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Delaware Legislates on Inheritance of Digital Assets

| Published on August 20, 2014 at 15:37 BST

The US state of Delaware has enacted a new law that regulates digital legacy issues and allows families to access their loved ones’ digital assets after death or incapacitation.

Notably for the bitcoin community, the legislation should help protect the interests of Delaware residents with cryptocurrency holdings.

Late last week, the Delaware House of Representatives passed House Bill 345, the 'Fiduciary Access to Digital Assets and Digital Accounts Act', which gives heirs and executors the authority to take control of digital accounts and devices, much like physical assets.

The law states:

“A fiduciary with authority over digital assets or digital accounts of an account holder under this chapter shall have the same access as the account holder, and is deemed to (i) have the lawful consent of the account holder and (ii) be an authorized user under all applicable state and federal law and regulations and any end user license agreement.”

HB 345 is based on the Uniform Fiduciary Access to Digital Assets Act (UFADAA), which was created by non-profit organisation the Uniform Law Commission. Delaware is the first state to pass legislation based on the UFADAA.

Law limited to Delaware residents

Although Delaware is one of the smallest US states, it is home to a number of major companies. Due to its business-friendly policies, the state has managed to attract leading credit card companies, along with tech companies like Google, Facebook and Twitter.

However, the new law will not apply to companies incorporated in the state. It is intended for Delaware residents rather than companies.

“If a California resident dies and his will is governed by California law, the representative of his estate would not have access to his Twitter account under HB 345,” Kelly Bachman, spokesperson for State Governor Jack Markell told Ars Technica.

Bachman stressed that the law applies only to persons whose will is governed by Delaware law. Whether or not the company holding the digital account is incorporated in Delaware is irrelevant. This has obvious implications for bitcoin users in Delaware and if other US states follow suit and enact similar legislation based on UFADAA, these protections could soon be available to all US residents.

House member Daryl Scott, the lead author of the bill, argues that because legislators had not kept up with advances in technology, the new law will help protect the rights and interests of average residents.

The new law is not without its critics. however. Director of the State Privacy and Security Coalition Jim Halpert warns that the law does not take into account privacy and that it allows executors and heirs to view highly confidential communications between third parties and deceased family members.

Digital wills pose challenges

CoinDesk examined the pitfalls of digital wills and potential challenges faced by heir and executors earlier this year.

The issue of digital asset management in such situations has started to attract attention from legal scholars too. The British Law Society has already urged people to leave clear instructions for their intellectual property and digital media in case of death.

Bitcoin assets pose even more challenges due to their very nature. Trades can be executed globally in seconds, keys can be stored halfway around the globe, while bitcoins can be stored on a wide range of digital media and on physical wallets.

Most jurisdictions simply lack the legal framework for such situations. Therefore the best course of action for the time being is to be prepared for all eventualities. Delaware's legislators are slowly catching up with technology, but the business-friendly state is an exception.

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