What Are Digital Assets and Why Do They Matter in Estate Planning?

Digital assets are an increasingly important part of modern life, encompassing everything from online accounts and cryptocurrencies to intellectual property and digital files. These assets often hold significant financial, sentimental, or practical value, yet they are frequently overlooked in estate planning. Unlike physical possessions, digital assets can be challenging to manage and transfer after death due to privacy laws, access restrictions, and the decentralized nature of certain technologies like blockchain.

Failing to address digital assets in your estate plan can lead to complications for your loved ones. For example, family members may struggle to access your email accounts, social media profiles, or subscription services, potentially losing valuable information or memories. Similarly, cryptocurrencies and NFTs could become inaccessible if private keys are not properly stored or shared. By proactively including digital assets in your estate plan, you can ensure they are managed according to your wishes and reduce the burden on your beneficiaries.

Identifying Your Digital Assets

Types of Digital Assets to Include

Digital assets come in many forms, and it’s essential to identify all categories to create a comprehensive estate plan. Common types of digital assets include:

• Financial Accounts: Online banking, investment platforms, and payment services like PayPal or Venmo.
• Social Media Profiles: Facebook, Instagram, Twitter, LinkedIn, and other accounts that may hold sentimental or reputational value.
• Email Accounts: Personal and professional email accounts often contain important correspondence and documents.
• Subscription Services: Streaming platforms like Netflix, Spotify, or Amazon Prime, as well as software subscriptions.
• Cryptocurrencies and NFTs: Digital currencies like Bitcoin and Ethereum, along with non-fungible tokens stored on blockchain networks.
• Intellectual Property: Blogs, eBooks, online courses, or other digital creations that generate income or hold personal significance.
• Digital Files: Photos, videos, and documents stored on cloud services or local devices.

Creating a Comprehensive Inventory

To ensure your digital assets are properly managed, start by creating a detailed inventory. This inventory should include the name of each asset, its purpose, and any associated login credentials or access information. For example, list your email accounts along with usernames, passwords, and security questions. For cryptocurrencies, document private keys, wallet addresses, and recovery phrases.

Consider using a password manager to securely store login credentials and simplify the inventory process. Additionally, update your inventory regularly to account for new accounts or changes to existing ones. A well-maintained inventory will make it easier for your executor or beneficiaries to access and manage your digital assets.

Legal Challenges in Managing Digital Assets

Privacy Laws and Access Restrictions

One of the biggest hurdles in managing digital assets is navigating privacy laws and access restrictions. Many online platforms have strict Terms of Service agreements that prohibit unauthorized access, even by family members or executors. For instance, the Computer Fraud and Abuse Act (CFAA) makes it illegal to access someone’s account without permission, which can complicate efforts to retrieve digital assets after death.

To address these challenges, consider granting explicit authorization to your executor or beneficiaries in your estate plan. Some platforms also offer legacy options, such as Facebook’s memorialization settings, which allow you to designate someone to manage your account after death.

State-Specific Legislation

State laws play a significant role in digital estate planning, particularly the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA). This legislation provides a legal framework for granting fiduciaries access to digital assets, but its implementation varies by state. Under RUFADAA, you can specify which digital assets your executor or fiduciary can access and manage, ensuring compliance with state laws and platform policies.

Consult an estate planning attorney to understand how RUFADAA applies in your state and to draft legally sound documents that address your digital assets.

Steps to Incorporate Digital Assets into Your Estate Plan

Appointing a Digital Executor

A digital executor is a person responsible for managing your digital assets after your death. This role is distinct from a traditional executor, as it requires technical knowledge and familiarity with online platforms. Your digital executor should be someone you trust and who is comfortable navigating digital systems.

Clearly outline the responsibilities of your digital executor in your estate plan, including accessing accounts, transferring ownership, and deleting or memorializing profiles. Providing detailed instructions will help them fulfill your wishes effectively.

Including Digital Assets in Your Will

To legally include digital assets in your estate plan, specify them in your will or trust. Be explicit about how you want each asset to be handled—for example, whether you want your social media accounts deleted or memorialized, or how you want cryptocurrencies distributed. Include any necessary access information, such as login credentials or private keys, in a secure document referenced in your will.

Using Password Managers and Secure Storage

Password managers are invaluable tools for estate planning, as they allow you to store and share login credentials securely. Many password managers offer emergency access features, enabling your executor or beneficiaries to retrieve information in the event of your death. Additionally, consider using encrypted storage solutions for sensitive data, such as private keys for cryptocurrencies or intellectual property files.

By combining password managers with secure storage, you can ensure your digital assets are both accessible and protected. This approach minimizes the risk of unauthorized access while simplifying the process for your executor or beneficiaries.

Regularly Updating Your Estate Plan

Digital assets are dynamic, with new accounts and technologies emerging frequently. To keep your estate plan relevant, review and update it regularly. This includes revising your inventory, updating access information, and ensuring compliance with any changes in laws or platform policies.

Regular updates will help you maintain a comprehensive and effective estate plan, ensuring your digital assets are managed according to your wishes.