If you are reading this blog article, you’ve probably given some thought to your estate plan. You’ve likely created a will or even a trust and have given careful thought to how you will pass your assets and cherished possessions to your loved ones. You probably considered your old-fashioned type assets, bank accounts, stocks and bonds, an heirloom quilt, or family silver, or just an awesome vinyl collection. As life becomes more and more online, you may be overlooking important property: digital assets.
Today, most of your banking and other financial transactions are online. You may also have personal social media accounts, photo, and video sharing accounts, maybe a Dropbox for files, cloud data, etc. If you have a business – part of the value of that business is in your domain name and your business social media accounts. And let’s get down to the real nitty-gritty, most of us have passwords for Amazon Prime and Netflix. Gone are the days when someone can go through your things at home, find statements for your accounts and account numbers, and figure things out from shuffling through your mail or file cabinet.
Things are different, and while digital life has made some things more accessible, it has raised many questions and complications for estate planning. Have you considered how are all these protected? How will others access them? Let’s face it; it’s hard enough to get into an account when you’ve forgotten your own password or other identifying information – for someone without that information, roadblocks are ranging from terms of service prohibitions by the service provider to Federal data privacy laws that make it impossible to access. And what if your devices are unavailable?
Not only can assets be different today in the digital age your estate plan may not include provisions for your digital life. From a serious financial perspective and from the very emotional side of helping your loved ones accept their new reality of life without you, it’s essential that these be safeguarded and smoothly transitioned so that access can be maintained. To get started you should create an inventory of your digital assets.
This list naturally breaks down into digital properties with monetary value and those with personal or sentimental value. There is also a consideration for maintaining your privacy after you’re gone, so you should think about any sites where you want your profile removed.
Examples of digital property with monetary value include:
- Bitcoin or other cryptocurrencies
- Domain names for websites
- Digital photos and videos or other intellectual property that you’ve created or otherwise own
- Digital rights to literary, musical composition, motion picture, or theatrical works
- Online video channels that create a revenue stream, like YouTube
- Social media accounts with partnerships that generate revenue
Next up, personal accounts:
- Social media accounts
- Subscription services
- Email accounts
- Online banking accounts
- Online payment services
- Credit card accounts
- Utility accounts
- Document or file storage accounts
- Smart Home accounts
- Accounts like Etsy or eBay where you have an established identity
- Contact lists
- Shopping accounts
- Photo and video sharing and storage accounts
- Smartphone, computer, tablet, or cloud data
Creating your inventory list could take a while, so block out some time to sit down at your computer and make a comprehensive list. As you go, put in the name of the service or account, your username, your password, any secret question answers, and the backup email account or phone number associated. For obvious reasons, store your inventory list in a secure location.
Protecting Your Assets
Next up, you’ll want to back up everything into the cloud or an external hard drive in case your devices are not available to your heirs. You’ll also want to have everything on an accessible computer that you can update regularly. And since you’re engaged in this process anyway – if you haven’t already made digital copies of essential documents like passports, birth certificates, etc., now is a good time.
Finally, you’ll need to understand what you actually own instead of things you’ve purchased a license for use. You’ll need to identify them for them to be legally protected property.
Laws governing digital assets are evolving all the time. Many states, including Florida, have adopted the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA), which lays out three tiers for accessing digital assets:
- Tier 1. If a digital service provides a tool to designate what happens to assets after you die, this designation guides what happens to the account. For example, if you used Google’s inactive account manager to designate a family member, this designation would guide what happens to your Google assets.
- Tier 2. If there isn’t any tool, then the owner’s directions in a will or legal document determine the handling of the account or asset.
- Tier 3. If neither of the first two scenarios are present, the terms-of-service agreement dictates how those accounts can be accessed. As mentioned, those agreements often restrict access to the original owner.
Based on the above, if you haven’t made legal provisions – your assets could be locked away from your heirs. You’ll want to work with an estate attorney to ensure that you identify who has access to digital assets and under what circumstances. Considering the two lists and the size and complexity of your estate, providing a blanket authorization may not be appropriate. You may prefer to specify multiple people with various roles, from executor to family member to trusted friend.
The next step is to create a digital estate plan which is a formal document that lays out everything discussed above – the inventory, the access information, your wishes, and who the executor(s) will be. The digital estate plan should be a separate document from your will – because wills go through probate and are public. To make it legal, you’ll need to make a note in your will or a codicil to your will. Your estate planning attorney will be able to do this for you.
The Bottom Line
Protecting and passing on your digital assets is just as important as any other part of your estate. Once you’ve done the hard work of getting it set up, however, since digital assets are relatively new and the laws are still changing, you should regularly talk with your attorney and review your plan. Don’t forget to update your inventory if anything happens that requires you to change passwords.
This material is provided as a courtesy and for educational purposes only. Investing involves risk including loss of principal. Please consult your investment professional, legal or tax advisor for specific information pertaining to your situation. This article contains links to articles or other information that may be contained on a third-party website. River City Wealth Management is not responsible for and does not control, adopt, or endorse any content contained on any third-party website. The information contained herein is derived from sources deemed to be reliable but cannot be guaranteed. Past performance is not indicative of future results.