Virtual Assets and Real Advice - Clients Need Candid Advice Regarding their Digital Assets (8 of 10)

UFADAA’s drafting committee recognized that there would be several large stakeholders who may be interested in their work.[i]  It is unclear how many of these groups the committee sought to include, however they did receive some early input from the ACLU and SPSC.[ii] Although both groups expressed reservations, SPSC provided concrete feedback and committed to “working with the ULC” through the drafting process.[iii]  Throughout 2013, SPSC sent letters to Maryland, Massachusetts, Nevada, Nebraska, New Hampshire, North Dakota, Oregon, and Virginia lobbying against proposals to grant access to a decedent’s digital assets.[iv]  In those letters, SPSC told legislators that the bills would violate contractual rights and federal privacy laws.[v]  Each letter went on to encourage the legislators to wait until the ULC finished its work on the Uniform Law that was to be completed sometime in 2014.[vi]  However, just as UFADAA was putting the finishing touches on its final draft, SPSC withdrew its support.[vii]  In a letter dated April 4, 2014, SPSC stated that if UFADAA was placed into law, service providers would “risk potential violation of federal law” and users would have “false expectations of what happens to their digital accounts after they die.”[viii]  It remains to be seen if other like-minded groups will join in opposition to UFADAA, but SPSC’s change of mind is a bad omen for UFADAA’s potential to be widely adopted across the nation.

IV. Current Practice Methods

Despite the legal uncertainties surrounding digital assets, many estate planners have been forging ahead, advocating the use of various estate planning methods to address the new world of online digital assets.  By trial and error, planners are beginning to see that at some of these methods just cannot be relied on.  Other methods have not been fully tested to know for sure whether they will work or not.  There are also some newer, market-based, approaches turning up on scene.  But as will be discussed, these are perhaps the greatest unknown of the bunch.

A. Durable Powers of Attorney

A power of attorney is a document that appoints a person (the attorney-in-fact or “agent”) to act on behalf of the person signing the document (the “principal”).[ix]  The powers that the principal wants the agent to have are outlined in the document and can be very broad or limited in time and scope.[x]  A power of attorney that remains effective after the principal becomes incapacitated is called a “durable power of attorney.”[xi]  All fifty states allow for the use of a power of attorney in some form.[xii]  However, there is growing evidence that agents acting pursuant to a power of attorney may be denied access to online digital assets.[xiii]

Take the case of Sidney Kripke who was diagnosed with a debilitating form of dementia rendering him unable to perform some of the simplest of tasks.[xiv]  Sidney had previously executed a power of attorney appointing his wife, Eva as his agent.[xv]  For several years, Eva managed his online bank account with Bank of America until she was locked out for using the wrong password.[xvi]  Eva tried working with the bank on several levels only to be turned away every time.[xvii]  A local investigative reporter contacted Bank of America on Eva’s behalf, but was told the same thing – powers of attorney cannot be accepted for accessing online banking.[xviii]  A Bank of America spokesman stated on record that in order to “protect the customer and mitigate risk,” only “an account holder or user” – in this case an incapacitated person – is given access to an online bank account.[xix] 

Privacy laws like the Graham-Leach-Bliley Act of 1999 (“GLBA”), impose stiff penalties if banks breach their duty to keep customer information private.[xx]  GLBA does contain provision that allows banks to disclose financial information “to persons acting in a fiduciary or representative capacity on behalf of the consumer”.[xxi] While a bank may disclose financial information to an agent acting pursuant to a power of attorney, the statute does not require banks to provide that information by granting access to the principal’s online banking profile.[xxii]  Online banking profiles and any information contained therein would also be covered by SCA, which does not contain a similar exception as the GLBA.[xxiii]  As the case of Sidney Kripke demonstrates, service providers seeking to comply with federal privacy laws are likely to turn away agents acting under powers of attorney when it comes to accessing digital assets.[xxiv]  Without a major shift in the status quo, planners should hesitate using powers of attorney to plan for the disposition of digital assets.