So much of our lives today are spent in the digital world. From social media profiles to cryptocurrency investments, our digital presence is more significant than ever. However, when it comes to estate planning, many people overlook their digital assets. Just as you would plan for your home, bank accounts, or other physical assets, it’s crucial to consider how your digital assets will be managed after you’re gone.
This blog will cover the importance of incorporating digital assets into your estate plan, the challenges associated with managing them, and the key steps you should take to ensure your digital legacy is protected and properly distributed.
What Are Digital Assets?
Digital assets encompass a wide variety of items stored online or in electronic form. These may include:
- Online accounts: Social media platforms (Facebook, Instagram, LinkedIn), email accounts, and cloud storage services (Google Drive, Dropbox).
- Financial accounts: Online banking, investment platforms, PayPal, Venmo, and other payment services.
- Cryptocurrency: Digital currencies such as Bitcoin, Ethereum, and other forms of blockchain-based assets.
- Digital content: Photographs, videos, music, e-books, and other media files.
- Business-related assets: Domain names, websites, online storefronts (such as eBay or Etsy accounts), and intellectual property like blogs or digital artwork.
Digital assets can have both financial and sentimental value, making it essential to include them in your estate planning process.
Why Include Digital Assets in Your Estate Plan?
Digital assets, like physical ones, require management after you pass away. Including digital assets in your estate plan ensures that they are handled in accordance with your wishes and that any potential value is preserved. Here’s why it’s crucial:
- Access and control: Many digital accounts require passwords and multi-factor authentication, which makes it difficult for loved ones to access them without the proper information. If you don’t plan for how these assets will be managed, family members may be unable to retrieve important information or close accounts.
- Financial implications: Cryptocurrencies, online investment accounts, or business-related digital assets can hold substantial financial value. Without access, these assets could be lost or tied up indefinitely.
- Emotional and personal significance: Digital photos, videos, or social media profiles may carry sentimental value for your loved ones. By planning ahead, you can ensure these assets are preserved and shared as you see fit.
- Legal complexities: Laws governing digital assets are still evolving. Many online service providers have terms of service that can complicate access by heirs, making it important to include explicit instructions in your estate plan.
Common Challenges in Estate Planning for Digital Assets
Incorporating digital assets into your estate plan comes with its own set of challenges. Here are some obstacles to be aware of:
1. Lack of awareness
Many people aren’t fully aware of the extent of their digital assets, which can lead to unintentional omissions in estate planning. From email accounts to subscription services, it’s easy to overlook the digital footprint you’ve built over time.
2. Password protection and encryption
Most digital accounts are password-protected or use encryption, making it difficult for anyone other than the account holder to access them. Without the proper credentials or a digital estate plan, your loved ones may be locked out of important files and accounts.
3. Legal hurdles
Different platforms have different rules regarding account access after death. For instance, social media giants like Facebook and Google have specific processes for handling accounts after a user passes away, but not all services offer the same level of support. In some cases, accounts may be permanently closed or their content deleted if no prior arrangements have been made.
4. No clear guidelines
Digital assets don’t always have the same legal standing as physical assets in estate planning. This means that estate executors may face difficulties when trying to manage these assets if no clear plan has been made in advance.
Key Steps to Include Digital Assets in Your Estate Plan
Now that you understand the importance of including digital assets in your estate plan, here are the key steps to ensure they are protected and properly handled:
1. Create an Inventory of Your Digital Assets
The first step in managing digital assets is to create a comprehensive inventory. This should include all your online accounts, financial accounts, digital files, and other assets. Here’s what to include:
- Account names and URLs
- Usernames and passwords (or where they can be found)
- Details of multi-factor authentication (if applicable)
- Instructions for accessing important files stored in cloud services or external drives
An easy way to organize this information is through a password manager, which stores all your login details in a secure, encrypted format. Just be sure to leave access instructions for your executor.
2. Appoint a Digital Executor
Just as you would name an executor to handle your physical assets, you should also appoint someone to manage your digital estate. This person will be responsible for ensuring your digital assets are distributed, deleted, or managed according to your wishes.
When choosing a digital executor, select someone who is tech-savvy and familiar with your online presence. This individual will be responsible for tasks such as:
- Accessing and managing your digital accounts
- Archiving or deleting files and accounts
- Handling digital financial assets like cryptocurrencies or online banking
- Closing or memorializing social media accounts
In some states, digital executors are not legally recognized, so make sure to consult with your estate planning attorney to ensure your plans comply with local laws.
3. Provide Detailed Instructions in Your Estate Plan
It’s essential to provide explicit instructions on how your digital assets should be managed. In your will or trust, detail what you’d like to happen to each of your digital assets. For instance:
- You may want certain social media accounts to be memorialized, while others are deleted.
- You might want your cryptocurrency to be transferred to specific beneficiaries.
- You could specify that certain digital files, such as photos or personal documents, be shared with loved ones.
You can also specify who should have access to specific accounts or files and under what conditions.
4. Use Online Tools for Legacy Planning
Many online platforms offer built-in tools for handling accounts after death. For example:
- Facebook allows you to designate a legacy contact to manage your account once it’s memorialized.
- Google offers an Inactive Account Manager, which allows you to specify what happens to your Google account and its data after a period of inactivity.
By taking advantage of these tools, you can provide additional safeguards to ensure your accounts are managed according to your wishes.
5. Plan for Cryptocurrencies
Cryptocurrency presents unique challenges in estate planning due to its decentralized nature. Unlike traditional assets, cryptocurrency is stored in digital wallets with private keys. If your loved ones don’t have access to these private keys, the cryptocurrency is effectively lost forever.
Here are steps you can take to secure your cryptocurrency in your estate plan:
- Include information on where your private keys or seed phrases are stored. This could be in a secure physical location, such as a safe deposit box, or in a password manager.
- Work with an estate planning attorney who is knowledgeable about cryptocurrencies to ensure your assets are transferred to the appropriate beneficiaries.
Regularly Update Your Digital Estate Plan
As with your overall estate plan, it’s important to update your digital estate plan regularly. Our digital lives are constantly evolving, and new accounts, services, or assets may emerge over time. By keeping your inventory current and updating access information as needed, you can avoid complications later on.
Seek Professional Help for Digital Estate Planning
The complexities of managing digital assets in estate planning can be overwhelming, but you don’t have to navigate them alone. At Lewis and Matthews, we specialize in helping individuals create comprehensive estate plans that cover both traditional and digital assets.
Contact Lewis and Matthews today to schedule a consultation and ensure your estate plan covers every aspect of your digital and physical estate. Our experienced attorneys can guide you through the process, helping you develop a plan that protects your digital legacy and provides peace of mind for the future.
Digital assets are an essential part of modern estate planning. By taking proactive steps to manage your digital accounts, cryptocurrencies, and digital files, you can ensure that your digital legacy is protected and that your assets are handled according to your wishes.
From creating an inventory to appointing a digital executor, it’s crucial to plan for these assets just as you would for your home or bank accounts. For personalized assistance, reach out to Lewis and Matthews to develop a comprehensive estate plan that includes both your digital and physical assets.
