Digital AssetsNext time you schedule an appointment with Downey Brand’s Sacramento office to revise your estate plan you will have a new question to consider: who will manage your Facebook account when you’re gone?

Assembly Bill No. 691, which became effective on January 1, 2017, attempts to aid in that process.  It is commonly called the Revised Uniform Fiduciary Access to Digital Assets Act (the “Act”), and it establishes a scheme for designating who is entitled to access your online accounts (and what portions of those accounts) after your death.  The Act has been added to the California Probate Code at sections 870 to 884.

Why Does It Matter?

In our everyday life we create millions of digital impressions.  The vast majority of these bytes are meaningless.  But, more and more, our digital impressions have monetary value, and collecting and protecting those digital assets after death may be necessary for a thorough estate and trust administration.  These sorts of monetized digital assets may include:

When a person who owns a valuable digital asset passes away, his or her heirs will want to take steps to protect and perhaps liquidate that asset.  This can be a trying experience when heirs are at the mercy of a variety of different internet companies and their varied policies, each with its own terms-of-service agreements that often restrict third party access to individual accounts.

In addition to financial assets, many of the digital impressions that we create on a day-to-day basis have a sentimental value; things like pictures and messages.  It can be painful (or healing) to continue to interact with a Facebook account after the friend has passed away.  Who makes the decision about whether your Facebook account remains active after you have expired?

The Act endeavors to answers these questions.

How Does It All Work – Online Tools

The Act creates a preference for “online tools.”  Think of online tools as a beneficiary designation like you would expect to see for life insurance.  You can use an online tool to direct that a website disclose (or not disclose) some or all of your online content and/or communications to a “designated recipient” after your death.

This would typically be something found in “Advanced Settings.”  For example, within Facebook’s “Security Settings” there is a section called “Legacy Contact,” which is an online tool, as defined by Probate Code section 871.  Using this online tool you can designate another Facebook user to be your designated recipient, and that person will be able to pin posts, respond to new friend requests, and update your profile photo after your death.  But, per Facebook’s terms of service, your designated recipient will not be able to use Facebook to make new posts on your behalf and will not be able to see your lifetime messages.

A designated recipient selected via an online tool will generally take precedence for access to digital assets against a contrary provision made in a will, even if the will was made later in time.  (See Probate Code section 873(a).)

How Does It All Work – I Don’t Have An Online Tool!

If there is no online tool designation available – either because the decedent did not make a designation using the online tool or because the particular website does not offer such a tool – a decedent may  designate a “fiduciary” in her “will, trust, power of attorney, or other record” to receive disclosure of digital assets.

“Fiduciary” is defined as a “personal representative or trustee,” which would seem to mean that, outside the trust context, a person seeking digital access must file a petition for appointment of a personal representative in the Probate Court.  This point is somewhat confusing because at other places the Act refers to a designee as using a small estate affidavit under Probate Code section 13101 to gain access to digital assets and that sort of affidavit is generally used in lieu of a petition to the court.

Adding to the confusion, “record” is defined very broadly and it is not clear what formalities, if any, would be required for a decedent to designate a fiduciary for digital assets.  For example, the Code does not specifically require a “record” to be signed by the decedent.

The Process for Gaining Access to Digital Assets

Once a “designated recipient” is selected via an online tool or a “fiduciary” is selected, the custodian of the digital assets (i.e., the internet company like Etsy or Facebook) may, in its sole discretion, grant full or partial access to the decedent’s account pursuant to Probate Code section 875.  But, there does not appear to be an affirmative obligation placed on the custodian to provide such access.

The Act does create a protocol for a “personal representative” or a “trustee” to demand disclosure of digital assets and/or electronic communications.  (See Probate Code section 876-879.)  The Act is, again, muddy as to whether this process is available to “designated recipients” named in online tools and designated “fiduciaries,” or whether the protocol for compelling disclosure is only available to trustees and court-appointed personal representatives.

Regardless, the Act is clear that for a “personal representative” to compel disclosure she must submit a list of documents to the custodian, including:  (a) a formal written request for assets, (b) a certified copy of the decedent’s death certificate, (c) a letter of appointment, small estate affidavit, or court order, and, (d) in certain instances, a copy of the decedent’s will, trust, power of attorney, or other record.

After receiving these documents, the custodian of the digital assets may decide in its sole discretion to compel the personal representative to provide a court order determining that disclosure of the digital assets “is reasonably necessary for estate administration.”  (Probate Code section 877(d)(4)(B).)

Thereafter, the custodian must produce digital assets within 60 days of receipt of the information referenced above, although since the custodian can insist upon a court order as part of that process, the 60-day deadline is illusory.

The default digital assets provided by a custodian do not include sent or received electronic messages, but rather only a “catalogue of electronic communications” – like a privilege log – that identifies the sender, recipient, time, and date of the message, but not the content.   There is a separate but similar process for a “personal representative” to obtain electronic communications sent or received by the decedent during their lifetime.

Interestingly, the discretionary right of a custodian to insist upon a court order does not exist if the fiduciary designation is made in a trust and the assets/communications are held in trust.  Perhaps the Legislature felt that if the decedent made a specific lifetime determination to hold their digital assets and electronic communications in trust then the post-death protection of a court order was not necessary.  The streamlined approach to digital assets is another reason to use a trust as part of your estate planning, and if you have a trust you might amend it to deal with digital assets.

For Whose Benefit Was This Enacted?

The Act was supported by industry – companies like AOL, Facebook, and Yahoo – and in their roles as custodians of digital assets and electronic communications it provides them with many protections.

As described above, the custodian may insist upon a court order before releasing any records, seemingly even if the decedent went through the process of using an online tool or making a fiduciary designation.

Other protections for custodians include:

Take Away Points

Overall, the Act seems like a step in the right direction to create a path for gaining access to digital assets and electronic communications.  Given some of the internally inconsistent and muddy language of the statute, this will not be the last word on digital assets, but at least it is a good start.  The appellate courts and Legislature will clarify the Act in the years ahead.

The Act feels overly protective of internet companies as custodians of digital assets.  Facebook and similar custodians have made plenty of money creating a platform where digital assets exist and they should not be able to “pass the buck” to avoid dealing with hard questions of succession to digital assets.  Yet, the Act creates plenty of discretion for custodians to do as they please, impose significant hurdles on fiduciaries/designees, defer decision-making to the courts, and at the same time the Act immunizes custodians from liability.

The imprecise use of terms makes it unclear about how useful the Act will be used for ordinary citizens.  The Act may help people access the digital assets of loved ones for sentimental reasons.  If, however, every request for access to digital assets under the Act will require a Petition for Probate, a Court Order, and/or a trust document, the Act may not help those seeking access on an inexpensive basis.

The imprecise definitions in the Act could lead to litigation.  For example, what if an online tool via the PayPal website leaves control of a sizeable account balance to a “designated recipient” who is someone other than a court-appointed personal representative?  It is not clear who would be entitled to ownership of that account or to hold that account pending administration of the estate.

If you hold significant digital assets, placing those assets in trust is the surest way to provide for your designee’s timely access to asset after your passing.  The discretion of custodians to release digital assets and electronic communications, and the requirements imposed upon a successor trustee to compel, are both significantly less when the assets are in trust.