Have you ever considered what will happen to your emails and other digital assets after you pass? If not, you’re in good company—it’s not something many people think about. Yet digital estate planning has become essential in today’s world. Since the turn of the century, our lives have become increasingly digitally based, from social media to online documents and records of our personal identities. Including your digital assets in your estate plan can help avoid confusion for your heirs and ensure your wishes are carried out properly.
What Are Digital Assets?
Digital assets are any form of digital content or information that holds value. Some types of digital assets are cryptocurrencies, digital tokens, online banking accounts, digital art or photos, video game accounts, and online documents, to name a few.
The amount of digital assets has expanded over the past several years, especially as things that weren’t traditionally looked at as assets, like social media accounts, have begun to hold monetary value.
The Legal Framework Surrounding Digital Estate Planning
As digital assets become more prevalent, the legal system is catching up to ensure they are properly handled after someone dies. Although digital estate planning is still a new area, laws and regulations are in place to help guide the process. These include:
The Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA) provides a framework for how digital assets should be accessed and managed after an individual’s death. Most states have adopted this act or enacted similar laws to allow individuals to grant fiduciaries access to their digital assets.
The Revised Uniform Law on Notarial Acts (RULONA) guides how electronic wills should be executed and authenticated. This law has been adopted in several states and provides a legal framework for executing digital wills.
The Electronic Signatures in Global and National Commerce Act (ESIGN) and the Uniform Electronic Transactions Act (UETA) provide legal recognition for electronic signatures and contracts. These laws ensure that digital documents and signatures have the same legal standing as physical ones.
It’s a good idea to keep up to date with legal changes and talk to a lawyer specializing in estate planning in your state to help ensure your digital assets are included in your estate plan. Without proper planning, these assets may not be handled according to your wishes. To avoid this, follow the steps below.
Steps to Take When Creating a Digital Estate Plan
Take inventory of your digital assets: To properly plan for your digital estate, inventory all your online accounts, files, and data. This inventory includes social media, email accounts, cloud storage, cryptocurrency wallets, bank accounts, and any other digital services you use. Creating a list of all your digital assets, along with their corresponding usernames, passwords, and security questions, is essential for your digital executor to access and manage your online presence after your passing.
Storing this list securely is crucial to avoid potential security breaches. Password managers or encrypted files are great options for storing this information. Two-factor authentication is a good way to add an extra layer of security to accounts that provide the option.
Regularly update your inventory as you create new accounts or update logins for existing ones.
Designate a digital executor: Designating a digital executor ensures your digital assets are properly managed after you pass away. This person will have the authority to access your digital inventory and carry out your wishes for each asset. It’s important to choose someone you trust and who is familiar with technology to handle this responsibility.
You should note that laws surrounding digital assets vary by state and country, and some online service providers may have their own policies and procedures for handling digital assets after death. While it can be arduous, it would be prudent to read through the terms of service on your accounts to see if there are any provisions related to transferring or managing the digital asset. Some providers may offer options for digital estate planning, and your executor may need to show specific legal documents like a court order or death certificate to access digital assets.
Determine your wishes for your digital assets: While thinking about what happens to your assets after you pass isn’t the most enjoyable activity, it is an important part of the estate planning process. It’s important to be specific about your wishes for each asset. Do you want your social media profiles deleted or memorialized? Do you want certain accounts transferred to loved ones or used for another specific purpose?
You should consider the emotional impact of your digital assets on your loved ones. Photos, videos, and messages can hold emotional value, and it’s important to consider how they will be handled. One approach is to include instructions in your plan for handling sentimental items. For example, you may designate specific people to memorialize photos on your social media accounts or computer files. Strategies like this can help ensure that your loved ones can honor your wishes and remember you in the way you want to be remembered.
Your wishes don’t have to be set in stone and can be changed throughout the years, but having guidelines for your digital executor will help ensure your assets are handled how you want them to be.
Draft legal documents: If you have not already, you should look into drafting a full estate plan. Some estate planning documents include wills, trusts, and powers of attorney. Without legal documents, it is less likely your wishes will be followed. See our previous blog on “Estate Planning Strategies for Your Aging Parents” for information on what a full estate plan entails. Consider working with an estate planning attorney or a financial advisor familiar with the process to ensure the documents are drafted properly.
You will want to make sure your estate plan takes into account your digital assets. You can use the previous steps to help organize the information you need. Your digital estate plan should outline what should happen to each asset after you pass, including social media profiles, cryptocurrency, and other digital files. Consider the long-term implications of your decisions and ensure they align with your overall estate plan.
Keep your plan up to date: Your digital estate plan should be a living document that changes and adapts with you. As you acquire new digital assets or change passwords, you must update your inventory and notify your digital executor. This way, they can access your accounts and fulfill your wishes when the time comes.
In addition, it’s a good idea to review your digital estate plan periodically to ensure it still reflects your wishes. For example, you can update your plan if you no longer use a particular social media platform.
You will also want to stay up to date on new laws and regulations surrounding digital assets. It is likely that we will see plenty of development regarding how these assets are handled over the next few years as technology changes, which may require changes in your original plans.
Communicate with your loved ones: Ensure your loved ones understand your digital estate plan and how you want each digital asset to be handled after your passing. You should store your digital estate plan in a place where a trusted loved one and your digital executor can find it. A trusted loved one should know where to find your inventory and have instructions for accessing your digital assets in an emergency or incapacitation. It’s also important to provide them with the contact information of your digital executor so that there are no delays if something happens.
Challenges and Considerations in Digital Estate Planning
Digital estate planning comes with challenges and considerations not present in traditional estate planning. Here are some of the critical factors to keep in mind:
Privacy concerns: Ensure your personal information remains private and your digital assets are well protected. Take the time to review the privacy settings for each asset and make sure that you document your wishes for how your personal information is shared or stored.
One area where many people share more personal information than they realize is on social media. However, it can be overwhelming to look through all the privacy options on a lot of social media platforms. One tip for maintaining your privacy is to see if the platform allows you to view your accounts from a stranger’s perspective. You can then find the respective privacy option for any information you don’t want to be public.
Account access: A significant challenge in digital estate planning is ensuring your loved ones can access your digital accounts. Certain accounts might have stringent security measures like two-factor authentication or encryption that make it difficult to access them. That’s why it’s important to maintain a detailed record of all your digital property, including usernames and passwords, and share them with a trusted person.
Digital asset management: Managing your digital assets can be overwhelming, particularly if you have several online accounts and assets on various platforms. Sometimes they can be difficult to manage even with a detailed inventory. If possible, consolidating some of your digital assets can make it easier to stay on top of everything.
If you struggle to manage your online life, you might want to consider using a digital asset management (DAM) service. A DAM service is a software solution designed to assist you in managing and safeguarding your assets. This service can provide a centralized storage and organization solution for your digital assets and related legal items, like rights and permissions. This can be particularly beneficial if you’re unsure how to handle certain assets or want a more streamlined approach to digital estate planning.
While it is good to have an online resource to use for your digital assets, it is always a good idea to have information stored in a backup location. The server you keep your information on could become temporarily unavailable, creating issues if you need access to your digital assets. Consider storing a copy of your inventory and digital estate plan in a secure physical location, like a locked filing cabinet, to be accessed if needed.
Legal and tax implications: Legal and tax implications can be an important aspect of digital estate planning, and it’s essential to be aware of the potential differences from traditional estate planning. Laws and regulations regarding digital assets and online accounts can vary depending on the state you live in, and different tax laws may apply to digital assets compared with physical assets. For example, most states have either adopted RUFADAA or a version of it. Since digital assets are a relatively new concept, we can expect the laws and regulations surrounding them to continue to evolve.
Digital assets, depending on how they operate, can be subject to taxes that you are used to seeing with other assets. For example, cryptocurrencies can be subject to capital gains and estate taxes. There are other taxes that can be more nebulous, however, such as properly valuing a digital asset like art or intellectual property. It’s a good idea to work with a knowledgeable estate planning attorney or financial advisor to ensure your digital estate plan considers potential tax implications so that you or your heirs are not paying unnecessary taxes.
Conclusion
Digital assets represent a growing and diverse ecosystem of intangible valuables that rely on digital technology, cryptography, and distributed ledgers for their creation, storage, and exchange. They offer new possibilities for ownership, value transfer, and monetization, revolutionizing industries like finance, art, and gaming.
As our digital footprint expands, it is crucial to plan for the management, protection, and disposition of these assets upon incapacity or death. By proactively addressing digital assets in an estate plan, you can help maintain control over your digital legacy, protect your privacy, and facilitate the smooth transition of these assets to your intended beneficiaries. If you haven’t already, I encourage you to start planning for your digital property so you can preserve your digital life and ensure the secure management of digital assets after you can no longer do so yourself.
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