While people know to include traditional assets in their estate plans, they do not always address these lesser-known assets.
Until recently, when people thought about estate planning, they typically thought about the traditional objects of an estate plan, such as a person’s tangible belongings, financial assets and real property. However, as technology has become so prevalent in our lives, so much of what we have and enjoy is online.
We live in a digital world where it is easy and common to store information electronically. Digital assets of varying types can hold financial and sentimental value. For example, a lifetime of photos, videos and personal interests can be housed in a Facebook account. Thousands of dollars of frequent flyer miles and credit card and hotel credits may be held online. Planning for and dealing with these digital assets doesn’t always fit nicely in the traditional approach to estate planning.
Professional advisors need to be aware of their clients’ digital assets and be prepared to counsel them in a way that protects their interests and allows for their wishes to be properly executed. New legal approaches and solutions are emerging, but have yet to catch up with the quickly evolving technology and legal issues that arise. In the meantime, advisors must counsel clients on steps they can take to expeditiously pass on digital information and to give designated people the access and authority to manage their online accounts once they pass away.
Defining Digital Assets
While people know to include tangible belongings, financial assets and real property in their estate plans, it does not occur to many people—and even to some advisors—to address digital assets as part of the estate planning process. In time, the consideration of digital assets will become more commonplace. Meanwhile, the law is evolving, in fits and starts, to address the emerging issues they present.
For example, Illinois’ Revised Uniform Fiduciary Access to Digital Assets Act was created to address the issue of what to do with a decedent’s digital assets and online accounts. Under the RUFADAA:
- A digital asset is defined as “an electronic record in which an individual has a right or interest”; the term does not include an “underlying asset or liability unless the asset or liability is itself an electronic record.”
- A record is defined as “information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.”
- Lastly, electronic is defined as “relating to technology having electrical, digital, magnetic, wireless, optical, electromagnetic or similar capabilities.”
- Thus, logging into Facebook, checking your personal email, posting on Instagram or Twitter, writing a blog and playing an online video game all involve an individual’s digital assets. Digital assets also include software, information stored on hard drives, code, copyrightable works, CDs, thumb drives, or information stored in the “cloud.”
Digital assets may have sentimental value but little monetary value, such as photographs, social networks or emails. However, many digital assets have financial value, including PayPal, Bitcoin, Amazon, frequent flyer programs, hotel free nights or other loyalty benefits, and credit card points and benefits. All of these different asset forms, online accounts and online usage agreements can create potential issues for family members or heirs after a person’s death.
As we spend more and more time online—and with more of our personal and financial information stored there—the management of digital assets will be increasingly important in our lives. Naturally, therefore, the management of digital assets will become increasingly important in our deaths as well. Incomplete estate planning in this space can lead to financial loss, loss of photos, loss of personal information, loss of digital histories, lawsuits, and even the potential for theft or fraud.
Planning Amidst Technological Change
To account for all of your digital assets in the estate planning process, it is important to plan ahead. The first step is to document an inventory of your online presences. If the executor or other designated person handling your affairs after your death is not informed of how to access your online accounts, they will not be able to manage them properly. This includes making a list of usernames, passwords and “secret” answers for all electronic devices, bank accounts, utility accounts, personal email accounts, social media accounts, online store accounts and any other significant online accounts you use.
This information should not be put directly into a will, as a will eventually becomes public. Instead, you should provide specific, detailed instructions in your estate plan regarding where and how your digital asset information can be accessed. This personal and private information should be stored in a safety deposit box or held by your executor or attorney until your death, to be given to the designated individuals handling your estate.
You also need to provide explicit instructions on how these assets should be handled. For example, should assets that have monetary value or that may generate income be liquidated, or should they be transferred to people to continue to manage the accounts? Who should frequent flyer miles be transferred to? Should credit card points be redeemed? If you have an online store or business, should it be shut down or passed to someone else to continue? If these issues aren’t considered in advance, it is likely that your wishes won’t be known and your assets won’t be managed in the most efficient and effective way possible, if at all.
Protecting Digital Value
Anyone reading this article has digital assets, and after your death those digital assets will live on. They have value just like all other assets and should not be ignored in the estate planning process. An executor will need access to all accounts of the decedent in order to ensure that the value is not lost. While the law in this area is evolving, there are plenty of resources available to begin protecting your digital assets in the event of your death. Planning now can save a lot of heartache and trouble later on. An estate planning attorney can add significant value to this process, ensuring that an individual’s digital assets will be properly handled and preserved upon one’s death. iBi
Paige Blumenshine is an associate attorney with Quinn, Johnston, Henderson, Pretorius, and Cerulo