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In our increasingly digital world, our day-to-day lives are filled with technology. Whether we’re surfing the web; having virtual meetings for work; posting a photo on social media; checking travel points; or investing, these digital assets have become an essential part of our lives. Yet when creating an estate plan, these assets are often overlooked. This may pose a challenge for an executor when administering the estate. Many of us don’t realize just how many digital assets we have until we start accounting for them.
What are digital assets?
Social media accounts: Facebook, Instagram, YouTube, Reddit, Pinterest, TikTok, LinkedIn, email accounts, cloud storage, etc.
Financial accounts: PayPal, online banking accounts, investment accounts, cryptocurrencies, etc.
Subscription services: Netflix, Crave, Amazon Prime Video, Spotify, Apple Music, etc.
Loyalty reward programs: Air Miles, PC Optimum Points, hotel points, etc.
Intellectual property: digital patents, trademarks, copyrights, etc.
Digital media: purchased books, music, photos stored online, etc.
Miscellaneous: web domains, blogs, online shopping accounts, online dating accounts, gaming accounts, etc.
What is the significance in having digital assets as part of your estate plan?
Barriers to access:
As seen above, digital assets exist in many different forms, and they can be difficult to locate. Even if family members are aware of the assets, it can be difficult to access and obtain what they are looking for. Most digital assets will require a password to access information or the account. Without the proper credentials, it can become impossible to get access to the digital asset. Cryptocurrencies that you can’t access is essentially cryptocurrency that doesn’t exist. A lot of data is encrypted and without a password, family members are unable to access it. There are also laws that restrict access to anyone other than the owner. Therefore, certain social media accounts could have protections where they do not allow anyone else to have access to the accounts unless the original owner provided those permissions. This can prevent family members from accessing photos, videos and other stored information.
Assets with monetary value:
Common examples include cryptocurrencies such as Bitcoin, Ethereum, etc., non-fungible tokens (NFTs), digital artwork and domain names. Other assets that can have significant value include digitally published books, magazines and blogs that generate revenue through subscriptions or sales. Another example are social media platforms with a large following, including YouTube, TikTok, and Instagram. In addition, loyalty rewards can hold great value as well. Many people don’t redeem their points and continue collecting for many years which can hold considerable value. Most clients would want these assets to be passed down to their heirs. Different programs will have their own terms and conditions on the transfer of these assets, so it is important for consumers to be aware of how these assets are to be dealt with upon passing. For example, some programs will expire on death but permit a transfer during the lifetime of the member.
Without proper planning, there could be potential legal issues with accessing and administering these assets. It’s important to be proactive to ensure that you have included your intentions with respect to these assets in your estate planning documents to avoid potential hurdles and the risk of losing access to these valuable assets.
Assets with sentimental value:
These assets hold personal and emotional value, including photographs and videos. They may be stored on electronic devices, social media accounts, cloud accounts, etc. Other assets can include emails and messages that may capture meaningful moments.
These memories may be permanently lost without usernames and passwords. Some of the more well-known service providers have legacy programs to help assist with policies for accessing accounts that may hold these types of assets.
How to pre-plan for your digital assets
Creating a digital asset inventory
Create a comprehensive document including a list of all your digital assets and information on how to access those assets, including logins, passwords, etc. This should include, but is not limited to, email accounts, social media accounts, online banking, cloud storage, cryptocurrency and other assets listed earlier.
It will be important to note all credentials, including security questions and answers. Two-factor authentication is becoming more common, so it will be important to note details on those methods. Any encryption keys or recovery phrases for crypto wallets will be important as well.
Clients should create a document or spreadsheet containing all this information in one spot. Password managers are becoming more common to store all credentials, and these can often be shared with a trusted person. You may choose to keep physical copies in certain places such as an at-home safe, safety deposit box, with your estate lawyer or a safe spot in the home. Another option is to store the inventory in a cloud account.
One thing to keep in mind is that this is not a one-time effort. This digital asset inventory should be updated as you create accounts, change passwords, acquire new digital assets or if any information changes. Annual reviews should be done to ensure the information is up to date.
Last will and testament and the role of the executor
Your executor would be responsible for managing and administering your digital assets after death. Your will should have a clause or additional language that specifically addresses your digital assets and gives your executor the directions and powers to effectively administer the assets. However, the actual inventory should be a separate document as an individual will want to protect their privacy and will want to be able to update the inventory in an informal manner.
Given the digital age we are in, it’s important to take these assets into consideration and make them a part of our estate plan. The role of the executor is already difficult, and they can face further hardships when they are unaware of what assets exist and how to access them. It will be important to stay proactive in updating your digital inventory and keeping up with the terms of services for various service providers. You will want to consult with your estate professionals to ensure a proper plan is in place.
This should not be construed as legal, tax or accounting advice. This material has been prepared for information purposes only. The tax information provided in this document is general in nature and each client should consult with their own tax advisor or accountant. We have endeavored to ensure the accuracy of the information provided at the time that it was written, however, should the information in this document be incorrect or incomplete or should the law or its interpretation change after the date of this document, the advice provided may be incorrect or inappropriate. There should be no expectation that the information will be updated, supplemented or revised whether as a result of new information, changing circumstances, future events or otherwise. We are not responsible for errors contained in this document or to anyone who relies on the information contained in this document. Please consult your own legal and tax advisor.