The Importance of Digital Assets in Your Estate Plan
As many of you prepare to conduct an annual review of your estate plan, we wanted to remind you of important assets that are sometimes overlooked — digital assets. Many people don’t realize the value and extent of their digital assets and the potential for financial or sentimental loss if this property is lost or inaccessible. Consequently, clients may neglect to take into account all of the information, data, and even currency they store online. When creating or updating your estate plan, it’s important to take into account all of your assets, including digital ones.
What exactly are digital assets?
Digital assets are anything digital that require a “right to use.” This includes:
- Email accounts
- Websites you own or manage
- Blog sites
- iTunes and other proprietary music and video platforms
- Netflix, Hulu, Amazon Prime, and other streaming service subscriptions
- Facebook, Twitter, Instagram, YouTube, and other social media platforms
- PayPal, Venmo, and other online bank accounts and wallets
- Online reward programs, such as for credit cards, hotels, and airlines
- Digital photo, video and document storage platforms
- Cryptocurrencies (Bitcoin, Dogecoin, Ethereum)
If you know what to look for, digital property can hold significant value. There can be valuable intellectual property rights as well as value in ownership of things such as domain names, advertising revenue from web pages or social media, or even virtual currency in video games. Consider such online assets as having similar value to tangible property as well as sentimental value.
The recent New York Times article, “A lost password cost one man over $220 million in Bitcoin currency,” reminds us how detrimental it can be when you neglect to record your digital assets in your estate and financial planning documents. Don’t be that person! We are increasingly meeting with clients who have some form of cryptocurrency, and almost all have digital assets of some kind.
Plan ahead by preparing a complete list of passwords, online accounts, and other digital property to provide fiduciaries and family members with full access to your accounts and digital property. This list may include usernames, passwords, and answers to “secret” questions. There are also many planning techniques for protecting cryptocurrencies. You may opt to use an online password storage service to provide the necessary privacy and access to all this information. The simple step of keeping an inventory list can help keep legal costs down, provide a smooth trust administration process, and ensure no valuable property is overlooked. Also, keep a list of “auto-pay” or subscription services, to ensure your fiduciary can stop payments.
Determine who has access
When it comes to digital assets, specifying who gets what only gets you so far. If your family members or fiduciaries do not know how to access your digital assets, this can present a significant hurdle in an administration after death or during disability.
You should consider whether you want to select a special fiduciary to manage your digital assets in the event of death or disability. You may also decide that some or all your digital accounts are inaccessible. If you select a fiduciary, you will need to determine the scope of his/her powers to manage your digital assets. This includes instructions within a will, trust, or power of attorney to grant a fiduciary the right to either access or destroy certain digital assets. Terms-of-service agreements should also be considered since most user accounts have their own set of requirements to allow fiduciary access.
Take the first steps
Questioning where to start? Conduct a digital fire drill by asking yourself these questions:
- If your computer, cell phone or iPad is lost, stolen, or damaged today, what valuable or significant digital property would you lose?
- If you are in an accident today, can your family and fiduciaries access your valuable or significant digital property while you are incapacitated?
- If you die today, what valuable or significant digital property would you want your family or friends to have?
When drafting your estate plan, you have a few options on how to handle digital assets.
- You can include provisions and powers in your estate plan that lets your fiduciary know where to find a list of your access credentials (i.e. in a personal safe)
- You can use an online password keeper such as 1Password.com or LastPass.com and designate a successor who can access these vaults.
- You can assign a Legacy Contact or set up safeguards for access with participating companies (e.g. Facebook, Google)
- You can change the ownership of your cryptocurrency to your Trust
The most important part is to stay current with updating your passwords when they change. For more information about how to address your digital assets in your estate plan, please visit our “Maintenance” page on our website.
We look forward to hearing from you!