Digital Assets and Your Estate Plan

More than ever before, our lives are intertwined with the digital world. Whether it is family photos saved on a cloud drive or a valuable cryptocurrency portfolio, our virtual world is full with assets that, until recently, did not exist in traditional estate planning. Given their increasing importance, it's imperative to understand and incorporate digital assets into your estate plan.

Your first step is to take stock of what you have.

Understanding What Constitutes a Digital Asset

Before we delve into the intricacies of estate planning for digital properties, let’s take a moment to understand what qualifies as a digital asset:

Cryptocurrencies and Digital Wallets

One of the most notable and valuable digital assets, cryptocurrencies like Bitcoin, Ethereum, and thousands of other digital currencies have real monetary value, often in significant amounts.

Social Media and Online Profiles

These aren’t just platforms to interact with friends. They're repositories of memories, interactions, and personal histories. Think of your Facebook photos, Twitter history, or even your LinkedIn connections.

Email Accounts

While they might seem mundane, email accounts are pivotal. They often serve as the recovery method for countless other digital services and may also store critical personal and business correspondence.

Digital Collections

This category includes purchased e-books, digital music, movies, or software licenses. While some might see them as mere entertainment, they can hold considerable sentimental or financial value.

Online Businesses or Blogs

E-commerce websites, personal blogs, or YouTube channels can be significant sources of income and hold a central position in their owner's lives.

The Importance of Including Digital Assets in Your Will

The days when wills covered only physical assets like real estate or jewelry are long behind us. Here’s why you need to include digital assets in your will.

Tangible Monetary Value

Cryptocurrencies or revenue from online businesses can comprise a material portion of an individual's wealth. Failing to account for these in a will can mean significant financial loss for heirs.

Irreplaceable Sentimental Value

Digital memories, such as photos, blog posts, or email threads with loved ones, can be as valuable – if not more so – than physical letters or diaries.

Control Over Digital Legacy

By detailing how you'd like your digital presence to be handled after death, you maintain control over your online persona and its continued existence.

Legal Challenges and Considerations Related to Digital Assets

Incorporating digital assets into estate planning is not always as straightforward as you would want. 

Ownership Versus Licensing

Most digital products (e.g., software, e-books) are licensed, not owned. This distinction can complicate their transfer after the owner's death.

Jurisdictional Challenges

The global nature of the internet means your digital assets might be governed by international laws, depending on where servers and companies are based.

Terms of Service Agreements

Many online services have terms that address posthumous account access, often prohibiting unauthorized access – even by heirs or executors.

Ensuring Your Heirs Can Access and Manage Your Digital Legacy

Given the unique nature of digital assets, special considerations are needed:

Inventory Your Digital Assets

Maintain a comprehensive list of all digital assets, from cryptocurrencies to subscription services. Keep this list updated and stored securely.

Designate a Digital Executor

Choose a trustworthy individual who's comfortable with technology to manage and execute your digital estate.

Provide Clear Instructions

Be as detailed as possible in how you want each asset handled, whether it’s distribution, sale, or deletion.

Explore Digital Legacy Services

Consider platforms that help manage posthumous digital affairs, giving executors a roadmap for fulfilling your wishes.

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What happens if you are unable to manage your affairs personally?

In the event you are incapacitated or unable to manage your affairs personally, a power of attorney should specify access to these digital accounts. This ensures that your designated agent can effectively oversee and protect these assets on your behalf.

Without clear directives in a power of attorney, digital platforms may default to their terms of service when approached by someone attempting to access your account. Many of these platforms have stringent privacy measures, which could prevent even well-intentioned family members or friends from accessing crucial information in times of emergency.

Privacy and Security Concerns When Documenting Digital Assets

Privacy is paramount, especially when documenting sensitive digital assets. Don’t overlook these three steps:

Avoid Directly Storing Passwords in the Will

Wills can become public documents. Instead of directly listing passwords, reference a secure, external location where they're stored.

Use Encrypted Storage Solutions

Digital vaults and password managers, when used correctly, can provide a safe place to store information about digital assets, while ensuring only authorized individuals can access it.

Update Your Digital Regularly

As with all aspects of estate planning, keep your digital inventory updated. As you create new accounts or change passwords, ensure your digital asset inventory reflects these changes.

Factor Digital Assets into Your Estate Plan

The digital age has enriched our lives in many ways, but our need to protect our digital legacies as much as we do our physical ones. As technology continues to evolve, so will the ways we engage with and plan for our digital assets. With appropriate foresight, you can ensure that your digital legacy is secure.