password
Quicken
TurboTax
BANKING
Institution
Website Username
or Email
Password ATM PIN Security
Image
Checking
Savings
PayPal
STOCKS, BONDS, SECURITIES
Institution
Website Username
or Email
Password Other Information
2023] ESTATE PLANNING FOR CYBER PROPERTY 79
INCOME TAXES
Item
Website Username
or Email
PIN Password
Federal
income tax
payment
https://www.eftps.com/
eftps/
[https://perma.cc/QD3
X-CYJW]
State income
tax paymen
t
Prior
computerized
tax returns
RETIREMENT
Institution
Website Username or
Email
Password Other
Information
INSURANCE
Institution
Website Username
or Email
Password Other Information
Health
Life
Property
CREDIT CARDS
Institution
Website Username or
Email
Password PIN
American
Express
Visa
80 ESTATE PLANNING AND COMMUNITY PROPERTY LAW JOURNAL [Vol. 16:1
DEBTS
Institution
Website Username or
Email
Password Other
Information
Mortgage
Cars
Student Loan
UTILITIES
Institution
Website Username
or Email
Password Other
Information
Electric
Gas
Interne
t
Phone (landline)
Phone (cell)
TV
Trash
Wate
r
BUSINESSES
Institution
Website Username
or Email
Password Other
Information
Amazon.com
eBay.com
SOCIAL NETWORKS
Institution
Website Username
or Email
Password Disposition
Desires
Facebook
LinkedIn
X
Instagram
2023] ESTATE PLANNING FOR CYBER PROPERTY 81
DIGITAL MEDIA ACCOUNTS
Institution
Website Username
or Email
Password Other
Information
Netflix
iTunes
YouTube
Hulu
Nook
Kindle
CYBER PROPERTY (Cryptocurrency, NFTs, Metaverse)
Institution
Website Username
or Email
Password Other
Information
Coinbase
Metamask
Decentraland
LOYALTY PROGRAMS
Name
Website Username or Email Password
Airlines
Grocery stores
Appliance stores
Starbucks
OTHER ACCOUNTS
Name
Website Username or Email Password
Skype
LoJack
WoW
HalfLife
Flick
r
Medical records
82 ESTATE PLANNING AND COMMUNITY PROPERTY LAW JOURNAL [Vol. 16:1
A
PPENDIX B – SAMPLE DOCUMENT LANGUAGE
A. Wills
1. Short Form Samples
Digital Assets Other than Electronic Communications
I grant my executor full access to my digital assets other than electronic
communications to the fullest extent allowed under state and federal law.
Electronic Communications
[full access to all accounts]
I grant my executor full access to both the catalogue and the
content of electronic communications sent or received by me to the
fullest extent allowed under state and federal law. [The email addresses
of these accounts include but are not limited to: ___________________.]
[full access to some accounts]
I grant my executor full access to both the catalogue and the
content of electronic communications sent or received by me to the
fullest extent allowed under state and federal law limited to the following
email addresses: _________________________.
[partial access to all accounts]
I grant my executor the right to receive and access the catalogue of
electronic communications sent or received by me to the fullest extent
allowed under state and federal law. [The email addresses of these
accounts include but are not limited to: ____________.] However, my
executor has no right to receive access to the content of any electronic
communication sent or received by me.
[partial access to some accounts]
I grant my executor the right to receive and access the catalogue of
electronic communications sent or received by me to the fullest extent
allowed under state and federal law limited to the following email
address: ________________________. However, my executor has no
right to receive access to the content of any electronic communication
sent or received by me.
[no access]
My executor does not have any right to receive the catalogue or
content of any electronic communications sent or received by me [except
if required to comply with tax laws or other legally enforceable
requirements or obligations].
2. Long Form Sample 1
[Adapted from a provision supplied by James Lamm and reproduced in
Michael Froomkin, Estate Planning for Your Digital Afterlife,
2023] ESTATE PLANNING FOR CYBER PROPERTY 83
D
ISCOURSE.NET (Feb. 18, 2013), https://www.discourse.net/2013/02/estate-
planning-for-your-digital-afterlife/?utm_source=feedburner&utm_medium=
feed&utm_campaign=Feed%3A+discourse+%28Discourse.net%29
[https://perma.cc/7287-LELU].]
The personal representative may exercise all powers that an absolute
owner would have and any other powers appropriate to achieve the proper
investment, management, and distribution of: (1) any kind of computing
device of mine; (2) any kind of data storage device or medium of mine;
(3) any electronically stored information of mine; (4) any user account of
mine; and (5) any domain name of mine. The personal representative may
obtain copies of any electronically stored information of mine from any
person or entity that possesses, custodies, or controls that information. I
hereby authorize any person or entity that possesses, custodies, or controls
any electronically stored information of mine or that provides to me an
electronic communication service or remote computing service, whether
public or private, to divulge to the personal representative: (1) any
electronically stored information of mine; (2) the contents of any
communication that is in electronic storage by that service or that is carried
or maintained on that service; and (3) any record or other information
pertaining to me with respect to that service. This authorization is to be
construed to be my lawful consent under the Electronic Communications
Privacy Act of 1986, as amended; the Computer Fraud and Abuse Act of
1986, as amended; and any other applicable federal or state data privacy law
or criminal law. The personal representative may employ any consultants or
agents to advise or assist the personal representative in decrypting any
encrypted electronically stored information of mine or in bypassing,
resetting, or recovering any password or other kind of authentication or
authorization, and I hereby authorize the personal representative to take any
of these actions to access: (1) any kind of computing device of mine; (2) any
kind of data storage device or medium of mine; (3) any electronically stored
information of mine; and (4) any user account of mine. The terms used in this
paragraph are to be construed as broadly as possible, and the term “user
account” includes without limitation an established relationship between a
user and a computing device or between a user and a provider of internet or
other network access, electronic communication services, or remote
computing services, whether public or private.
2. Long Form Sample 2
[Adapted from Michael D. Walker, The New Uniform Digital Assets
Law: Estate Planning and Administration in the Information Age, 52 R
EAL
PROP., TR. & EST. L. J. 51, 75 (2017).]
(a) My personal representative may take any action (including,
without limitation, assuming or amending a terms-of-service agreement or
84 ESTATE PLANNING AND COMMUNITY PROPERTY LAW JOURNAL [Vol. 16:1
other governing instrument) with respect to my Digital Assets, Digital
Devices, or Digital Accounts as my personal representative shall deem
appropriate, and as shall be permitted under applicable state and Federal law.
My personal representative may engage experts or consultants or any other
third party, and may delegate authority to such experts, consultants or third
party, as necessary or appropriate to effectuate such actions with respect to
my Digital Assets, Digital Devices, or Digital Accounts, including, but not
limited to, such authority as may be necessary or appropriate to decrypt
electronically stored information, or to bypass, reset or recover any password
or other kind of authentication or authorization. This authority is intended to
constitute “lawful consent” to any service provider to divulge the contents of
any communication or record under the SCA (currently codified as 18 U.S.C.
§ 2701 et seq.), the Computer Fraud and Abuse Act (currently codified as 18
U.S.C. § 1030), and any other state or federal law relating to Digital Assets,
data privacy, or computer fraud, to the extent such lawful consent may be
required. My personal representative shall be an authorized user for purposes
of applicable computer-fraud and unauthorized-computer-access laws. The
authority granted under this paragraph is intended to provide my personal
representative with full authority to access and manage my Digital Assets,
Digital Devices, or Digital Accounts, to the maximum extent permitted under
applicable state and Federal law and shall not limit any authority granted to
my personal representative under such laws.
(b) The following definitions and descriptions shall apply under this
will to the authority of the personal representative with respect to my Digital
Assets and Accounts:
(1) “Digital Assets” shall be any electronic record that is defined as a
“Digital Asset” under the [applicable state law], together with any and all
files created, generated, sent, communicated, shared, received, or stored on
the internet or on a Digital Device, regardless of the ownership of the physical
device upon which the digital item was created, generated, sent,
communicated, shared, received or stored (which underlying physical device
shall not be a “Digital Asset” for purposes of this will).
(2) A “Digital Device” is an electronic device that can create, generate,
send, share, communicate, receive, store, display, or process information,
including, without limitation, desktops, laptops, tablets, peripherals, storage
devices, mobile telephones, smart phones, cameras, electronic reading
devices, and any similar digital device which currently exists or may exist as
technology develops or such comparable items as technology develops.
(3) “Digital Account” means an electronic system for creating,
generating, sending, sharing, communicating, receiving, storing, displaying,
or processing information which provides access to a Digital Asset stored on
a Digital Device, regardless of the ownership of such Digital Device.
(4) For the purpose of illustration, and without limitation, Digital Assets
and Digital Accounts shall include email and email accounts, social network
2023] ESTATE PLANNING FOR CYBER PROPERTY 85
content and accounts, social media content and accounts, text, documents,
digital photographs, digital videos, software, software licenses, computer
programs, computer source codes, databases, file sharing accounts, financial
accounts, health insurance records and accounts, health care records and
accounts, domain registrations, DNS service accounts, web hosting accounts,
tax preparation service accounts, online store accounts and affiliate programs
and other online accounts which currently exist or may exist as technology
develops, or such comparable items and accounts as technology develops,
including any words, characters, codes, or contractual rights necessary to
access such items and accounts.
B. Power of Attorney
[Adapted from Keith P. Huffman, Law Tips: Estate Planning for
Digital Assets, I
ND. CONTINUING LEGAL EDUC. F. (Dec. 4, 2012).]
Digital Assets. My agent has (i) the power to access, use, and control
my digital device, including, but not limited to, desktops, laptops,
peripherals, storage devices, mobile telephones, smart phones, and any
similar device which currently exists or exists in the future as technology
develops for the purpose of accessing, modifying, deleting, controlling or
transferring my digital assets, (ii) the power to access, modify, delete, control,
and transfer my digital assets, including, but not limited to, any emails, email
accounts, digital music, digital photographs, digital videos, software licenses,
social network accounts, file sharing accounts, financial accounts, domain
registrations, web hosting accounts, tax preparation service accounts, online
stores, affiliate programs, other online programs, including frequent flyer and
other bonus programs, and similar digital items which currently exist or exist
in the future as technology develops, and (iii) the power to access the content
of all electronic communications as defined by [citation to state statute].
C. Authorization and Consent for Release of Electronically Stored
Information
[Adapted from Sample Digital Language, DIGIT. DEATH,
https://www.digitaldeath.com/wp-content/uploads/2014/11/Will.pdf (last
visited Oct. 20, 2023) [https://perma.cc/3QT2-BRRT].]
By this document, I hereby authorize and consent for any person or
entity that has possession, custody or control over any electronically stored
information or digital assets wherein I have a property right or interest, or
that provides an electronic communication service, a remote communication
service, a storage service, whether public or private, to release and disclose
to my personal representatives (a) any electronically stored information,
(b) the contents of any communication that is in electronic storage by that
service or that is carried or maintained on that service, and (c) any record or
other information pertaining to me with respect to that service.
86 ESTATE PLANNING AND COMMUNITY PROPERTY LAW JOURNAL [Vol. 16:1
It is my intention that this authorization and consent is to be
construed as broadly as possible to allow my personal representative under
this document to have the access and use of information described above. I
intend for my personal representative to include a trustee of my revocable
trust, a trustee of a trust appointed under my will, an attorney in fact (agent)
acting under a power of attorney document, a guardian or conservator
appointed for me, the personal representative or executor of my estate or
other representative created by operation of law.
This authorization and consent is to be construed to be my lawful
consent under the Electronic Communications Privacy Act of 1986, as
amended; the Computer Fraud and Abuse Act of 1986, as amended; and any
other applicable federal or state data privacy or criminal law.
This authorization is effective immediately. Unless I revoke this
authorization in writing while I am competent, this authorization continues
to be effective during any period that I am incapacitated and continues to be
effective after my death.
Unless a person or entity has received actual notice that this
authorization has been validly revoked by me, that person or entity receiving
this authorization may act in reliance on the presumption that it is valid and
unrevoked and that person or entity is released and held harmless by me, my
heirs, legal representatives, successors, assigns from any loss suffered, or
liability incurred for acting according to this authorization. A person or entity
may accept a copy or facsimile of this original authorization as though it were
an original document.
D. Non-Authorization
[Adapted from Jennifer J. Wioncek & Michael D. Melrose, Executive
Summary (May 10, 2016).]
My [type of fiduciary such as executor or agent] does not have any
right to receive the catalogue or content of any electronic communications
sent or received by me.
[or]
My [type of fiduciary such as executor or agent] has the right to
receive and access the catalogue of electronic communications sent or
received by me. However, my [type of fiduciary such as executor or agent]
shall have no right to receive access to the content of any electronic
communication sent or received by me.
E. Pleading
Applicant, the personal representative of the Estate of [name of
deceased], respectfully requests the court to make the following findings:
1. [Name of deceased] had the following account with [name of
custodian] identified as follows:
2023] ESTATE PLANNING FOR CYBER PROPERTY 87
o Account number: ____________.
o Username: _________________.
o Address: ___________________.
o Unique subscriber or account identifier: ______________.
2. Disclosure of the content of this account would not violate 18 U.S.C.
§ 2701 et seq., 47 U.S.C. § 222, or other applicable law.
3. [Name of deceased] expressly consented to the disclosure of the
content of an electronic communication in [his/her] will.
4. Disclosure of the content of [name of deceased] electronic
communication is reasonably necessary for the administration of
[name of deceased]’s estate.
F. Court Order
The court finds the following:
1. Applicant is the personal representative of the Estate of [name of
deceased].
2. [Name of deceased] had the following account with [name of
custodian] identified as follows:
o Account number: ____________.
o Username: _________________.
o Address: ___________________.
o Unique subscriber or account identifier: ______________.
3. Disclosure of the content of this account would not violate 18 U.S.C.
§ 2701 et seq., 47 U.S.C. § 222, or other applicable law.
4. [Name of deceased] expressly consented to the disclosure of the
content of an electronic communication in [his/her] will.
5. Disclosure of the content of [name of deceased] electronic
communication is reasonably necessary for the administration of
[name of deceased]’s estate.
88 ESTATE PLANNING AND COMMUNITY PROPERTY LAW JOURNAL [Vol. 16:1
A
PPENDIX C – SAMPLE REQUEST LETTER TO DIGITAL ASSET CUSTODIAN
[Adapted from Michael D. Walker, The New Uniform Digital
Assets Law: Estate Planning and Administration in the Information Age, 52
R
EAL PROP., TR. & EST. L. J. 51, 77 (2017).]
Via Certified Mail ______________
Return Receipt Requested
Cyberdyne Systems
1701 Enterprise Drive
Skynet, CA 90210
Re: Email Account of Sarah Connor, Deceased [email protected])
Dear Custodian:
I am the duly appointed personal representative of Sarah Connor (the
Decedent). The Decedent died on __________.
Pursuant to the [citation to state’s version of RUFADAA] (hereafter,
RUFADAA), I hereby request full access to the Decedent’s email account
maintained by Cyberdyne Systems. In connection with this request, I am
enclosing the following:
1. A certified copy of the death certificate of the Decedent.
2. A certified copy of the Letters Testamentary issued by [court] on
[date] which appoints me as the personal representative of the
Decedent’s estate.
3. A copy of the Will of Decedent dated [date]. Please note that
pursuant to [citation to enabling will provision] of the Decedent’s
Will, the Decedent expressly provided her full consent to the
disclosure of all her digital assets, including the content of
electronic communications, to her personal representative, and
further authorized her personal representative to take any and all
actions relating to her digital assets as her personal representative
shall deem appropriate.
4. A copy of an email dated [date] which was sent to me by the
Decedent. This email contains the Decedent’s cyberdyne.com
email address referenced above, together with other information
identifying the Decedent’s account with Cyberdyne Systems.
I look forward to your prompt response in accordance with RUFADAA.
Please contact me if you have any questions.
2023] ESTATE PLANNING FOR CYBER PROPERTY 89
Very truly yours,
Kyle Reese
Personal Representative
Estate of Sarah Connor, Deceased
90 ESTATE PLANNING AND COMMUNITY PROPERTY LAW JOURNAL [Vol. 16:1
A
PPENDIX D – A PRIMER FOR PROBATE JUDGES
770
A new type of motion is going to start hitting your bench with increased
frequency—a request for an order allowing the personal representative to
access a decedent’s or ward’s digital assets. What is this all about? What do
I need to know? Should I grant or deny the motion? This Article aims to
answer these, and other questions, so that probate judges are well-informed
about the cyberspace-estate administration interface.
What is a digital asset?
Digital assets are electronic records (think binary 1s and 0s) in which a
person has a right or interest. Examples include emails, text messages,
photos, digital music and video, word processing documents, social media
accounts (e.g., Facebook, LinkedIn, X), and gaming avatars.
Why does a personal representative care about the digital assets of a
decedent?
There are many reasons why a personal representative would want
access to the decedent’s digital assets. (1) Many people forego paper
statements for financial accounts such as bank accounts, retirement accounts,
and brokerage accounts. The personal representative may seek access to the
contents of the decedent’s email messages to ascertain where these accounts
are located and to gain the information necessary to complete the estate
inventory, pay creditors, and distribute the funds appropriately. (2) Likewise,
many people forego paper statements for utilities, credit cards, car loans, and
home mortgages. The personal representative may need to give notice to and
pay these creditors and thus needs access to email messages to determine the
names of the creditors and the amounts owed. (3) Some digital assets like
domain names, customer lists, manuscripts, and compositions may have
significant economic value. The personal representative needs access to these
assets for both inventory and distribution purposes. (4) Some digital assets
like family photos and videos do not have monetary value but they have great
sentimental value and need to be transferred to the proper heirs or will
beneficiaries.
What law governs a personal representative’s access to digital assets?
See infra Appendix E.
770. Originally published as Gerry W. Beyer, The Revised Uniform Fiduciary Access to Digital Assets
Act: A Primer for Probate Judges, N
AT’L COLL. PROB. JUDGES J. 1, 1 (2017), https://ncpj.files.wordpress
.com/2018/02/ncpj-journal-fall-2017.pdf [perma.cc/WPR3-8GTN] (slightly edited to update).
2023] ESTATE PLANNING FOR CYBER PROPERTY 91
Does it matter when the decedent died?
No, RUFADAA applies to a personal representative acting for a
decedent who died before, on, or after the effective date.
How is priority for access to a decedent’s digital assets determined?
Section 4 of RUFADAA provides the priority order. First priority is
given to the decedent’s instructions using the custodian’s online tools.
Examples include Google’s Inactive Account Manager and Facebook’s
Legacy Contact. Second priority is given to the decedent’s instructions in the
decedent’s will. If the decedent has not provided instructions through an
online tool or will, then the service provider’s TOSA (the “I agree’ button)
will govern the rights of the decedent’s personal representative.
Is there anything special about “access” that I need to know?
Yes! There is a major difference between the two types of access. The
first type is access to the contents of electronic communications which refers
to the substance or meaning of the communication such as the actual subject
line and text of email messages.
The second type of access encompasses both the catalogue of electronic
communications (e.g., the name of sender, the email address of the sender,
and the date and time of the message but not the subject line or the content)
and other digital assets (e.g., photos, videos, material stored on the decedent’s
computer, etc.).
Why is the personal representative bothering me for a court order?
RUFADAA Sections 7 and 8 provide procedures for the personal
representative to seek access to digital assets directly from the custodian
without the need for a court order. However, the custodian is authorized to
ask for a court order before granting access. Many custodians ask for a court
order as a matter of standard practice.
What must a court order granting access to contents of electronic
communications contain?
You must make the following findings in your court order to grant
the executor access to the contents of electronic communications:
The decedent had the specific account with the custodian including the
account’s number, username, address, or other unique subscriber or
92 ESTATE PLANNING AND COMMUNITY PROPERTY LAW JOURNAL [Vol. 16:1
account identifier assigned by the custodian to identify the decedent’s
account.
The disclosure of the contents would not violate 18 U.S.C. § 2701 et
seq., 47 U.S.C. § 221, or other applicable law.
The decedent expressly consented in the decedent’s will to the
disclosure of the contents.
May I issue a court order granting access to contents of electronic
communications if the decedent died intestate or did not authorize access
in the decedent’s will?
From a practical point of view, no. You should issue a court order
granting access to contents only if the decedent had a will which expressly
authorized the executor to have access to contents. From the exact terms of
the statute, however, you have the power to issue the order even without
permission, but evidence shows the custodian will balk at such an order.
What must a court order granting access to the catalogue of electronic
communications and other digital assets contain?
You must make the following findings in your court order to grant the
executor of a will or the administrator of an intestate estate access to the
catalogue of electronic communications and other digital assets:
The decedent had the specific account with the custodian including the
account’s number, username, address, or other unique subscriber or
account identifier assigned by the custodian to identify the decedent’s
account.
The disclosure is reasonably necessary for the administration of the
estate.
How long does the custodian have to comply with my court order?
The custodian should comply with the request not later than sixty days
after your order under RUFADAA Section 16. However, a custodian incurs
no penalty for failing to disclose within sixty days of a proper request. If the
custodian does not disclose, the personal representative may apply to your
court for an order directing compliance. This order must state that compliance
is not in violation of 18 U.S.C. Section 2702. The decedent’s estate bears all
the expenses of seeking and obtaining the court order such as attorney fees
and court costs. If the custodian does not comply with the court order, you
may be able to make an award against the custodian for non-compliance
expenses or contempt of court.
2023] ESTATE PLANNING FOR CYBER PROPERTY 93
Might I need to deal with digital assets in a guardianship or
conservatorship?
Yes. Because a protected person is likely to retain a right to privacy in
personal communications, access to digital assets is not automatically granted
to a guardian or conservator by virtue of the fact that the person is appointed
as a guardian or conservator.
If there is a hearing on the matter, you may grant a guardian complete
access to the ward’s digital assets, that is, the contents of electronic
communications, the catalogue of electronic communications, and other
digital assets in which the ward has a right or interest. RUFADAA Section
14(a).
Without a hearing, a guardian may obtain access to the catalogue and
digital assets other than the content of electronic communications, but a court
order is still required along with other specified required documentation
including a certified copy of the court order that granted the guardian
authority over the ward’s digital assets. RUFADAA Section 14(b).
A guardian may also request that an account be terminated or suspended
for good cause upon providing the custodian with a copy of the court order
giving the guardian general authority over the protected person’s property.
RUFADAA Section 14(c).
Might I need to deal with digital assets when a power of attorney or trust
is involved?
Yes. A custodian has no right to ask for court findings as is the case
when a personal representative of a decedent’s estate is involved. However,
if the custodian does not comply with an agent or trustee’s valid request, the
agent or trustee may seek a court order requiring the custodian to comply
with the disclosure request.
Where can I get more information about RUFADAA?
RUFADAA has extensive Comments which are very helpful. You may
access them on the website of the Uniform Law Commission at
http://www.uniformlaws.org/ [https://perma.cc/MAE8-475W].
You may also access a comprehensive article on the planning for and
administration of digital assets at https://papers.ssrn.com/sol3/papers.cfm?
abstract_id=2166422 [https://perma.cc/2DXJ-YHMR].
94 ESTATE PLANNING AND COMMUNITY PROPERTY LAW JOURNAL [Vol. 16:1
A
PPENDIX E – SUMMARY OF STATE STATUTES
A. RUFADAA Enacted
1. Alabama. ALA. CODE §§ 19-1A-1–18 (2018).
2. Alaska. A
LASKA STAT. § 13.26.645 (2017).
3. Arizona. A
RIZ. REV. STAT. ANN. §§ 14-13101–13118 (2016).
4. Arkansas. A
RK. CODE ANN. §§ 28-75-101–118 (2017).
5. Colorado. C
OLO. REV. STAT. §§ 15-1-1501–1518 (2016).
6. Connecticut. C
ONN. GEN. STAT. §§ 45a-334b–s (2016).
7. District of Columbia. D.C.
CODE §§ 21-2501–2518 (2021).
8. Florida. F
LA. STAT. §§ 740.001–.009 (2016).
9. Georgia. G
A. CODE ANN. §§ 53-13-1–40 (2018).
10. Hawaii. H
AW. REV. STAT. §§ 556A-1–17 (2016).
11. Idaho. I
DAHO CODE §§ 15-14-101–119 (2016).
12. Illinois. 755 I
LL. COMP. STAT. 70/1–21 (2016).
13. Indiana. I
ND. CODE §§ 32-39-1-1–32-39-2-15 (2016).
14. Iowa. I
OWA CODE §§ 638.1–.18 (2017).
15. Kansas. K
AN. STAT. ANN. §§ 58-4801–4819 (2017).
16. Kentucky. K
Y. REV. STAT. ANN. §§ 395A.010–.180 (West 2020).
17. Maine. M
E. STAT. tit. 18-C, §§ 10-101–118 (2019).
18. Maryland. M
D. CODE ANN., EST. & TRUSTS §§ 15-602–620
(LexisNexis 2016).
19. Michigan. M
ICH. COMP. LAWS §§ 700.1001–.1018 (2016).
20. Minnesota. M
INN. STAT. §§ 521A.01–.19 (2016).
21. Mississippi. M
ISS. CODE ANN. §§ 91-23-1–35 (2017).
22. Missouri. M
O. REV. STAT. §§ 472.400–.490 (2018).
23. Montana. M
ONT. CODE ANN. §§ 72-31-401–417 (2017).
24. Nebraska. N
EB. REV. STAT. §§ 30-501–518 (2016).
25. Nevada. N
EV. REV. STAT. §§ 722.010–.450 (2017).
26. New Hampshire. N.H.
REV. STAT. ANN. §§ 554-A:1–19 (2019).
27. New Jersey. N.J.
STAT. ANN. §§ C.3B:14-61.1–.18 (West 2017).
28. New Mexico. N.M.
STAT. ANN. §§ 46-13-1–18 (2017).
29. New York. N.Y.
EST. POWERS & TRUSTS LAW §§ 13-A-1–5.2
(McKinney 2016).
30. North Carolina. N.C.
GEN. STAT. §§ 36F-1–18 (2016).
31. North Dakota. N.D.
CENT. CODE §§ 47-36-01–17 (2017).
32. Ohio. O
HIO REV. CODE ANN. §§ 2137.01–.18 (LexisNexis 2016).
33. Oregon. O
R. REV. STAT. §§ 119.006–.086 (2016).
34. Pennsylvania. 20 P
A. CONS. STAT. §§ 3901–3918 (2020).
35. Rhode Island. 33 R.I.
GEN. LAWS §§ 33-27.1-1–19 (2019).
36. South Carolina. S.C.
CODE ANN. §§ 62-2-1010 to–1090 (2016).
37. South Dakota. S.D.
CODIFIED LAWS §§ 55-19-1–27 (2017).
38. Tennessee. T
ENN. CODE ANN. §§ 35-8-101–118 (2016).
39. Texas. T
EX. EST. CODE ANN. §§ 2001.001–.232 (2017).
2023] ESTATE PLANNING FOR CYBER PROPERTY 95
40. Utah. U
TAH CODE ANN. §§ 75-11-101–118 (LexisNexis 2017).
41. Vermont. V
T. STAT. ANN. tit. 14, §§ 3551–3568 (2017).
42. Virginia. V
A. CODE ANN. §§ 64.2-116–132 (2017).
43. Virgin Islands. V.I.
CODE ANN. tit. 15, §§ 1301–1317 (2019).
44. Washington. W
ASH. REV. CODE §§ 11.120.010–.901 (2016).
45. West Virginia. W.
VA. CODE §§ 44-5B-1–19 (2018).
46. Wisconsin. W
IS. STAT. §§ 711.01–.16 (2016).
47. Wyoming. W
YO. STAT. ANN. §§ 2-3-1001–1017 (2016).
B. RUFADAA Pending
1. Massachusetts. H.R. 1641, 193rd Gen. Ct., Reg. Sess. (Mass. 2023).
C. Non-RUFADAA
1. California. CAL. PROB. CODE §§ 870–884 (West 2016) (partial
RUFADAA).
2. Delaware. D
EL. CODE ANN. tit. 12, §§ 5001–07 (2014) (UFADAA)
3. Louisiana. L
A. CODE CIV. PROC. ANN. art. 3191 (2023).
4. Oklahoma. O
KLA. STAT. tit. 58, § 269 (2010).
