Podcast: Helping Your Clients Prepare for Their Digital Afterlives
[AUDIO INTRODUCTION] Welcome to the Bryn Mawr Trust Wealth Management podcast providing commentary on what’s moving the financial markets, financial planning, and other timely business and monetary topics. Please welcome your host, Jennifer Fox, President of BMT Wealth Management.
[SPEAKER: JEN FOX] Hello, everyone. And welcome to our podcast on the digital afterlife, part 2, for professionals. We’re discussing what happens to your client’s digital assets after death. And with me today is Lee Poskanzer, CEO and founder of Directive Communication Systems. If you haven’t listened to part 1, we recommend that you listen to part 1. This part 2 is directed specifically to those advisors who are counseling clients on how to protect their digital assets.
So Lee, why don’t we just get started and talk about what is a digital asset and how has it evolved over the past 10 years.
[SPEAKER: Lee Poskanzer] Absolutely. First, I just want to thank you for inviting me to be here. I want to just start with how a digital asset is defined by the RUFADA. And that is it’s defined as an electronic record in which an individual has a right or interest. The term does not include an underlying asset or liability unless the asset or liability is itself an electronic record.
So a digital asset can be any type of digital communication or statement. It can be an investment portfolio. It can be a gaming character. But it also is not, let’s say, a checking account located at Bryn Mawr Trust. That would still be a tangible asset. But all the communications associated with it to the clients that may be digital assets. And those can be privy. And they are protected by privacy policies.
[SPEAKER: JEN FOX] Lee, what are some of the things that we need to pay particular attention to when a client passes away and they have these digital assets?
[SPEAKER: Lee Poskanzer] Sure. Digital assets, in terms of estate planning and administration, is still like the Wild West. It’s still being figured out. There are new laws. There are laws that have been on the books for 20-plus years that now pertain to estate planning that they’ve never had to pay attention to before.
We have to adhere to terms of service agreements. And I think, everybody along the chain is still trying to figure out how do we deal with digital assets in terms of an estate, both in terms of distribution to heirs but also how do we get a hold of information so we can find financial and sentimental matter.
The world for e professionals has changed greatly. And we really need to be aware of that. As I just mentioned, we have to be compliant to Electronic Communications Privacy Act. We have to be concerned with the Computer Fraud and Abuse Act. We have to certainly be aware of the new Revised Uniform Fiduciary Access to Digital Assets Act, also known as RUFADA, as well as we have to be fully aware of our terms of service agreements that site owners have.
Estate professionals now are constrained by these new guidelines and regulations they’ve never ever had to consider before. In addition, the assets themselves are quite different. It used to be a lot easier to have a stamp collection or get bank statements in the mail. But now, they come via email. And that email is protected. But how do you go into an email to find those bank statements?
Well, according to Google, you have to have certain proofs and certain requirements in order to get the emails downloaded and provided to the fiduciary in order to be vetted. You don’t just automatically get access. And that’s because of privacy policies that we want while we’re alive, they continue even though we pass away. And so we have a lot more to be concerned with as an estate professional.
We also have been spending years speculating what will work. And what worked in the past doesn’t necessarily mean that it will work in the future. In the past, a lot of estates have been able to get away with sharing passwords. Primarily, because it was older individuals that were passing away, they weren’t really dependent online or they weren’t dependent for online activities or on mobile apps.
And as the generations get older and as these website owners become smarter in protecting our privacy, we’ve now had to adjust. And that’s where the new law, the RUFADA that I just mentioned, has been enacted in, as of this date, 42 states. And California has their own version of it. That creates a rigorous guideline for obtaining disclosure of an account’s contents, which, again, is a data dump, not the ability for somebody to go in and impersonate the account holder.
Those requirements on an over simplistic level really demand that the account holder make a declaration, be able to identify that user name with that URL to that decedent and really not allowed to use passwords, as well as ensure that it’s a necessity to the estate. Estate professionals can’t just go fishing and hope they find assets. And we really now have to be aware of the different aspects we have to really pay attention to.
[SPEAKER: JEN FOX] And I think you had mentioned before that the average person has 150 different accounts that may or may not refer to digital assets but something that, as a professional and working with a client’s estate, likely need to find a way to be aware of. So what have you found as a best practice for estate professionals or executors and fiduciaries to kind of work through this process?
[SPEAKER: Lee Poskanzer] I’m going to start a little bit, if you don’t mind, backwards way on that. I think we need to be very clear that password sharing really should not be an option. It’s a very dangerous recommendation to be making. It also places the estate professional at great liability for several reasons. One, it can actually place our practice at liability if information is broached and someone steals that and starts conducting nefarious activity.
But down the road, if a site owner sees someone using a bad password or not using the pattern or unable to authenticate via two-factor authentication, the site owner can only assume it’s hacking. And that may permanently lockout everybody from that set of information that’s needed to be able to find bank accounts and other financial matter. It’s a very dangerous practice.
And I say this knowing and I having spoken with several site owners about some of the priorities that they have, which, usually in the top three, is to prevent password sharing. We also know that digital executors with broad-based powers are not effective.
We know Facebook and Google have declined disclosure on account contest requests, because they’re saying, nope, it’s still the executor making assumptions of what the account holder wanted to do and they can’t actually prove that the account holder specifically mentions Facebook or Google. So as an estate professional, we have to be aware of what site demands are, especially because your clients have signed those terms of service agreements and agreed to the provisions included in there.
So what we have to do is find what are the effective tools that are out there to ensure that a client’s goals are achieved. I would certainly recommend my service, of course, at Directive Communications. Because we streamline the entire process. The website community has called DCS the lawful, effective, and secure means for handling these matters.
Because we’re able to know the options that are available at a website owner, both the informational options but also what are the action-oriented options. So closing the account, removing my name from the account, deleting the account, et cetera. So we can aggregate all that data and make it very easy, not only for the planning, but for the administration.
My organization also handles the notifications to the different site owners in partnership with the estate. So we don’t do anything independently. We want to partner with the estate the entire way. Another very good option, but in today’s world might be complicated for the estate or the proprietary tools that are offered by Google and by Facebook and Instagram and the others, while they are there for the account holders’ needs, in some cases, they may not work best with the estate.
So you want to recommend your clients to use them, but make sure that they are also preparing their estate for access to information. Lastly, I would say, you as the estate professional really should be aware of what your client is doing online. Ask the appropriate questions.
Ask them what they do online. How much time are they spending online? Are they investing with E-Trade? Are they playing games and buying characters spending $50,000 or $100,000 on there? Are they interested in cryptocurrency or crypto assets? One that has come up recently is these DNA organizations where people are finding out they had children that they didn’t even know existed. So do you want that information to be shared? Or do you want that to be maintained in some type of privacy?
So you want to ask your clients the right questions. And you do have to dig a little bit deep. And you do have to break your traditional routines. But you really want to ask them the right things so that you can achieve their goals.
[SPEAKER: JEN FOX] Lee, thank you very much. I know that this is a very rich subject with a lot of developments and a lot of evolution. But I think that this is a great highlight for our colleagues who are professionals looking to help our clients. So thank you very much.
[SPEAKER: Lee Poskanzer] Thank you for having me.
[AUDIO CONCLUSION/CLOSE] This has been a production of Bryn Mawr Trust, copyright 2018, all rights reserved. Visit us online at bmtc.com/wealth.
The views expressed herein are those of Bryn Mawr Trust as of the date recorded and are subject to change without notice. Guest opinions are their own and may differ from those of Bryn Mawr Trust, its affiliates, and subsidiaries. This podcast is for informational purposes only and should not be construed as a recommendation for any product or service.
BMT Wealth Management provides products and services through Bryn Mawr Bank Corporation and its various affiliates and subsidiaries, which do not provide legal, tax, or accounting advice. Please consult your legal, tax, or accounting advisors to determine how this information may apply to your own situation. Investments and insurance products are not bank deposits, are not FDIC insured, are not backed by any bank or government guarantee, and may lose value. Past performance is no guarantee of future results. Insurance products not available in all states.