6 Tips for Helping High Net Worth Clients with Digital Asset Estate Planning
Tangible items like bank and investment accounts, a home, valuable jewelry, and art likely come to mind when thinking about the assets an estate plan should govern. However, if you’ve ever sent someone money using Venmo or PayPal, saved photos or other valuable documents in the cloud, or logged into Instagram or Twitter, you probably have digital assets that should be accounted for in your estate plan.
What Constitutes a Digital Asset?
Almost any type of online activity can generate valuable digital assets. Along with the accounts associated with the activities listed above, digital assets may also include (but certainly aren’t limited to):
- Personal knowledge-based information, like documents or books you’ve written, or any data/research you’ve conducted
- Business-related information, including trade secrets or patents, information regarding inventions, digital designs for projects or services
- Software you’ve created (executable applications, code, services)
- Email accounts
- Websites and blogs (personal or business), and any domains you have registered in your name
- Social media accounts (Facebook, Instagram, Snapchat, Twitter, LinkedIn, Reddit, tumblr)
- Consumer accounts (online logins for utility companies, telecommunications companies like AT&T or Verizon, Amazon)
- Digital media (photos, books, music)
- Virtual property (characters or other items of value in online gaming platforms like Second Life or World of Warcraft)
- Medical or tax information stored on government department systems, like the Healthcare Marketplace, Medicare or Social Security websites, or the IRS website
- Information stored on any of your personal electronic devices, like your phone, tablet, or computer
Online banking accounts should still be considered as a digital asset; however, a personal representative, beneficiary, or Trustee will usually be able to gain access to the bank account itself without specific language regarding digital assets, whether it be at a physical branch or over the phone. However, it is a best practice to err on the side of caution and authorize access to your online banking accounts through your estate plan, in the event the login information cannot be furnished or the online account cannot be changed or deleted (even after the account has been closed).
Updating Your Estate Plan to Account for Digital Assets
Given the relatively new concept of digital assets, along with little to no legislation governing the topic until recently, the majority of estate plans don’t include appropriate language to protect them. Without this language and an actual inventory of these digital assets, personal representatives, Trustees, and beneficiaries can encounter privacy policies and legislation that may prevent access, and subsequently prevent your estate plan from being carried out as you intended.
Digital assets do function like other, tangible property in that they can be passed on to heirs through an estate plan. If your plan doesn’t include protection for these assets, there are a couple of items to keep in mind should you choose to update it accordingly.
- Identify and Create an Inventory of All Digital Assets. There are two ways to capture this information. The first is to create a hard copy list of all websites that contain personal or business data that you access via a login and password. This may not be ideal if you frequently register with new websites or update passwords. The second method is to sign up for a service like LastPass, allowing you to maintain one login and password. Once you’ve successfully logged in, your vault contains web addresses, logins, passwords, and answers to security questions for all of the websites you access (that you’ve added to the vault.) The upside is that it is fairly simple to update an electronic password management system, so your information is more likely to be current. The downside is that if your password is forgotten, you may not be able to access your account.
- Backup Your Data. There are numerous cloud storage services available online, allowing you to securely save your digital assets and access them from almost anywhere (which also allows your personal representative to more easily access them when the time comes). While you can back up data to a physical hard drive, a hard drive is not immune to physical damage, theft, or hardware failure, and may not preserve your digital assets in the event of a loss.
- Know What Assets are Transferable. Depending on the user agreement for a website or product, you may not be able to leave certain digital assets to your heirs. It’s important to review and determine which digital assets will be successfully governed by your estate plan and to incorporate them into your digital asset inventory.
- Get Ahead of the Red Tape. Including passwords and other account information may not be enough to guarantee access to all digital assets. Some online services like Facebook and Google have their own built-in functionality to grant someone else access to your account in the event of your passing. Review your online accounts to determine which websites and services offer this feature, and add the appropriate information. This type of authorization will generally work much more quickly than having to work with a service provider to gain access. If sites you use regularly do not offer this type of feature, you may also create written consent letters for providers to release digital information to specific heirs or beneficiaries.
- Don’t Forget the Specifics. Depending on the type of digital asset in question, you may not want your personal representative or heir to have full access to or control of the asset or account. By including explicit guidelines in the estate plan for how the asset should be used, you can minimize the risk of your personal information being used against your wishes.
- Choose your authorized successor carefully. As you would when selecting a power of attorney, a healthcare agent, or a trustee, you should also select the person who will have access to your digital assets carefully and logically. Assigning someone to this role who is not technologically savvy may delay or prevent your estate plan from being carried out as you intended. By choosing someone who is familiar with the platforms and websites you use (or can learn how to use them relatively quickly), you may minimize the amount of time and effort spent on locating and distributing your digital assets after your passing.
Digital Asset Planning and the Law – The Revised Uniform Fiduciary Access to Digital Assets Act ( RUFADAA)
The federal government, as well as many states, have laws in place prohibiting unauthorized access to private personal information and computer systems (which are expanding to include cell phones, tablets, and other tech devices storing sensitive data.) While these laws were designed with the intention of protecting consumers from identity theft and fraud, they may also prevent a deceased person’s family from accessing their digital assets after they’ve passed away. In addition, online service providers are prohibited from granting access to account information and any stored content to anyone other than the account owner – unless the account owner has deliberately granted consent.
As technology continues to evolve at a rapid place, government legislative measures haven’t always kept up. There has been a marked absence of all-encompassing legal framework around digital assets, preventing trusted agents from accessing a deceased loved one’s digital assets or information. The Revised Uniform Fiduciary Access to Digital Assets Act, which extends the traditional power of a fiduciary to include management of an individual’s digital assets, has already been enacted by 38 states since it was passed in 2015.
Under the law, fiduciaries can access and manage digital property, including computer files and cryptocurrency. However, it still restricts access to electronic communications like emails or social media unless otherwise dictated by the individual – highlighting the importance of including digital asset planning in your estate plan. This legislation does provide slightly more guidance and flexibility for financial advisors and administrators in managing the digital assets of a deceased client.
Digital asset management is still a relatively new yet already complex estate planning concept. While current legislation may be on the right track, it certainly isn’t all-encompassing and will continue to change as the digital world does. Incorporating digital assets into an overall estate plan should absolutely be considered if the goal of the estate plan is to govern and distribute all assets efficiently and completely. Without it, heirs could face challenges that their deceased loved one assumed their estate planning documents would help them to avoid.