How to Protect Digital Assets in Your Estate Plan
- No Comments
In today’s technology-driven world, digital assets are becoming increasingly more important to consider when creating an estate plan. “Digital assets” is an umbrella term for any valuables or key information stored online or on digital devices, such as personal computers. These include cryptocurrency, passwords, digital media (such as photos and videos), and access to virtual platforms tied to financial records and revenue. And in some cases, it may mean securing access to precious memories and mementos stored online.
With the rise in popularity of cryptocurrency, investing, and online financial storage accounts (e.g. PayPal, Venmo, Cash App, etc.), many people are concerned about the protection and access to their digital assets after they pass away. Below are a few tips to keep in mind when planning for the future.
Create an Inventory of All Digital Assets
The first and most essential part of digital asset estate planning is to create an inventory of all your digital assets. Although this may sound like an overwhelming and daunting task for those with a large number of online accounts, it is crucial to the success of your estate plan.
An ideal digital inventory should include:
- A thorough list of all digital assets and their classifications.
- The location of all digital assets.
- The financial value of digital assets.
- The username and password associated with accessing the assets.
We recommend combing over bank statements and your browser’s password manager function to ensure that no digital stone is left unturned. Copies should be made of this inventory, possibly in both physical and digital form, and access should remain only in the care of trusted individuals. The goal should be to strike the proper balance between access to those who would need this information if you should pass and protection of the information from those who could cause harm with access to the information.
Decide on a Personal Representative
Typically, the Personal Representative you appoint in your Will is also the person that will manage your digital assets after you pass away. They do not necessarily need to be an attorney, but they should be an individual who can be trusted with managing the upkeep and transfer of all your digital assets. Your Will should include specific language giving your Personal representative access to your digital assets.
Back-Up All Data in Secure Locations
Digital records are often lost due to hardware malfunctions, or even in instances of cybercrime. A secondary location for digital assets may not be enough to recover precious lost items or accounts. Storing digital assets on the Cloud, as well as an alternate physical hard drive can be a crucial precaution to take at any point—regardless of estate planning. It is critical for your Personal Representative and possibly even other trusted advisors, to be aware of, and ultimately have access to, all online and offline locations of these digital assets. Again, access does need to be balanced with security because spreading valuable information across multiple platforms can lead to an increased risk of a security breach. A varied, yet secure and manageable approach is key when creating backups for assets.
Be Aware of Privacy Laws
Provide Legal Consent Regarding Data
In many cases, digital assets housed primarily on privately-owned online servers, such as social media websites, lawful consent is required to transfer access from one party to another. Without express consent given to online platforms, family members and beneficiaries run the risk of being permanently locked out of their loved ones’ accounts after their passing. Court battles with online service providers and social media companies to regain lost online data and account access without written consent are often costly and time-consuming.
Certain parties, however, may not feel comfortable leaving access to all of their online data available to inheritors. In these cases, instructions for permanently terminating online accounts and data should be put into writing and entrusted with the Personal Representative.
Include the Digital Estate in the Will
To maximize your Personal Representative’s ability to access and handle your digital assets, digital asset provisions and protections should be added directly to your Will.
Laws surrounding access to and management of digital assets are still relatively new and vary state-by-state. Meeting with an attorney who can help break down the process of protecting and preserving such assets can be a most valuable step toward achieving all necessary access and security of your digital assets upon your passing.
At Sessa & Dorsey, we consider the bigger picture at hand and advise our clients on the best estate planning tools for their specific needs and desires. If you have questions about estates and trusts, please contact us at (443) 589-5600.
Related blog posts:
The Importance of Updating Beneficiaries on Retirement Accounts and Life Insurance Policies
2021 Federal Gift & Estate Tax Exemption Update