With the rise of digital assets—from social media accounts and digital photos to online banking and cryptocurrency—traditional estate planning no longer covers all the aspects of a modern individual’s life.
Digital assets can hold both sentimental and financial value, making it crucial to consider who will inherit, manage, or have access to them after your death.
This article will cover why planning for digital assets is essential, what constitutes a digital asset, and how to effectively include them in your estate plan.
What Are Digital Assets?
Digital assets refer to any electronic content or account that you own or control.
They can include:
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Social media accounts (e.g., Facebook, Instagram, Twitter)
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Emails and messages (e.g., Gmail, iMessages)
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Digital photos and videos (e.g., photos saved in iCloud, Google Photos, or personal drives)
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Financial accounts (e.g., PayPal, Venmo, online banking)
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Cryptocurrency and NFTs (e.g., Bitcoin, Ethereum, non-fungible tokens)
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Subscription services (e.g., Netflix, Amazon Prime)
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Online stores and domain names (e.g., Shopify, personal websites)
Many digital assets come with terms of service agreements that restrict access to anyone other than the account owner, complicating inheritance.
Why Are Digital Assets Important in Estate Planning?
Digital assets can have both financial and sentimental significance and neglecting them in estate planning could lead to loss of valuable items or identity theft. Here are some key reasons why digital assets should be included in your estate plan:
- Financial Impact: Cryptocurrency, online investments, and revenue-generating websites could constitute a substantial portion of an individual’s net worth.
- Sentimental Value: Digital photos, videos, and social media content can hold cherished memories that loved ones may wish to preserve.
- Preventing Identity Theft: Inactive online accounts are often prime targets for hackers. By planning for digital asset inheritance, you can reduce this risk.
- Ease of Access: Without an estate plan, family members may face obstacles accessing your accounts due to terms of service agreements, privacy laws, and account security measures.
Steps to Plan for Digital Assets
Incorporating digital assets into your estate plan may seem challenging, but it’s achievable with the right approach. Below are the steps to get started.
1. Make an Inventory of Your Digital Assets
Start by listing all your digital assets, including details like usernames, passwords, and backup security questions where possible.
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Categorise your assets: Separate them into financial, social, and sentimental categories.
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Include access details: Note any required two-factor authentication methods, such as secondary emails or phone numbers.
2. Identify the Legal and Practical Limitations
Some accounts, such as Facebook or Google, offer legacy options, but others may be more restrictive:
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Review Terms of Service: Different platforms have specific rules around account access after death.
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Check for “Inactive Account” features: For example, Google offers an Inactive Account Manager, where users can assign a person to receive account data if the account becomes inactive.
3. Decide Who Will Be Your “Digital Heir”
Just as you name heirs for your physical assets, you can assign individuals to manage your digital assets:
• Appoint a Digital Executor: This person will be responsible for handling your digital estate. Make sure they are tech-savvy and trustworthy.
• Specify Roles and Permissions: You may want some people to access only sentimental assets (e.g., family photos) and others to manage financial accounts.
4. Specify Your Wishes in Legal Documents
Make sure your wishes are legally documented to ensure they will be honoured.
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Include Digital Assets in Your Will: Detail who will inherit or manage each type of digital asset.
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Create a Digital Assets Trust: In some cases, you may wish to create a trust for digital assets, which provides privacy and protection for sensitive information.
Legal Options for Managing Digital Assets in Estate Plans
Planning for digital assets involves understanding both traditional and newer legal mechanisms that can secure your digital estate.
1. Wills and Digital Assets
While a will is a foundational estate planning document, its limitations can complicate digital asset inheritance:
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Risk of Exposure: Including passwords in a will can expose them, as wills become public records.
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Limited Authority: Some digital accounts may not legally pass through a will, due to restrictions in their terms of service.
2. Digital Asset Trusts
Trusts are an increasingly popular option for digital assets:
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Privacy: Trusts remain private, unlike wills.
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Flexible Management: You can define specific instructions on how each digital asset should be handled.
3. Utilising an Online Vault
An online vault is a secure, cloud-based tool for storing passwords and account details:
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Secure Access: Online vaults, like LastPass or 1Password, allow only designated individuals to access your information.
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Convenient Updates: You can easily add or remove digital assets as your online presence changes.
Key Challenges in Digital Estate Planning
Planning for digital assets comes with unique challenges that require awareness and proactive solutions.
1. Privacy Laws and Terms of Service Restrictions
Some privacy laws, like the U.S. Stored Communications Act, prohibit access to certain digital accounts, even for heirs:
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Legal Hurdles: Executors may need court orders to access certain accounts, which can be time-consuming and costly.
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Inconsistent Rules: Each platform has its own access policies, which can create obstacles for digital executors.
2. Changing Technology
The rapid evolution of technology means that new types of digital assets are constantly emerging therefore it is essential to review and update your digital estate plan periodically to include new accounts, subscriptions, or investments.
3. Security Concerns
The security of digital assets can be vulnerable if sensitive information, such as passwords, is improperly stored. It is vital that passwords and account information are stored securely, either in a physical format or in a digital vault with high encryption standards.
Steps to Update Your Estate Plan for Digital Assets
If you already have an estate plan, updating it to include digital assets is straightforward:
- Review and Revise: Revisit your will, trust, or other documents, and make sure all digital assets are included.
- Inform Executors: Notify your digital executor of their role and responsibilities.
- Add New Accounts: If you have recently opened new accounts, be sure to add these to your digital asset inventory.
- Store Securely: Ensure your updated estate plan and digital asset details are stored securely and share access with your digital executor.
Conclusion
Including digital assets in your estate plan helps protect the sentimental, financial, and practical aspects of your online presence.
Whether it’s preserving memories, securing financial assets, or protecting loved ones from potential identity theft, a digital estate plan ensures that your wishes are honoured, and your assets are safe.
By creating an inventory, appointing a digital executor, and including digital assets in your estate documents, you can provide clarity and ease for your loved ones when they need it most.
Planning for digital heirs is an essential step toward a comprehensive estate plan that reflects today’s digital lifestyle.