Hawai‘i Life. Hawai‘i Law.

black-sand beach at Isaac Hale Park
  1. Home
  2.  | 
  3. Estate Planning
  4.  | Digital Estate Planning for Hawai’i Business Owners

Digital Estate Planning for Hawai’i Business Owners

On Behalf of | Jul 31, 2023 | Estate Planning

In preparing their estate planning plans, most small business owners do a good job thinking about their business’s physical and financial assets and liabilities. But have you thought about how your business will operate in the virtual world?  For example, who will manage your business’s electronic domain, web pages, social media accounts and online marketing operations? 

For Hawai‘i business owners, digital estate planning is becoming increasingly crucial. Many businesses rely on digital assets, like social media accounts, online marketing campaigns, and websites to successfully operate. Furthermore, customer databases, domain names, proprietary software, and financial records are valuable business resources that are often stored digitally. Proper management and protection of these digital assets may be essential to ensure the continuity and security of Hawai‘i businesses.

Identifying and securing business-related digital assets

Business owners should first identify and document all the digital assets associated with their business. Then, they will need to secure these assets by implementing appropriate security measures, such as by using strong passwords, two-factor authentication, encryption, and performing regular backups. Business owners should also ensure that login credentials or other access information for these digital assets are properly documented and securely stored, such as in an encrypted password manager. 

Next, business owners should determine what, if any access to their business’s digital assets they will grant to designated individuals. An awareness of how access-granting actions are prioritized under Hawaii law is important to ensure that a business owner’s wishes for the management, transfer, or closure of their digital assets are complied with. 

Designating future access to business-related digital assets

Upon a business owner’s death or incapacitation, a Hawai‘i law, the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA), uses a tier system to determine designated individuals’ access to digital assets. Under the first tier, digital service providers, called “custodians” can implement “online tool” programs that allow their users to decide how their account will be managed. For example, users of Google’s Inactive Account Manager can designate a “trusted contact” who can access the business owner’s account information, such as file storage data. Alternatively, business owners can prohibit others’ access to their digital assets entirely. A business owner’s specifications through an online tool control even over a will, trust, or power of attorney.

Under the second tier, a will, trust, power of attorney, or other record determines who may access a business owner’s digital asset. Any person specified to manage the asset must be a fiduciary, however. 

Finally, under the third tier, a custodian’s terms-of-service agreement controls if a business owner does not give directions through the methods in the first or second tier. Generally, terms-of-service agreements tend to prevent disclosure of digital asset information to those other than the user. Therefore, if a business owner wants to grant access to others, they should make their wishes explicit. 

Providing guidance on how to manage a business’s digital assets is also essential because by default, RUFADAA grants limited access to designated individuals. For example, absent other directions from a user, personal representatives can only access the “catalogue of electronic communications.” These catalogues only include a list of who the user communicated with, timestamps of the communications, and contact information, such as email addresses. For businesses that rely on social media to generate revenue, for instance, access to this limited information would not allow continued operation of these important accounts. 

Avoiding potential criminal liability for accessing a business’s digital assets

A digital estate plan can also help prevent criminal liability for individuals attempting to access digital assets after a business owner’s death or incapacity. RUFADAA deems fiduciaries authorized users of a business owner’s digital assets, minimizing potential liability under computer fraud or unauthorized computer access laws. Therefore, business owners can help ensure a smooth transition in access to their digital assets by engaging in digital estate planning.

Updating digital estate plans to include new assets and technology

It is also important for Hawai‘i business owners to regularly review and update their digital estate plan to account for any changes in their business’s digital assets, such as new platforms, software or online accounts. Digital technology evolves rapidly, so this aspect of a business’s estate plan may need more frequent updates than other elements of an estate plan. 

Hawai‘i business owners can protect their business’s value, reputation, and ongoing operations by seeking legal guidance in creating a digital estate plan. 

Notice: We are providing this as a commentary on current legal issues, and it should not be considered legal advice, which depends on the facts of each specific situation. Receipt of this content does not establish an attorney-client relationship.