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Online Bankers, Shoppers and Browsers Beware: How to Protect Digital Assets

With over 87% of the United States population using the internet or having access to computers in their homes in 2020, and 97% of Americans owning cell phones in 2021, the need for users to protect and plan for their digital assets is at an all-time high.

What are Digital Assets?

Oftentimes, users only consider their online accounts as digital assets and neglect that the content and accounts saved on computers, phones and tablets, and the devices themselves, also qualify as digital assets. 

The phrase “digital assets” covers a wide range of online information including:

  • Credit and cash cards and related loyalty program benefits
  • Personal social, email and gaming accounts and the content shared on these accounts
  • Financial accounts
  • Shopping and music accounts
  • Personal information
  • Account numbers
  • Passwords
  • Transaction history
  • Crypto and/or digital currency – Ethereum, Bitcoin, Bitcoin cash, etc.
  • NFTs
  • Creative work including photos, videos, poem, novels, etc.
  • Domain names
  • Any information stored on:
    • Digital devices
    • External hard drives or discs and thumb drives
    • Cloud accounts or other online or physical storage

Who Can Access Digital Assets on Behalf of Others?

Many of the online digital assets that are commonly used are governed by the provider of the online service in the user agreement that allows the creation of such accounts.

Under two Federal laws, The Stored Communications Act and the Computer Fraud and Abuse Act, those who wish to act on behalf of others must have legal authority in addition to the necessary login information to legally access digital accounts and related assets.

The Revised Uniform Fiduciary Access to Digital Assets Act (“RUFADAA”) passed in 2015 in Illinois allows Illinois residents to give legal authority to fiduciaries, or someone named to act on the user’s behalf, to access the digital accounts despite the two prior mentioned federal laws.

Protecting Digital Assets with Estate Planning

A person can and should designate those individuals who they wish to manage their digital assets in the event that they become unable to do so on their own. These individuals can be designated in a Power of Attorney for Property to handle financial and asset affairs. Individuals should also put a will or trust in place to handle the management and disposition of assets or affairs at the client’s passing.

It is also crucial to ensure documents drafted before 2015 are updated to include appropriate language under RUFADAA to protect digital assets.

In order to protect digital accounts and stored information or specify who can be prevented from accessing the same, there are three options under the RUFADAA to do so, listed in strength of effectiveness:

  1. Designate digital authority via account: Some digital account providers allow users to designate who may or may not access some or all of the information in the accounts.
    1. If this option is provided and used, it is the strongest statement of legal access for those designated and will take effect even if the user agreement or will, trust, power of attorney or other designation have contrary language.
  2. When designating digital authority is not an account option: To appoint someone to act on their behalf, individuals can include (or add to documents created before 2015) language to a power of attorney, will and/or trust that specifically allows those whom they wish to legally handle their affairs access to all or at least some of their digital accounts to make sure that they are properly managed or terminated.  
    1. A person may also specifically prohibit access to digital accounts in these documents as well.
    2. These documents will take effect even if the user agreement has contrary language.
  3. When digital authority has not been outlined via account option or estate planning documents: Information will be governed by the user agreement, in which usually there is no legal access allowed to others aside from the account owner.

How Designated Persons Can Access Digital Assets

When a fiduciary requires access to the digital accounts, they will likely need to submit the following to the service or content manager/provider:

  • A copy of the power of attorney, will or trust
  • Other proof of legal authority such as a death certificate or a court order appointing them as a Conservator, Guardian, Personal Representative or Trustee
  • Information linking the account to the client such as a user id and password or social security number

For creative assets stored offline or not posted to the internet, or hardware such as smart phones, computers and storage devices, individuals can also grant or limit access in a power of attorney, will or trust. They should also provide a list of user ids and passwords or direction to where those are stored.

Determining What Digital Assets to Pass On to Loved Ones

While a person may rather some digital accounts be closed after their death, other assets will likely want to be passed on to loved ones.   

Assets like digital currency, investments and even creative work may be very valuable and so great thought should be put into whom they should be passed on to in estate planning documents. Individuals must also ensure that the intended recipient can access the items once the estate has been settled with the appropriate language in the documents as certain user agreements may prohibit the transfer of assets.

Nina Stillman is a veteran attorney at Fischel | Kahn who focuses on creating and executing estate plans and the related administration, taxation and litigation of estates and trusts.