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As more of life happens online, digital assets are becoming increasingly valuable. Ensure your estate plan properly accounts for them to protect your legacy.

• Digital assets include cryptocurrency, NFTs, digital media, online accounts, and more
• Accessing digital assets can be difficult due to passwords, encryption, laws, and privacy policies
• Update your estate plan to include provisions for digital property and information
• Take steps like inventorying assets, backing up data, and designating a digital executor

Why is estate planning for digital assets important? 

Estate planning for digital assets is critical to ensure your heirs can access valuable online property like cryptocurrency, digital media, and online accounts. Without proper planning, passwords, encryption, laws, and privacy policies can make digital assets inaccessible after you’re gone.

Estate Planning for Digital Assets

Estate planning often involves careful consideration of tangible assets, from treasured family heirlooms to real estate holdings. In an era dominated by digital interaction, attention is increasingly turning towards an often-overlooked category of possessions: digital assets. With vast portions of daily life and financial activity conducted online, digital assets are accruing significant value and importance. Please incorporate these digital properties into an estate plan to avoid complications for heirs, potentially leading to inaccessible accounts or lost digital treasures.

A wide array of digital assets exists, each with its own set of challenges and considerations for estate planning. Among these are cryptocurrencies like Bitcoin and Ethereum, which can represent substantial financial value but require specific instructions for access and transfer. Non-fungible tokens (NFTs), which have gained popularity for their uniqueness and value, also necessitate clear estate planning strategies.

Domain names, another key digital asset, can hold both financial and sentimental value, often serving as the digital facade for personal or professional ventures. Likewise, digital photos and videos capture irreplaceable memories, yet without proper planning, may become permanently locked away or lost.

Further complicating the landscape are digital rights to creative works, which can generate ongoing income or hold personal significance. Online accounts, from betting platforms to monetized content channels, embody financial and emotional investments. Even virtual assets, such as airline miles or online gaming avatars, can hold real-world value and merit consideration in estate plans.

Given the diversity and complexity of digital assets, crafting an estate plan that adequately accounts for these digital properties is not just advisable—it is imperative. Such planning ensures that heirs can access valuable or sentimental digital assets without unnecessary legal hurdles or loss. Estate planning for digital assets, therefore, extends beyond traditional considerations, embracing the digital legacy individuals leave behind.

Obstacles to digital access

In the digital era, managing the transfer of digital assets posthumously presents unique challenges, with heirs often facing obstacles in accessing these valuable or sentimental digital properties. The primary barriers include:

• Passwords and Access Credentials: Digital assets protected by passwords or encryption keys pose a significant hurdle. Especially for high-value assets like cryptocurrencies stored in noncustodial wallets, the absence of a known password or key can mean permanent loss, given the lack of centralized support for recovery.
• Encryption: Digital encryption secures data across devices and cloud services, making it nearly impossible to access without the correct passcode. This technology, notably advanced in mobile devices, can lock away content permanently if not preemptively shared or stored with access in mind.
• Legal Restrictions: Laws designed to prevent unauthorized access to computer networks and protect against fraud simultaneously create barriers for family members seeking to retrieve a decedent’s digital assets. The evolving legal landscape necessitates clear permissions for fiduciaries in estate plans to navigate these restrictions.
• Data Privacy Laws: Regulations restrict online service providers from disclosing electronic communications to anyone other than the original owner without explicit consent. Without such consent, heirs may be denied access to cloud-stored emails, photos, and other content, potentially leading to expensive legal battles for access.

These challenges emphasize the importance of incorporating digital assets into estate planning, ensuring heirs can access and inherit digital legacies without undue financial or legal complications.

Upgrade your estate plan to a digital one

Transitioning your estate plan to include digital assets can safeguard these properties for future generations, mitigating the risk of loss or inaccessibility. Here are four strategic actions to enhance your estate plan:

• Compile a Comprehensive Digital Asset Inventory: Start by listing all digital assets, such as domain names, virtual currencies, and online accounts, complete with access credentials. It’s crucial to inform trusted family members about the list’s whereabouts while ensuring it remains secure. Given the heightened risk of cyber theft—particularly for cryptocurrencies, which lack recovery options if compromised—storing passwords for such assets demands extra caution. For managing non-crypto assets, consider utilizing affordable password management tools like LastPass to maintain security without sacrificing convenience.
• Understand the Nature of Your Digital Holdings: It’s possible to misinterpret the nature of digital purchases, confusing the acquisition of a license for use with ownership of a digital asset. Carefully review any contracts or terms of service to determine what you own accurately. This step prevents misunderstandings and ensures your estate plan accurately reflects your digital legacy.
• Implement Redundant Backup Strategies for Cloud-Stored Data: While the convenience of cloud storage is undeniable, solely relying on it poses risks. Regularly backing up digital assets stored in the cloud to a local computer or external storage device can offer an additional layer of security. Companies like Facebook, which provide straightforward options for downloading your data, exemplify the ease with which you can secure digital information. However, diversifying storage solutions, especially for different types of digital assets, can offer further protection and ease of access for fiduciaries and family members.
• Stay Informed and Consult Legal Expertise: Digital asset regulations are rapidly evolving, reflecting the burgeoning nature of this asset class. Engaging with a legal professional knowledgeable about digital assets can provide tailored advice and ensure your estate plan remains up-to-date with the latest legal developments. Regular reviews of your estate plan, considering legal and personal digital asset portfolio changes, are advisable.

For individuals with significant digital assets, considering the appointment of a specialized digital executor—someone with the requisite commercial and legal expertise to manage digital properties—is prudent. This approach ensures that your digital legacy is handled with the same care and strategic foresight as traditional physical assets, securing your digital footprint for future generations.

Final Thoughts

In an era where digital footprints are as significant as physical ones, incorporating online assets into estate planning cannot be overstated. The essence of digital estate planning transcends mere safeguarding; it’s about ensuring a seamless transition of digital assets that are increasingly integral to personal and financial legacies. By adopting a forward-thinking approach to document and secure digital property, individuals can prevent their digital assets from falling into oblivion or becoming inaccessible due to technical or legal barriers.

An essential first step is to take stock of digital assets and establish a comprehensive inventory. This process includes identifying and cataloging assets like social media accounts, digital wallets, and online repositories, as well as securing access through meticulous management of passwords and encryption keys. Equally important is regularly backing up digital data to physical devices or utilizing hybrid storage solutions, ensuring that digital assets remain accessible even when cloud services are discontinued or compromised.

Updating legal documents to reflect the reality of digital asset ownership and management is another pivotal action. Modern estate plans must explicitly address the disposition and handling of digital assets, from cryptocurrencies to digital rights and online accounts. Designating executors with the competence to manage digital assets—or appointing specialized digital executors—can streamline the process, ensuring that assets are transferred according to the deceased’s wishes and in compliance with prevailing laws.

Moreover, legal and technological landscapes are constantly evolving, making it imperative to regularly review and adjust estate plans. This dynamic approach ensures alignment with new regulations, emerging digital asset classes, and changes in personal digital asset portfolios.

Proactive digital estate planning is a testament to the value placed on digital assets and their significance within one’s legacy. By taking definitive steps to integrate digital assets into estate plans, individuals can alleviate potential burdens on loved ones, ensuring that digital memories and properties are cherished and preserved as intended. The call to action is clear: act now to ensure your digital estate plan is robust, comprehensive, and reflective of your wishes.

Expert Legal Support at at Stephenson Chavarri & Dawson

Navigating the complexities of digital estate planning can be overwhelming, but our experienced attorneys are here to guide you every step of the way. We’ll work with you to craft a comprehensive, up-to-date estate plan that protects both your traditional and digital assets, giving you the peace of mind that comes from knowing your legacy is secure. 

Contact us today to schedule a consultation and take the first step towards safeguarding your digital future.