Delaware Governor Jack Markell this month signed a bill that would grant fiduciaries wide access to the digital assets and accounts of incapacitated or deceased individuals.
Gov. Markell signed Delaware's House Bill 345 on Aug. 12. Entitled the “Fiduciary Access to Digital Assets and Digital Accounts Act,” the law allows a fiduciary — who has authority over the digital assets or accounts of an accountholder — to have the same access as that individual. They also will be considered an authorized user under state and federal laws. Digital assets can include photos on a website, social media profiles, PDF documents, as well as other web-based businesses, such as eBay storefronts and PayPal accounts.
With Gov. Markell signing off on the legislation, Delaware is the first state to enact the Uniform Law Commission's Fiduciary Access to Digital Assets Act. The ULC, which is also known as the National Conference of Commissioners on Uniform State Laws, is striving for uniformity among the states with respect to the treatment of digital assets.
Generally, custodians of digital assets — namely, service providers — can choose to deny third-party access to a customer's digital files.
The new law in Delaware makes custodians immune from liability if they act in good faith in giving fiduciaries access to digital assets. Fiduciaries have to make their request for access in writing, per the legislation.
According to the law, there are three conditions under which custodians aren't required to accept the written request: 1. If the custodian isn't required to engage in a transaction with the accountholder in the same circumstances, 2. If the custodian's decision to engage in a transaction with the fiduciary or accountholder is inconsistent with state or federal laws or end-user license agreements, and 3. The custodian has knowledge that the fiduciary doesn't have the authority to make the request in the first place.
For decedents who reside in Delaware at their time of death, fiduciaries over digital assets have the same rights as the decedent did. “If I'm the trustee and I have an affidavit that says I'm the current acting trustee, and I give that certification of my authority to a service provider, then Delaware law says that the service provider is released of liability for acting on the reliance of my certification of authority,” said Matt McClintock, vice president of education at WealthCounsel.
Even though the new law grants broad rights to fiduciaries, clients still need to have a plan for their digital assets. “It eventually has to become part of the conversation for financial planners,” said William Bissett, wealth manager at Pinnacle Advisory Group. “They're going to see the language pop up in wills, in trusts as more estate attorneys adopt it. Be familiar with the states that have passed it.”
Clients need to create a list of online accounts and passwords as part of their plan for digital assets, and empower their fiduciary to deal with the digital assets by granting authorization in a will, trust or through powers of attorney.
Make sure clients don't forget to grant access to the physical assets where the digital assets are stored, noted Mr. McClintock. “The Delaware statute doesn't deal with tablets, smart phones and devices through which these digital assets are accessed,” he said. “To have absolute clarity in the plan, the documents should authorize the fiduciary to deal with digital assets as well as the tangible assets that control those digital assets.”