You may have heard about cryptocurrency and NFTs in the news recently. While these are examples of digital assets that some people may own, there are many more common examples, including email and social media accounts, digital photos and videos, online subscriptions and loyalty programs, websites, and even online gaming profiles.
Because digital assets are so prevalent, most states now have laws that define what constitutes a digital asset, which is any intangible, electronic record in which an individual has a right or interest. Additionally, digital assets are becoming an important part of conversations between estate planning professionals and their clients. Here are a few things to keep in mind as you consider including them in your estate plans.
How digital assets fit into estate plans
Estate planning documents typically include a provision for distributing tangible personal property to intended recipients. For example, your will may instruct that a piano or jewelry be given to a child or friend. Real estate may also be designated for transfer to desired beneficiaries in an estate plan. Transferring digital assets can be trickier, and historically such assets have not been part of many estate plans. However, with the rise in popularity of digital assets in recent years, those assets can no longer be overlooked.
You may have personal experience with the difficulties encountered in gaining access to a family member’s online accounts when they become disabled or pass away. Many online platforms have terms and conditions that restrict access and make it difficult even for legally appointed representatives, such as executors and trustees, to gain access. Data privacy and other laws have understandably created additional barriers to access.
To address this, nearly all states have enacted some version of the uniform Fiduciary Access to Digital Assets Act. This act allows individuals acting as agents under power of attorney, personal representatives of estates, trustees, conservators and guardians to request access to digital assets under certain conditions. Some key points of this law include:
- Access generally remains subject to the online platforms’ user terms and conditions
- Users must generally utilize online tools within each platform, if available, to direct disclosure to some or all content to designated recipients. For example, Apple users may designate a “Legacy Contact” for their Apple ID. Otherwise, users may include such directions in their estate planning documents. User selections within the online platform generally override any contrary directions that may be included in the user’s estate planning documents.
- Even if the user grants access in the online platform or in their estate planning documents, access is not automatic. The intended recipient must request access, and digital asset custodians still have discretion whether to grant access.
Tips for properly addressing digital assets in estate plans
With the digital asset landscape rapidly evolving, it’s important you stay up to date on how to best address them in your estate plan. Whether you’re considering adding digital assets to your estate plan for the first time, or would like to revise how your plan currently addresses them, here are a few tips:
- Make a complete list of all the digital assets you own, including accounts that may have valuable content, even if that value is only sentimental. Make sure your estate planning attorney is aware of these assets when compiling an inventory of assets to include in your estate plan.
- Understand what digital content rights may expire at your death.
- Use the tools within each online platform to designate the persons you want to have access to your accounts in the event of death or disability.
- Include provisions in your estate planning documents authorizing your legal representatives to have access to digital assets, making sure that those representatives are consistent with the persons you have named using online platform tools.
- For digital assets with significant monetary value, consider re-titling those to a trust for ease of post-death management and transfer. Additionally, utilize beneficiary designations whenever available for assets such as cryptocurrency accounts and loyalty programs that permit transfer of rewards.
- Avoid sharing passwords whenever possible. Password sharing not only presents data privacy and security concerns; it is also generally prohibited under most user terms and conditions. Online platforms are increasingly utilizing multi-factor authentication, and persons attempting to gain access using shared passwords may inadvertently lock accounts.
- Create backup copies of items such as cloud-based digital photos and videos, using an external hard drive or similar device. This will enable sharing files without requiring access to online platforms.
- If there are online accounts or digital content that you want destroyed, understand your rights and make sure to designate this preference with online platforms, if available.
While these are general guidelines for addressing digital assets in estate plans, your financial advisor and estate planning partner should tailor your approach based on your specific wishes and situation. Since digital assets are still a relatively new concept and the laws that deal with them are changing rapidly, it’s important you talk to your financial and legal partners about the steps you can take now, as well as make regular updates in your approach.
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Bankers Trust Company and its affiliates and their representatives do not provide tax or legal advice. This article is intended for informational purposes only and should not be construed as tax or legal advice. You should consult with your tax and legal advisors regarding your unique situation and needs.