When creating an estate plan, now more than ever you must consider how to deal with your digital assets. Below is a discussion of what constitutes a digital asset, obstacles to accounting for digital assets in your estate plan, and how to create an estate plan for your digital assets.
Digital Assets Defined
Technology is constantly evolving—and at a much faster pace than the law can keep up with. Thus, what constitutes a digital asset now may evolve into something completely different within five years. However, as of now, digital assets are simply assets that exist online and commonly include:
- Email accounts
- Personal photographs that are stored online
- Income-generating websites or blogs
- Virtual currencies
- Credit card rewards
- Information or documents stored in the cloud
- Social media accounts
- Digital copyrights or trademarks
- Online bank accounts or investment accounts
- Digital photos, videos, or written works that produce income
Digital assets do not have to have a tangible financial value which leaves many people asking why do you need to account for digital assets when planning your estate. The answer to this question is that creating a plan for digital accounts—whether or not they are financial in their nature—will make it easier for your loved ones to retrieve and secure these assets after you pass away. Estate planning for your digital assets eliminates the need for your loved ones to track down passwords and gives the beneficiaries of your estate the legal right to your passwords. Additionally, when dealing with online financial accounts, estate planning for digital assets protect income that your digital assets can generate such as royalty rights or revenues from an online business.
Obstacles to Digital Access
From a legal perspective, digital property is similar to other kinds of property. However, as digital property laws are still evolving, gaining access to digital assets or digitally encoded financial information can present challenges to those other than the original owner. However, there are four general obstacles that family members and friends may face when trying to access digital assets from someone who recently passed away.
- Passwords: If a family member or friend does not know a password, they may not be able to access your phone or computer and the digital assets on these devices. While certain passwords are significant dates or easy to figure out, other accounts may require complex passwords that even an expert cannot break.
- Data encryption: In addition to passwords, digital assets may be encrypted—adding another layer of protection to these accounts. Encryption can destroy data in a single file, device, or in the cloud—making it impossible for anyone without the proper passcode to unscramble it. Most digital assets exist on new technology such as smartphones that have advanced encryption. Thus, it is vital that you leave passwords behind or risk your family losing all of your information.
- Criminal laws: Both federal and state laws prohibit unauthorized access to computer systems and private personal data. These laws protect consumers against fraud. However, they also create obstacles for family members trying to access their loved ones’ information. Thus, you must give your family and friends the authorization they need to access your digital assets.
- Data privacy laws: In most cases, online account service providers are unable to give the contents of electronic communications to anyone without the lawful consent of the data’s owner. This could leave your heirs unable to access photos, messages, online accounts, and other data.
How to Create an Estate Plan for Digital Assets
The first thing you need to do before going to create an estate plan for your digital assets is to determine whether your state has laws pertaining to these assets. This is an important step to take as certain states may specify what a person can or cannot include in their digital estate plan, the format your digital estate plan must take, and who must witness or record your digital estate plan. The below tips will be useful to consider when creating your online estate plan.
- Inventory your digital assets: Before creating a digital asset estate plan, you must first know what digital assets you hold. For example, you must know the type of asset, where it is, its financial value, and the login information. One tip is that if you include multiple online accounts, it may be helpful to use an online password manager.
- Decide how you want to manage your assets: You must decide what you want your estate or family to do with each of your digital assets when you pass away. This could include deciding what to do with credit card reward points or a larger decision. For example, what will happen to your online company, or how your digital assets will be split between your beneficiaries. Make sure you are stating specific things when outlining how you want your beneficiaries to handle your assets.
- Pick who you want to manage your assets: You will also have to decide if you want the executor of your estate or a family member to be able to manage your assets once you pass away.
- Put it in writing: Finally, make sure you write down your digital asset plan. Make sure to be as specific as possible.
Final Thoughts
Trust and estate laws are complex. This is so no matter the type of trust you decide to establish. As such, it is extremely important to have legal representation that can help you correctly set up your trust. The Antonoplos & Associates trust and estate lawyers have 20 years of experience helping clients set up a variety of trusts. With this knowledge and experience, we can help with any legal issues that occur from setting up your trust.
Furthermore, Peter Antonoplos, founder and managing partner of Antonoplos & Associates has an LLM in Taxation from Georgetown University Law Center. With this knowledge, Peter can help you decide what is the best type of trust for you and your family. Additionally, he can maximize the cost savings you receive from setting up a trust in DC, Maryland, and Virginia.
Contact our DC Law Office for More Information
Finally, for more information regarding estate planning for digital assets, contact us at 202-803-5676. You can also directly schedule a consultation with one of our skilled attorneys. Additionally, for general information regarding trust and estate law, check out our blog.