Digital Assets ActSince the Information Age dawned around 1990, a new type of asset gradually moved to the forefront of legal discourse: the digital asset. What began with online diaries has now grown to include entre businesses with no offline presence as well as Bitcoin accounts worth millions of dollars. Traditional Florida probate law was simply not set up with digital assets in mind.

In response to this emerging disparity, the Florida state legislature passed the Florida Fiduciary Access to Digital Assets Act (FADAA). Florida was one of the first few states to pass a digital assets law based in the federal Revised Uniform Digital Assets Law, a non-binding federal law designed to encourage states to pass similar laws that are harmonized with the federal version.

The Legal Definition of “Digital Assets”

For the purpose of interpreting FADAA, the term “digital assets” means an electronic record, including electronic communications. Significantly, it does not apply to the underlying asset or liability “unless the asset or liability is itself an electronic record.” For example, bank account records can be digital assets, but the actual funds in the account (even cryptocurrencies) are not.

Who Is a “Fiduciary”?

For the purpose of access to digital assets, a “fiduciary” means someone in one of the following four categories, depending on the circumstances:

  • A personal representative (executor) of the probate estate of a deceased digital asset owner
  • A legal guardian of the property of a minor or incapacitated persons (a “ward”)
  • An agent acting under a power of attorney
  • A trustee

A family member enjoys no automatic right to access digital assets unless he/she is also a fiduciary.

Fiduciary Duties

Fiduciaries are subject to very stringent ethical and legal duties, regardless of whether they are granted access to digital assets. The two most important of these duties are:

  • The duty of loyalty: A fiduciary must act in the best interests of the person(s) for whom the relationship was established, not himself. A trustee may not exploit trust property for his own benefit, for example, even if the trust beneficiaries are not harmed thereby.
  • Duty of care: A fiduciary must manage the assets that have been entrusted to him with all of the care that a prudent person would exercise in caring for his own assets. In some cases, this may give rise to a duty to invest those assets – but risky ventures are often prohibited.

These are not the only two fiduciary duties in existence. Other duties apply to various types of fiduciary relationships. A fiduciary is subject to civil and even criminal liability for violating his fiduciary duties.

FADAA’s Purpose

FADAA attempts to balance two competing concerns:

  • Granting a fiduciary the access necessary to manage digital assets in accordance with the assets owner’s estate plan; thereby effectuating that estate plan; and
  • Protecting the digital assets owner’s privacy to the extent that he did not waive his privacy rights by consenting to access.

Although these two concerns are in constant tension with each other, in close cases, FADAA generally tends to favor privacy over access.

In light of these competing concerns, FADAA’s three primary purposes are:

  • To grant fiduciaries (such as estate executors) the access they need to perform their duties;
  • To grant digital asset custodians (Facebook, for example) immunity from liability for complying with fiduciary requests as long as they act in good faith; and, most importantly,
  • To grant owners of digital assets the ability to plan in advance for the disposition of assets in the event of their death or incapacity.

Any ambiguity in the text of the law should be interpreted in light of these three purposes.

Rights of Digital Assets Owners

Since digital assets are considered property, FADAA attempts to ensure that the owners of digital assets enjoy the same rights as other property owners, including the rights to:

  • Specify the disposition of his or her digital assets (preservation, distribution, or destruction) upon his death or incapacity; and
  • Prevent custodians of his property (Internet Service Providers, for example) from releasing information or assets to fiduciaries without the owner’s consent (consequently, fiduciaries must prove their right to access).

Interpretation of Disposal Instructions Provided by a Digital Assets Owner

Since a digital assets owner’s privacy is so important, fiduciary access to these assets is based on instructions issued by the owner wherever possible. Where the expression is unclear or contradictory, the following methods of interpretation apply:

  1. An online planning tool (separate from the terms of service agreement)
  2. A last will and testament, power of attorney, trust instrument, or other written indicator
  3. The ISP’s terms of service for the corresponding user account

These methods of interpretation are prioritized, and one will be selected over the other in the event of a conflict. If the terms of an online service tool conflict with the terms of a trust instrument, for example, the instructions provided in the online planning tool will prevail.

Limitations on the Fiduciary’s Authority

A fiduciary’s authority to access digital assets is not unlimited. The following are examples of some significant limitations:

  • In some cases, a fiduciary is entitled to access the content of a digital asset (the full text of an email, for example). In other cases, the fiduciary is entitled only to a “catalog”: a list of these assets without details.
  • A fiduciaries’ right to access a digital asset is limited to information. An estate executor, for example, might be entitled to detailed bank account records. However, this right does not entitle him to dispose of the contents of the bank account to pay estate creditors (an executor may indeed enjoy this right, but if so it will not be based on FADAA).
  • A fiduciary’s access to the digital assets of another is limited to that access that is necessary for him to perform his functions as a fiduciary. For example, a trust administrator would not enjoy access to the grantor’s private bank account statement if the bank account is not a part of the trust.

Other limitations also apply under various circumstances. However, space limitations prohibit listing them here.

Start Preparing Today

To begin preparing for the disposal of your digital assets upon your death or incapacity, contact the probate attorneys at Beller & Bustamante either online or by calling (904) 288-4414. We serve clients throughout the Jacksonville metropolitan area, including St. Johns County (St. Augustine, Ponte Vedra, Ponte Vedra Beach, and St. Johns, among others), Duval County, Flagler County, Putnam County, and Clay County.