Recent advances in digital technology have made many aspects of our lives exponentially easier and more convenient. But at the same time, digital technology has also created some serious complications when it comes to estate planning. In fact, if you haven’t properly addressed your digital assets in your estate plan, there’s a good chance that most of those assets will be lost forever when you die.
Without the proper estate planning, just locating and accessing your digital assets can be a major headache—or even impossible—for your loved ones following your incapacity or death. And even if your loved ones can access your digital property, in some cases, doing so may violate privacy laws or the terms of service governing your accounts. Plus, you may also have certain digital assets that you don’t want your loved ones to inherit, so you’ll need to take steps to restrict or limit access to those assets.
There are a number of special considerations you should be aware of when including digital assets in your estate plan, and this series addresses each one. Last week in part one, we discussed some of the most common types of digital assets and the current legal landscape governing what happens to those assets upon your death or incapacity. Here, we offer some practical tips to ensure all of your digital assets are properly included in your estate plan, so these assets can provide the most benefit for your loved ones for generations to come.
5 Steps For Including Digital Assets In Your Estate Plan
If you’re like most people, you most likely own numerous digital assets, some of which may have significant monetary value and some which have purely sentimental value. You may also own digital assets which hold no value for anyone other than yourself or have certain digital property that you’d prefer your family and friends not access or inherit when you pass away.
To ensure all of your digital assets are properly accounted for, managed, and passed on exactly the way you want, take the following five steps:
1. Create a detailed inventory with access instructions: Start by creating a list of all the digital assets you currently own. Then, for each asset on your list, provide detailed information about where the asset is stored online and how it can be accessed, including all of the relevant login information and passwords. If you have a lot of different accounts, password management apps, such as LastPass, can help simplify this effort.
If you own cryptocurrency, prepare detailed instructions about how to access your cryptocurrency, and ensure that one or more people you trust know that you have a cryptocurrency and how to find your instructions. Because accessing cryptocurrency requires correct usernames and private keys, as well as knowledge of wallets, digital exchanges, and other storage devices, leaving a detailed “How To” guide may be essential to ensure your loved ones can access these assets.
After you’ve created your inventory and access instructions, store these documents in a secure location with your other estate planning documents, and ensure your fiduciary (executor or trustee) and your lawyer (if you have an ongoing relationship with a trusted lawyer), knows how to access these documents in the event something happens to you. Back up any digital assets stored in the cloud to a computer, flash drive, or other physical storage devices to make them easier to manage. And remember to update your digital-asset inventory regularly to account for any new digital property you acquire or accounts you close.
2. Add your digital assets to your estate plan: Once you’ve created your inventory of digital assets, you’ll need to add those assets to your estate plan. As with any other asset you own, you’ll typically pass your digital assets to your loved ones through either a will or a revocable living trust. Consult with us about which strategy is best suited for your particular situation.
From there, specify in your will or trust the person, or persons, you want to inherit each asset and include detailed instructions for how you’d like the asset to be managed in the future if that’s an option. Additionally, some assets might be of no value to your family or be something you don’t want them to inherit or even access, so you should specify that those accounts and files be closed or deleted by your fiduciary.
Do NOT provide the specific account info, logins, or passwords in your estate planning documents, which can be easily read by others. This is especially true for wills, which become public records upon your death. Keep this information stored in a secure place, and let your fiduciary know how to find and use it. Consider using a digital asset management service, such as Directive Communication Systems, to support you with securing and managing all of your digital assets.
It’s also a good idea to include terms in your estate plan allowing your fiduciary to hire an IT consultant if necessary, especially if your fiduciary doesn’t have a lot of technical knowledge. This will help them manage and troubleshoot any technical challenges that come up, particularly with highly complex assets like cryptocurrency.
Alternatively, if your fiduciary isn’t particularly tech-savvy, you can designate a separate co-fiduciary just to manage your digital assets, known as a digital executor. A digital executor is someone who’s specifically tasked with accessing and managing your digital assets upon your death, and this might be a smart move if you have a lot of digital property or you own highly encrypted digital assets like Bitcoin.
Meet with us to help decide if you should have a digital executor or would be better off using a different arrangement to manage your digital assets.
3. Limit access: In your estate plan, you also need to include instructions for your fiduciary about what level of access you want him or her to have. For example, do you want your executor or trustee to be able to read all of your emails, texts, and social media posts before deleting them or passing them on to your loved ones? If there are any assets you want to limit and/or restrict access to, we can help you include the necessary terms in your estate plan to ensure your privacy is fully honored.
4. Include relevant hardware: Your estate plan should also include provisions for any physical devices—smartphones, computers, tablets, flash drives—on which the digital assets are stored. Having quick access to this equipment will make it much easier for your fiduciary to access, manage, and transfer the online assets. And since the data can be wiped clean, you can even leave these devices to someone other than the person who inherits the digital property stored on it.
5. Check service providers’ access-authorization tools: Review the terms and conditions for each of your online accounts. Some service providers like Google, Facebook, and Instagram have tools that allow you to easily designate access to others in the event of your death. If such a function is offered, use it to document who you want to access and manage these accounts when you pass on.
Just make certain the people you named to inherit your digital assets using the providers’ access-authorization tools match those you’ve named in your estate plan. If not, the provider will probably give priority access to the person named with its tool, not your estate plan.
Don’t Neglect Your Digital Assets In Your Estate Plan
As technology continues to evolve and our lives become increasingly digitized, it’s vital that you adapt your estate planning strategies to keep pace with these changes. We can assist you in updating your estate plan to include not only your traditional wealth and property but all of your digital assets as well.
We are keenly aware of just how valuable your digital property can be, and our estate planning strategies are designed to ensure your digital assets are preserved and passed on seamlessly to your loved ones in the event of your death or incapacity. Furthermore, we can accomplish all of this while ensuring you have the maximum level of privacy, and you stay in full compliance with the latest laws and regulations governing the ever-changing digital universe. Contact us today to get started.