A Guide to Estate Planning Considerations for Digital Assets

Estate Planning

 Susan Jones By: Susan Jones
A Guide to Estate Planning Considerations for Digital Assets

By definition, an estate plan is a set of legal documents that dictates how you’d like your assets to be transferred upon your death or incapacitation. When you think of assets that need to be considered under an estate plan, you likely default to thinking about traditional assets like homes, cars, and retirement account balances.

While those things are still very important to protect from disputes, unnecessary tax levies, or probate, the reality is as more of our lives have moved into the digital space, conversations about estate planning for digital assets have become more common.

Because digital assets don’t typically show up on a balance sheet, it’s easy to overlook them. Creating a digital estate plan keeps those assets from getting lost and ensures your estate documents provide the information your survivors need to access them after your death.

But estate planning for digital assets isn’t only about what happens if you die or become unable to make decisions for yourself. It can also help protect you if you lose your cell phone, are a victim of identity theft or your wallet is stolen.

At Plancorp, we’ve modernized our estate planning strategies to reflect the growing increase in digital property and the importance making a clear path. In this article, we’ll examine the risk of not having a digital estate plan, the types of assets to include and how to create one.

Risks of Not Establishing a Digital Estate Plan

A digital estate plan allows family members, beneficiaries, and your digital executor or trustee to access your online accounts. Without it, you risk:

  • Lost memories. Physical photo albums and VHS tapes have largely been replaced with digital photos and videos taken on smartphones. Many people store these files on hard drives or back them up using cloud storage apps. If your loved ones don’t have account access, they may lose the visual reminders of the memories you cultivated together throughout the years.
  • Financial loss. The potential for loss isn’t just sentimental. It can be financial as well. Without adequate planning and preparation, your heirs may not be able to access digital assets like cryptocurrency and NFTs, which could account for a significant portion of your estate—depending on how your assets are allocated.
  • Legal complexities. If you don’t provide clear direction about who can access your digital property after your death, your estate may have to go through probate, resulting in a lengthy legal proceeding for your family members.

Digital Assets with Monetary Value

No one wants to leave money in limbo after their death. To ensure your property is distributed the way you want it to be, it’s a good idea to add these assets to your digital estate plan.

Cryptocurrency or NFTs

Although the value of NFTs or cryptocurrencies like Bitcoin or Ethereum is not considered a digital asset, the platform that allows you to access it is. If your heirs can’t get onto the platform because they don’t have your login credentials, they won’t be able to access the cryptocurrency in your account.

Digital Payment Accounts

Services like Venmo and Paypal make it easy for friends and family to send and receive money, split dinner bills and contribute to group gifts without stopping at the ATM first.

However, if people routinely send you money through digital payment services, your account balance may grow quickly.

If you don’t give anyone access to your account, a balance may remain indefinitely.

Airline Miles and Hotel Points

If you’re earning airline miles or hotel points on purchases you’d be making anyway, it’s easy to overlook their value. However, they can add up quickly. Free flights and hotel stays you’ve earned will go to waste if you don’t account for them in your estate plan.

Bank Accounts

The money in financial accounts isn’t considered a digital asset. However, online access to it is.

If your account balances are set up to transfer to your beneficiaries after your death, including your online account information in your digital estate plan is a good idea. This will allow them to access your account to see balance information, transactions and historical statements.

Online Accounts

Not all digital assets have a financial value attached to them. Many have sentimental value or store important information your loved ones may need to access upon your death. Here are some other accounts to consider including in your digital estate plan.

Email Accounts

Email accounts are a treasure trove of important information. Many people receive bill reminders, payment notifications, account information, confirmation emails, recovery emails and more through their accounts.

Without access to your email, family members could miss out on important information they need to manage your estate.

Social Media Accounts

Technology companies generally don’t want anyone other than the owner managing social media accounts. However, having access can give you a chance to post a memorial message about your loved one and close the account to prevent unauthorized access.

Shopping Accounts

As online shopping has exploded in the last decade, many people have created accounts with retailers they shop with frequently.

Giving someone access to your accounts allows them to use the remaining balances and close the accounts to prevent hacking or identity theft.

Subscriptions or Memberships

According to the Leichtman Research Group, more than half of U.S. households have four or more video streaming services.

Add in e-commerce subscriptions, news and magazine subscriptions, and other membership-based services, and you could have quite a collection of subscriptions and memberships your loved ones need to cancel.

Giving someone you trust access to your accounts allows them to turn off autopay, end recurring subscriptions and delete credit card information from your accounts.

Digital Devices

A lot of important information is stored on digital devices like smartphones, tablets and laptops. In some cases, it may be the only way you can get the information you need to access many of the accounts discussed in this article.

But facial recognition and password protection can make it difficult for anyone other than you to gain access.

That’s why you need to have a plan in place that gives your loved ones the information they need to unlock your devices.

How to Build a Digital Estate Plan

Creating a digital estate plan doesn’t have to be difficult, but it does require planning. These four steps can help you set one up.

  1. Make a list of all your digital assets. Include usernames and passwords to make it easy for someone to access after your death. Consider using a password manager so your digital executor only needs to know one password to get the information for all your accounts.
  2. Decide who gets what. For assets with monetary value, designate a beneficiary on the account if possible. If not, designate one in your will. Choose who gets access to other non-monetary accounts (e.g., family photos, videos, etc.)
  3. Appoint an executor. This is the person in charge. They get access to all digital accounts and distribute or destroy them according to your wishes.
  4. Make it official. Work with your advisors to ensure your digital estate plan is legally binding under your state’s law. Keep it in a safe place with the rest of your estate planning documents, and ensure the executor and your attorney know where it is so they can access it after your death.

Next Steps

A wealth manager can help you create a digital estate plan that ensures your digital assets are distributed according to your wishes.

However, it’s important to remember that planning for your digital property is just one component of a comprehensive estate plan.

At Plancorp, we guide our clients through all aspects of estate planning, including identifying their intentions, crafting a plan to avoid probate, minimize taxes and ensure both financial and non-financial goals are met. We work with their attorneys to create estate planning documents that reflect their wishes.

Our holistic approach helps preserve your assets during your lifetime and after your death, minimizes the burden on your family and ensures your assets are distributed the way you want them to be.

Complete our estate planning memo to help your family properly handle the distribution of your assets.

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For over twenty years, Susan has passionately provided wealth management services to individuals, families, fiduciaries, private foundations and their related entities with a focus on sophisticated income, gift and estate tax consulting and compliance, proactive executive compensation planning and succession planning. Susan understands the many facets involved in creating a successful multi-generational family legacy and uses a forward-looking approach to help clients grow and preserve assets, reduce taxes and realize both their financial and non-financial goals. Susan’s experience includes practicing law in the tax and estate planning. More »