The importance of having a digital estate plan has grown exponentially over the past decade as technology continues to occupy our daily lives.
This leads to the question: Who has access to my online accounts and how will those accounts be managed and distributed once I’m gone? As with any property, you should plan for the use, management, and disposition of your digital assets in the event of your death or incapacity.
To answer that, we must break down the details of digital estate planning.
What is a digital asset?
A digital asset can be any electronic record or file stored online, on a mobile device, or on a personal computer. Examples of digital assets include:
- Email accounts
- Social media accounts
- Online banking accounts
- Online subscription-based accounts
- E-commerce or marketplace accounts (such as Amazon, eBay, etc.)
- Photos saved online or on the cloud
- Online chatroom accounts
- Cell phone apps
- Online dating or gaming accounts
- Online accounts for utilities
- Loyalty program benefits (such as frequent flyer miles, credit card perks, etc.)
- Cryptocurrency or digital currency
While there are seemingly endless things on that list, there are certain things that don’t actually qualify as digital assets. For example, electronic bank account statements may be considered digital assets, but the actual liquid funds held in the bank account would not be considered a digital asset.
Why include your digital assets in your legacy plan?
Because technology has become such a huge part of our everyday lives, it can feel like second nature to store important information about ourselves and our loved ones online. Computers save our passwords instantly, cell phones keep track of our photos, tablets house our downloaded movies and music, and so much more. As our lives become more online, our future planning needs to adjust accordingly.
Protecting your digital assets is just as important as protecting your physical assets. Unlike non-digital assets, however, planning for digital assets requires special care due to various laws, rules, and contracts that must be considered. Creating a digital estate plan allows your family to rely on a clearly written plan that outlines the passwords for your digital assets as well as how those assets should be managed. Having a digital estate plan also spares your family an extensive probate court process. Additionally, by creating a digital estate plan, you can better protect your online assets from certain risks like identity theft, hacking, and fraud.
Wondering how to create a digital estate plan?
Creating a digital estate plan does not need to be difficult, but it may be time-consuming as you will want to be as thorough as possible.
- The first step in creating your digital estate plan is to take inventory of all your digital assets. Because so much of our lives are stored online, it’s important to be thorough in your checklist and think about everything from social media accounts to online banking information.
- Now that you have a complete inventory of all your online accounts, you will need to write down the username and password associated with each account. Be sure to include your answers to commonly asked security questions in case those answers need to be referenced by family members after you’ve passed. Even better than just writing these answers down, you can set up a password management tool that you designate who can access your passwords after you are gone. This way your passwords are secure but also accessible by your beneficiaries. Password management tools will allow for you to document notes about each account to help the next generation sort through your assets.
- After you’ve created your master list of digital assets, you’ll need to decide how you want those assets to be distributed. For example, some information you may want saved while other information you’ll want erased completely; other assets may be directly allocated to certain friends and family members; perhaps you want digital assets with monetary value to be given to your children and your online photos handled by your spouse.
- Next, you need to choose an executor, the person you entrust to carry out your wishes for your digital assets. While a digital executor is not necessarily a legally binding or enforceable designation, it’s still wise to make the specific classification in your will.
- Lastly, you’ll need to secure your information and turn it into a legally binding document. It’s important to realize that certain states don't acknowledge a digital estate plan, so you should formalize it by making note of it in your will. However, keep your digital estate plan separate from your will for two reasons: 1) because after you die, your will becomes public information and you won’t want strangers having access to significant usernames and passwords, and 2) you can update your digital estate plan on an annual basis as you create and delete online accounts without having to update your will.
So, what’s the bottom line?
Creating a plan for your digital assets now will get you one step closer to having a comprehensive estate plan. And with a comprehensive estate plan in place, you, your family, and your loved ones can enjoy more peace of mind knowing that they won’t have to deal with the ordeal of having to comb through years of online account information when you’re gone.
If you are one of the 46% of Americans who have a will, have you considered your digital assets in that plan? Our advisors can work with you to create a comprehensive estate plan or assist you in adding digital assets to your existing estate plan. CONTACT US today!
SOURCES:
https://www.smartriskcontrol.com/blog/digital-assets-essential-to-estate-planning
https://trustandwill.com/learn/digital-estate-planning
https://clfusa.com/estate-planning/estate-planning-digital-assets/
https://www.everplans.com/articles/digital-cheat-sheet-how-to-create-a-digital-estate-plan