As the world goes increasingly digital, many of us have amassed sometimes large collections of non-physical assets such as digital photos, music, movies, eBooks, cryptocurrencies and more on our computers, smartphones, portable media players, hard drives and other devices. Although they are in an electronic format, these assets often have personal or financial value, which can make them part of your estate. And that means they should be included in your estate planning.
What are digital assets?
Your digital assets are anything of value that exists solely on your digital devices or in your cloud-based storage accounts. In other words, they can be the files or information accessed through or stored on the internet, in on-line accounts and in files stored on your computer. These may include, but are not limited to your:
digital music files
digital commercial movies
digital medical records
artwork and manuscripts
These assets may have been purchased (e.g., eBooks, music files, Bitcoin) or created by you (e.g. logos, artwork, personal photos, manuscripts).
What is digital asset estate planning?
Digital asset estate planning recognizes digital assets as a property right and addresses the process of cataloging, organizing, accessing and planning for the disposition of these non-traditional assets after death or incapacitation.
Are online banking and brokerage accounts digital assets?
No. While these accounts may be online, the assets held in these accounts are not considered digital assets.
Why is it important to include digital assets in estate planning?
Before we lived in a digital world, bequeathing one’s assets was often simpler. Let’s say you wanted to leave a valuable album collection to a nephew who shares your taste in jazz. You could stipulate in your will that your albums get physically passed along to that nephew.
But imagine that you purchased all those albums digitally, and they live on a hard drive or in your personal computer, along with other digital assets you also want to bequeath. How do you ensure that the right beneficiaries get the specific assets you want them to have? Digital estate planning provides a way to organize those assets, a means for a designated person to access them after your death or incapacity and a path for their disposition.
Can’t I just give my passwords to my heirs so they can access my digital assets?
You may be able to if the assets you own (such as photos or manuscripts) are on your personal devices. If your loved ones get along well with each other, everything may be disbursed just as you intended. However, if there could be any questions about what goes to whom, it’s always best to get your wishes legally documented.
What’s more, when it comes to online accounts, giving out your personal information, such as your user names and passwords, to allow someone else to access them may not be legal, depending on the Terms of Service of the website and various state and federal laws. And without proper planning, the company may not be required to provide anyone else with access to the site.
I see your point. So what should I do next?
Over 40 states have now put in place a legal framework that allows the user of a website to control the access to and disposition of digital assets. To help make sure you’re complying with a governing statute in your state, you’ll first want to create an inventory of all your digital assets. Use the list provided above as a starting point. If you have digital assets that are valuable, whether sentimentally or financially, you’ll need to make decisions on who will get access to them should you die or become incapacitated and how and to whom they should be passed along.
Next you should consult with an estate planning lawyer. Bring up your specific wishes on how and to whom you want those assets distributed. You’ll also need to make it clear how your loved ones and/or the personal representative of your estate will gain access to your digital assets if you die or become incapacitated. It’s important to make sure you have a plan in place that complies with the statute in your state that addresses this unique form of assets.
At Modera, we take into consideration a wide range of issues in our clients’ financial world, offering guidance and support for issues you bring to us, and for those you might not have yet thought of. We also can work closely with your other financial advisors, such as your attorney and your CPA, as well as your loved ones, to help see that your financial life is going according to plan. If you’d like to discuss this or any other financial topic that interests you, please get in touch.
Source: Jeffrey Levine, “What’s RUFADAA? Estate Planning Needs an Update,” Financial Planning, Sept. 14, 2018
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