We can’t overemphasize the importance of having an estate plan. And while estate planning is as old as personal assets, with the growth of technology over decades past, there’s so much more to talk about. Instead of just giving away your house and car, you now have to consider digital assets estate planning.
When your possessions are being administered, what will happen to your cryptocurrency wallet, your successful blog, or even your digital archive of family photos? How do digital assets estate planning work, and how can you plan your digital estate? Read on to find out.
What Are Digital Assets?
What are digital assets in the estate planning context? It is very easy to make the mistake of listing everything in your digital footprint. In fact, some properties don’t qualify as digital property within estate planning. To make this easier to understand, let’s first define digital properties in the broad, general sense.
Generally, in layman’s terms, digital property or assets can be defined as any asset that is stored electronically to which you have rights. These assets include all online information, any electronic record, and accounts with or without monetary value. Some of these are highlighted below:
- Email address, email accounts, and electronic address
- Accounts with any digital platform, online service provider, or other online services
- Subscription services and utility accounts
- Login information and digital records
- Cloud storage information and cloud accounts
Digital Business Assets
- Website or blog administration information
- Intellectual property
Digital Financial Assets
- Online bank account access
- Brokerage accounts login information
- Cryptocurrency wallet login information
- Shopping accounts
Social Media and Personal Digital Assets
- Social or digital media accounts
- Documents or digital collections saved online or in the cloud
Any digital asset can be shared, stored, transferred, or sold just like a physical asset. As such, the digital property can be quite valuable and needs to be considered during estate planning. Let’s get into that.
Digital Assets Estate Planning: What Is It?
Digital assets estate planning can be defined as the process in which arrangements are made towards the protection, management, distribution, and administration of digital assets upon the death or incapacitation of their owner. Most people prioritize regular estate planning so much that they forget to consider their digital assets in their plans. However, in today’s day and age, digital estate planning is as important as regular estate planning.
You will agree that nobody wants their assets and properties in the wrong hands. Without estate plans, your digital assets can get lost in the general probate process. When this happens, it is likely that their heirs and beneficiaries will go through a lot of stress trying to access the testator’s digital assets.
Many people also aren’t aware of the basic restriction of most digital platforms. The accounts we often use in our daily lives usually only afford a single person the rights or license to a unique login for a specific account. You cannot transfer your rights to these personal logins in your conventional will.
You do not want this for your heirs and beneficiaries, and you most definitely do not want your private information to end up somewhere you didn’t expect. This is why it is very important to consider your digital assets when making estate plans and be sure to always update your estate plan to ensure nothing is left out.
Digital Assets Estate Planning: Digital Assets vs. Other Digital Material
It’s easy to confuse otherwise normal digital properties as assets. A good rule of them is that often, the asset itself is a part of your normal estate, but online access to said asset is a digital asset. Since digital assets and physical assets are bound by different laws, these classifications are important, even if they can initially be difficult to grasp. Here are three examples that can help clarify this nuanced difference.
Cryptocurrency: While the wallet platform or wallet address login details are digital properties, the cryptocurrency assets or digital currencies themselves aren’t classified as digital assets in estate planning. They are rather classified as part of the normal estate.
Online Banking: The login details to your online banking, your eStatements, and other electronic information may be classified as part of your digital assets, but the funds held in such bank accounts are not classified as digital assets in estate planning.
Hard Drive Data: While the information stored in cell phones and personal computers are digital properties, the cellphone and personal computer hardware are not digital properties.
How to Approach Digital Assets Estate Planning
Like other parts of estate planning, your digital assets estate planning can be tailored to your needs. You can make plans for your digital assets in your will, trust, deed of gift, or power of attorney. You just have to make sure that you research these various estate planning forms and understand their idiosyncrasies regarding digital assets.
Make sure to consider tax laws and policies relating to your digital assets. You don’t want your beneficiaries to go through undue stress or get disinherited due to your digital asset estate taxes. Depending on the size of your digital assets, you may want to consult an estate planning attorney.
Further, keep in mind that different digital assets require different treatments. You wouldn’t use the same simple estate planning strategy for social media accounts for other digital financial accounts or online banking accounts. You would want to make sure certain valuable digital assets are adequately protected and distributed to your beneficiaries.
With all that in mind, let’s delve into how to plan your digital estate.
Planning Your Digital Estate: The Details
Just like regular estate planning, there are various methods of digital asset estate planning. These methods, just like those used in conventional estate planning, apply in different situations.
Whatever digital asset management system you use for estate planning, the four steps highlighted below will likely come in handy. They’ll help ensure that your digital assets are managed, protected, and distributed adequately to your heirs and beneficiaries.
Inventory: This is the first step to take when making any plans regarding your estate. Taking digital asset inventory involves making a list of assets including everything you own digitally, from passwords to intellectual properties. Then, classify each item into groups according to their value and importance (digital accounts, digital information, digital finances, and so on). This will help you to keep track of all your assets and make sure that nothing gets left out.
Taking inventory also involves making a note of all your electronic records. This includes login details (usernames and passwords), online accounts and platforms on which you have accounts, online banking information among others.
Access Allocation and Directives: Next, it’s time to decide what to do with everything. Who will get which digital assets? Who will get access to accounts? This is the same thing as naming a beneficiary or stipulating your wishes in conventional estate planning. It is very important, as only people you allow and name will be able to access these assets and information when you pass away.
Digital Estate Executor/Trustee Appointment: Appointing a digital executor or trustee to oversee these identified online assets can ensure your wishes are followed. The executor or trustee has to be someone you can trust with all your information; remember, they will have fiduciary access to your assets. Appointing your spouse, a close friend or relative, or a trusted attorney may be the best idea.
Storage: When the time comes for your estate plans to be executed, it would be best if they are readily available. Of course, they must be in a safe space where they are secured and protected to prevent unauthorized access. Therefore, it’s a good idea to make plans for the adequate safekeeping of your digital estate. This will aid with a seamless attorney or executor access.
Where can you keep this sensitive information? You can choose to keep it with your attorney, in a storage service like a password manager, or in a physical place like a vault or safe deposit box. Just make sure your executor, the trustee to whom you have given fiduciary access, or your attorney has access in case of emergencies to make for easy estate administration. You can also have a master password that gives assess to all your assets that you share with your attorney or digital executor.
Incorporation: Finally, incorporate your digital estate plans into your previous estate plans. If you have a will, note your wishes regarding these digital assets in the will or add them in another document as a codicil. You can also make arrangements for your digital property in your trusts by granting fiduciary access to assets to your trustee. Similar steps can also be taken in other estate planning methods you employed.
Proceed with Your Digital Assets Estate Plan
By following the steps outlined in this article, you can make a comprehensive digital estate plan that will encompass all your digital assets while protecting your interests and the interest of your heirs or beneficiaries. Many people may consider enlisting the help of a qualified and experienced estate planning attorney when planning their digital estate; after all, a lawyer versed in estate planning law and the digital aspect of the estate planning process can help you leave no stone unturned. However, help like that isn’t cheap, and unless your estate is very complicated or large, it probably isn’t necessary.
Having a reliable source of comprehensive estate planning documents will go a long way in making your digital assets estate planning experience a stress-free one for you while saving you hundreds of dollars in the process. A People’s Choice is dedicated to providing you with legal documents, including wills and digital estate planning documents, at a fraction of the cost of hiring a lawyer. Contact us today for help navigating the legal landscape and achieving your goals!
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