What are Digital Assets in Estate Planning?

Cryptocurrency grabs the headlines. However, the digital assets of most Americans have little to do with bitcoin and Ethereum. Their digital assets are online accounts, streaming subscriptions, financial accounts, credit cards, emails, websites, gaming credits, gambling accounts, airline miles and any of the approximately 150 online accounts owned by the average person. It can make your head spin just thinking about it.

All of these are considered “digital assets.” They all need to be addressed in an estate plan. They may have financial value, such as emails containing work product, investment accounts or commerce-driven websites. Sentimental value drives many court cases against Big Data, especially when photos and personal correspondence cannot be accessed by family members of the deceased.

What Should You Do to Protect Digital Assets?

Start with a complete inventory. It may be daunting but imagine how much harder it would be for your spouse or adult child. There are commercially available password protection systems. However, a pad of paper will do just as well. If you create a spreadsheet on your computer, be sure to encrypt it to prevent access by bad actors.

Your list should include the following:

  • URL or website address
  • Name of the company
  • Account number and name
  • Password and Username
  • Any additional access information, i.e., third party verification (TPV) where a code is sent by email or text to verify the user.
  • Whether the platform allows the user to give another person access after death, often referred to as a “Legacy Contact,” or if you can provide directions to have the account deleted after death upon proper notification.

To date there is no universally established guideline for platforms to give another person access to digital assets. It falls to the user to create an inventory for their digital executor.

What Does a Digital Executor Do?

A digital executor is the person assigned to address your digital assets when you die. This is a relatively new role in estate planning. However, it is vital when we manage and live so much of our lives online. Just as the executor will have an easier time of gathering, managing and distributing your assets, the digital executor will be more effective when digital assets are organized.

Unlike traditional assets, digital assets typically leave no “paper trail” in the form of paper account statements or paper files. If digital assets are not accessed and managed, they will be lost. Many millions have been lost even before their owner died because of lost passwords, digital keys, or digital wallets.

How Do I Appoint a Digital Executor to my Estate Plan?

The digital executor is appointed in your last will and testament. They do not take the place of the traditional executor, so the language will need to clearly state their role as digital and not traditional executor. Make sure your state recognizes this role and the proper way to include it in your estate plan.

What Happens if I Do Not Have an Estate Plan?

Without an estate plan, or without a last will and testament, your digital assets may become vulnerable to hackers and scammers. Just as thieves read obituaries and probate documents to target victims, hackers look for abandoned apps, websites and social media accounts to uncover vulnerabilities.

What if I Own Cryptocurrency and NFTs?

If your estate includes cryptocurrency and/or NFTs, especially if they are of significant value, you will want to take additional steps to protect them upon your death. If no provisions have been made to place these assets in a trust, they may be considered part of your estate and require probate. The decentralized nature of crypto is a great strength, but also an attending weakness. Practically speaking, this decentralization means your crypto needs to be securely transferred and someone will need to have access to crypto keys – the string of randomly generated numbers and letters serving as passwords. If you have digital wallets, your digital executor will need to know how to access the information.

An Estate Plan Protects Yourself and Your Loved Ones Too

While a last will and testament helps protect, preserve and distribute your assets postmortem, a comprehensive estate plan also protects you while you are living. A power of attorney, medical power of attorney, living will, HIPAA release form and other essential legal documents empower others to act on your behalf if you are incapacitated. Having a comprehensive estate plan protects you, everyone you love and everything you own.

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