As our lives become increasingly intertwined with technology, the issue of digital assets and estate planning has become more complex. Digital assets, such as online banking, social media accounts, and cryptocurrency, can have significant value and may even outlast their owners. Yet, many people overlook the importance of including these assets in their estate plan, leaving their loved ones with a difficult and confusing task after their passing.
We often have clients who come to see us and are not aware of their deceased family member’s digital assets or know about them but cannot access them. For good reason (although sometimes mixed with some bureaucratic delay!) many institutions such as banks are reluctant to hand over confidential details without comprehensive documentation. Some of this can be avoided by having proper estate management plans in place.
In this blog post, we will explore some of the complexities of digital assets and estate matters and provide some guidance for navigating this rapidly evolving area of law.
What are Digital Assets?
Digital assets can be broadly defined as any electronic record that contains data. This can include anything from email accounts and online banking to cryptocurrency and social media accounts. Digital assets can hold financial and sentimental value, making them an important consideration in estate planning.
Many assets are not strictly “digital” but they are mainly managed online. For example, we often assist clients to access their passed loved one’s share portfolio. It may be that this was completely managed online. We often conduct ASIC or Landgate (the office of Land Titles in Western Australia) searches to assist people to gather the estate information. Often cancellations of direct debits and memberships need to be managed via online accounts too.
There are also things that are not really “assets” as such but exist online and are important to you. A popular example might be your password to your social media accounts like Facebook or subscription services such as Netflix. Even things as simple as gym memberships are now mainly done online. Access to your email and phone may be important to receive access codes or to find further information.
Why Include Digital Assets in Your Estate Plan?
One of the main reasons to include digital assets in your estate plan is to ensure that your loved ones have access to these assets after your passing. Without a plan in place, digital assets can be difficult to locate and access, and in some cases, may even be lost forever.
Additionally, digital assets may have significant financial value. For example, if you own cryptocurrency (whether that be bitcoin, altcoins, stablecoins or NFTs), failing to include it in your estate plan could mean that your heirs miss out on a valuable inheritance. Including digital assets in your estate plan can help ensure that your assets are distributed according to your wishes. We have another article outlining how a Bitcoin inheritance plan may operate, as custody arrangements for this digital asset can be complicated.
What are the Challenges of Digital Assets and Estate Matters?
One of the biggest challenges with digital assets is that they are often difficult to locate and access. Unlike physical assets, which can be stored in a safe or passed down hand-to-hand through generations, digital assets are typically tied to online accounts, and these accounts are often protected by complex passwords and security measures.
It is difficult to have an arrangement whereby your executors or heirs have access to that information while still maintaining your own security and privacy prior to your passing. For example, you might want to allow access to your executor to your online accounts in the event of your death, but not prior. Additionally, laws governing digital assets and estate matters are still evolving and can vary widely from state to state. This means that it’s important to work with a lawyer who is familiar with the laws in your state.
How to Include Digital Assets in Your Estate Plan
There are several steps you can take to ensure that your digital assets are included in your estate plan:
• Take an inventory of your digital assets.
• Take appropriate professional advice from a lawyer, accountant and potentially a financial planner. Plan ahead of time. Consider whether an enduring power of attorney is appropriate at some stage.
• Consider leaving instructions to your executor. This may include a list of all your online accounts, passwords, and security questions.
• Determine how you want your digital assets to be distributed. This can include designating specific individuals to inherit certain accounts or outlining a plan for the distribution of all your digital assets.
• Have a properly prepared Will that takes into account your digital assets and online presence.
• Work with an experienced estate planning lawyer to ensure that your digital assets are included in your estate plan. Your lawyer can help you navigate the complex laws governing digital assets and estate matters and can help ensure that your wishes are carried out after your passing.
As a practical matter you may then want to have some written record of your inventory of digital assets with instructions as to how to access them. For example, a copy of this list might be distributed to your trusted executors, left with a professional third party or physically left with your original will. As with anything, proper precautions should be taken to safeguard this information from fire and theft. You might want to discuss some of these logistical matters with your proposed executor ahead of time, however, always be sure to make sure your instructions make sense when compared to your will – the Will is the ultimate document. Of course, having a properly drafted and executed Will or testamentary trust is the starting point for ensuring smooth administration of your estate.
Conclusion
Digital assets are an increasingly important consideration in estate planning. By taking the time to include your digital assets in your estate plan, you can help ensure that your loved ones have access to these assets after your passing, and that your assets are distributed according to your wishes. We’re here to help you navigate the legal complexities of digital assets and estate matters