Florida Banking May 2024

account holder and conducts activity as the account holder. Account holder impersonation can violate guiding TOSAs and privacy laws. Effective vs. Ineffective Succession Planning Effective succession planning goes well beyond ensuring all items are covered in a will. In fact, statistics show that memories shared with loved ones are the most important component of the legacy individuals leave behind. Ineffective succession planning avoids the allocation and assignment of digital property without a monetary value. As trusted advisors, you need to be sure your strategies encompass this vital component. First, you need to understand how clients want their property distributed upon death. Clients want control over their privacy and who sees their contents. Statistics support that 43 percent of a client’s digital property should be deleted upon death. This includes personal accounts, photos, and videos that clients believe will hinder their legacy. Another 30 percent of accounts within the estate should only be accessed with prior consent. 6 These statistics confirm that a large proportion of clients don’t want anyone to see certain account contents. Instead, they want these accounts deleted and forbidden from falling into the hands of beneficiaries, executors or trustees. Clients are turning toward advisors for help facilitating these wishes, presenting a perfect opportunity to build trust with your clients. First, they need to understand that they have options and choices when it comes to their digital accounts. Next, they need to know which strategies fit best into their trust and estate plan. An effective succession planning approach limits the use of password sharing. For one, password sharing can be time intensive. With the number of digital accounts on the rise, an individual can have hundreds of varying passwords. The first hurdle to overcome is the custodian’s ability to use the IP address of the device being used to login into the decedent’s account. That will trigger security protocols to authenticate the account holder. Even if you do locate the correct login information, it’s highly likely the two-factor authentication protocols will be initiated, which may send a code to an email or mobile phone that will need to be accessed or require accurate and correct responses to a series of personal security questions. This time is better spent grieving and making other financial decisions and handling family matters. Not to mention that account holder impersonation is a violation of laws and breaches the Terms of Service agreements. With too many log-in attempts, the account could be permanently locked out, taking years of legal proceedings to gain access, that may or may not result

with AI intelligence, ICOs, and crypto wallets are all relevant innovations within the digital property realm. Your team needs to be able to identify these digital assets and develop an effective game plan for your client’s trust and estate plan. Fiduciary Laws are Evolving to Encompass Digital Assets The Covid pandemic skyrocketed the demand for trust and estate planning, as Americans who dealt with a serious case of COVID-19 were 66 percent more likely to develop a will.3 Even more surprising is the piqued interest among younger generations. Historically, older generations and those with serious health conditions would be the group of clienteles to engage in trust and estate planning. Now, we see the distribution even out, with 71 percent of Americans aged 21 to 35, and 81 percent of Americans aged 36 to 42, interested in a trust. These age ranges pull ahead of the 64 percent of Americans aged 51 and older who are interested in creating a trust. 4 When you look at the investments and digital property acquired by age group, nearly 60 percent of millennial investors hold digital currency. 5 Lawyers and estate planners aren’t factoring the shift in investments and digital property when preparing trusts and other succession planning documents, despite fiduciary laws adapting to changing conditions. There are now three main definitions of digital assets: 1. Legal – An electronic record in which an individual has a right or interest. 2. Financial – Although there is no formal definition, the financial interpretation of digital assets is commonly cryptocurrencies and NFTs. 3. IRS – “Any digital representation of value that is recorded on a cryptographically-secured distributed ledger or any similar technology” as specified by the Secretary, including convertible virtual currency and cryptocurrency, stablecoins, and non-fungible tokens (NFTs). The most popular definition is the financial one, but the legal definition encompasses what digital assets truly are: any form of digital property. Advisors who narrow their view of digital assets to the financial definition are missing out on a key component of trust and estate planning. It’s also important to differentiate between “disclosure of account contents” and “account holder impersonation.” Data disclosure is when the custodian posts raw data to the cloud so that data disclosure designees can retrieve and evaluate the data to find important matters. On the contrary, access to the account means someone logs in as if they’re the

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3. https://www.legalzoom.com/articles/estate-planning-statistics 4. https://www.privatebank.bankofamerica.com/articles/generational-financial-estate-planning-priorities. html#:~:text=84%25%20of%20millennials%20believe%20it,than%20their%20silent%20generation%20forebears 5. https://www.fool.com/investing/2022/11/10/60-of-millennial-investors-own-cryptocurrency-shou/ 6. NO SOURCE from PG 23 Powerpoint

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