Kudos to Sharon Hartung and Jennifer Zegel for their powerful article on digital assets. This is the first article I’ve seen that very clearly and directly says that Trusts and Estates attorneys are doing things wrong. This most recent installment, Five Signs That Estate Advisors Aren’t Getting With the Digital Program in the Bloomberg Tax Insight series exposes the many pitfalls and realities of digital assets associated with Trusts and Estates work. They share the truths that are often brushed over when attorneys meet with clients and construct estate plans.
Trusts and Estate work is going through significant changes as a result of the technology evolution. The growing problem is deep, wide and can no longer be ignored. For years, addressing digital property was unclear and practitioners were left speculating about solutions, such as password sharing, but were unsure of their ability to succeed. With RUFADAA enacted in most states and more estates’ experiences, best practices are now surfacing.
The authors expose the important criteria for handling the many facets of this delicate and dynamic problem. Their discussion of laws and regulations is buttressed by real and practical solutions that will drive success while recognizing the responsibility and limitations of the Trust and Estate profession.
Law firms, organizations and practitioners associated with financial planners, estate planning, eldercare and estate administration need to consider updating policies, internal processes, practice/data management tools and staff education. They need to evaluate their customer experience from both perspectives: client relationships and portfolio risk management.
It may be beneficial to bring to light some of the actual instances where ill-prepared or popular misconceptions wreaked havoc on an estate, families, fiduciaries and even financial institutions. Consider the following real cases;
- Apple- The Thompson family spent over three and half years in court battles, with untold expense, to get obtain access to the family photos and videos stored in Apple’s iCloud.
- AOL- A widow estimates she lost $600,000 in income from her deceased husband’s consulting business because she was denied access by AOL to his email and files. Subsequently, as per the Terms of Service Agreement, the data auto-deletion policy was activated after the account was dormant.
- 1Password- Deceased account holder’s estate was unable to identify digital assets holdings with 1Password unable to fulfill request due to policy and inability to decrypt.
- Vanguard- Vanguard Manager stole $2.1M from deceased account holder dormant accounts, recognizing that the estate had not logged in.
The problems doesn’t stop with the Trusts and Estates profession. Content providers also need to be fully prepared to handle the expected increase in estates’ data disclosure of information requests. Few innovators address account holders’ passing while developing their platforms, apps and software. They prefer to focus getting their product up and running. But as account holders age and die, content providers will need to scale up their operations, policies and technology to handle the volume of requests to come.
Ms. Hartung and Ms. Zegel also bring up a subject that is often resisted by practitioners: using technology to solve a technology problem. Now and going forward, clients’ estates and digital asset portfolios are only going to grow in complexity. The common practice of including provisions regarding digital assets in an estate document falls far short. They’re only as good as the accounts and assets that are visible, that’s assuming the provision meets RUFADAA or custodian policy requirements. In fact, they may prove to be more problematic, leaving even the most experienced of fiduciaries or representatives overwhelmed with a heavy workload and responsibility. In addition, they do nothing for preventing subscriptions from expiring or data auto-deletion policies from kicking in.
Companies such as Directive Communication Systems (DCS), deliver benefits and reduce liability to lawyers and their firms. DCS handles online account and digital asset succession management. Working with practitioners and their clients, digital property and their account level directives are effectively prepared for, without using passwords and fully compliant to privacy/fiduciary laws and TOSAs.
The DCS platform builds and updates client digital asset portfolios so representatives can easily identify accounts and obtain the disclosure of an account’s contents. It centralizes the portfolio and partners with the estate to handle the daunting and unwanted task of carrying out the directives to custodians. Through technology, service providers can get a law firm quickly adapted to digital property while significantly reducing the hardship of its management. It protects an estate’s value, preserve personal privacy and ensure legacies live on.
Technology has irrevocably penetrated the Trusts and Estates profession. These articles are pointing out the need for more awareness and strategic conversations around a fast moving and expanding problem. Perhaps approaches like these will demonstrate the opportunity that lies on the road ahead.
Lee Poskanzer is the CEO of Directive Communication Systems(DCS) and a veteran of innovation. He has successfully led product innovation change at Fortune 500 companies including American Express, Safeway, PolyGram, and Staples that ultimately evolved to becoming industry standards and practices. Mr. Poskanzer’s areas of expertise include Legal Tech, Fintech, and Consumer Services. With the recognition of the growing need for solutions for managing digital assets and online accounts, Mr. Poskanzer founded DCS to help all aspects of digital assets directives management including estate professionals, their clients, and website owners with the planning and administration of their digital estate. DCS has become an established and respected authority on the digital afterlife, having representation on several panels - including discussions with the International Bar Association, the International Association of Privacy Professionals, and the American College of Trust and Estates Counsel. DCS has also been featured at the Washington State Trust and Estates Conference. Mr. Poskanzer has appeared in several articles and features for leading press including CNBC.com, Wealthmanagement.com, CNET, Insurance News, Trust and Estates Magazine. Mr. Poskanzer has also led several CLEs for WealthCounsel, Bryn Mawr Trust Company, Essex Estate Planning Counsel, and others. Mr. Poskanzer continues to inform and advise on the security and management of digital estates and afterlife protection, both as an individual and through the growth of DCS.