Monday, October 30, 2017
Recent Changes in Texas Estate Planning and Digital Assets Law
In our digital age, more and more estate planning clients are storing and maintaining assets and information electronically. A conundrum arises when a person becomes incapacitated or dies and has stored assets or information digitally and no one is privy to the assets or how to access them. Fiduciaries, such as agents under powers of attorneys, executors, trustees and guardians, are frequently faced with this dilemma. How does a fiduciary access the digital assets of a person if the person has not divulged the assets or the information to access the assets such as passwords?
Today a myriad of electronic assets and information about such assets abounds. Assets and information which used to exist in tangible paper form such as letters, tax returns and bank statements, now only exist for some persons in digital form. Documents are stored in the cloud. Reward points and frequent flier miles are accumulated. Bitcoins and other electronic money are used online. Blogs are written and published. Electronic mail and social media accounts are a way of life. Online banking and accessing financial institution accounts to pay bills and service utility and other service accounts is a daily occurrence.
These functions are performed online on servers that are not owned or controlled by the user. Instead, companies store the electronic information on their servers and are the custodians of the information. The companies secure the electronic information to protect the privacy of the user. Electronic Communication Service (ECS) provider companies are regulated by the Stored Communications Act (SCA) of 1986 as part of the Electronic Communications Privacy Act (ECPA). Generally, a person’s Fourth Amendment right to privacy is protected with regard to electronic information by prohibiting the vendor-company from voluntarily disclosing a person’s communications and content, albeit with certain exceptions.
None of the exceptions apply to fiduciaries and their ability to access information for or on behalf of the deceased or incapacitated person.
In response to this dilemma, the Uniform Law Commission recognized the obstacles fiduciaries face when dealing with digital assets after death or incapacity and created the Uniform Fiduciary Access to Digital Assets Act (UFADAA). The UFADAA was drafted to ensure that fiduciaries could access digital assets when appropriate. However, most large internet companies such as Google and Yahoo opposed the UFADAA. The UFADAA favored provisions in a user’s will, trust and powers of attorney with regard to authorizing a fiduciary’s access to the user’s electronic information. The large internet companies wanted access rights to be governed by the terms of their agreements. Consequently, the Uniform Law Commission revised the UFADAA and struck a compromise.
The Texas legislature addressed the issue and on September 1, 2017 the Texas Revised Uniform Fiduciary Access to Assets Act (TRUFADAA) became effective as Chapter 2001 of the Texas Estates Code. The new Code section provides generally that if a user who uses a custodian’s (service provider’s) online tool with regard to disclosure of information to a fiduciary and the tool permits the user to change the direction regarding disclosure at all times, then the direction on the online tool overrides any direction in a user’s will, trust, power of attorney or other record. If a user has not used a service provider’s online tool or if the service provider has not provided an online tool, then the user’s directions in a will, trust, power of attorney or other record will control as to the user’s direction regarding what a fiduciary may access. If a user engages a service provider’s online tool as to disclosure, or if the user’s will, trust, power of attorney or other record contains directions as to what a fiduciary may access digitally, then the online tool or the will, trust, power of attorney or other record of the user prevails over a service provider’s terms-of-service agreement as to what may be disclosed to a fiduciary.
The new law gives estate planners an opportunity to discuss with their clients ways to handle conversations with their fiduciaries -- regarding disclosure of digital assets and information related to digital assets. It appears prudent for clients to give express authorization to fiduciaries in their estate planning documents. To this end the 85th Texas legislature has revised the statutory durable power of attorney form to include a specific power regarding digital assets which may be selected by the principal who signs the power of attorney. This new power can be used to enable the principal’s fiduciary (agent) to avoid the dilemma of how to handle digital assets and disclosure issues.
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