21st century estate planning accounts for digital assets
Do you possess digital assets? If you have online bank and brokerage accounts or keep your music and photos stored on your home computer or “the cloud,” the answer is “yes.” Thus, you need to account for digital assets in your estate plan. If you haven’t done so, your heirs or other representatives may not be able to access these assets without going to court and, in some cases, may not even know that they exist.
Identifying and unlocking digital assets
Traditionally, when a loved one dies, family members go through his or her home to look for personal and business documents, including tax returns, bank and brokerage account statements, stock certificates, contracts, insurance policies, loan agreements, and so on. They may also collect photo albums, safe deposit box keys, correspondence and other valuable items.
Today, however, many of these items may not exist in “hard copy” form. Unless your estate plan addresses these digital assets, how will your family know where to find them or how to gain access?
Suppose, for example, that you opened a brokerage account online and elected to receive all of your statements electronically. Typically, the institution sends you an e-mail — which you may or may not save — alerting you that the current statement is available online. You log on to the institution’s website and view the statement, which you may or may not download to your computer.
If something were to happen to you, would your family or executor know that this account exists? Perhaps you save all of your statements and correspondence related to the account on your computer. But would your representatives know where to look? And if your computer is password protected, how would they get in?
Even if your family knows about a digital asset, they’ll also need to know the username and password to access it. If they don’t have that information, they’ll have to get a court order to access the asset, which can be a time-consuming process — and delays can cause irreparable damage, particularly when a business is involved. If your representatives lack access to your business e-mail account, for example, important requests from customers might be ignored, resulting in lost business.
Granting immediate access to digital assets
The first step in accounting for digital assets is to conduct an inventory, including any computers, servers, handheld devices, websites or other places where these assets are stored. Next, talk with your estate planning advisor about strategies for ensuring that your representatives have immediate access to these assets in the event something happens to you.
Although you might want to provide in your will for the disposition of certain digital assets, a will isn’t the place to list passwords or other confidential information. For one thing, a will is a public document. For another, amending the will each time you change a password would be expensive and time consuming.
One solution is writing an informal letter to your executor or personal representative that lists important accounts, website addresses, usernames and passwords. The letter can be stored in a safe deposit box, with a trusted advisor or in some other secure place. However, the problem with this approach is that you’ll need to update the list each time you open or close an account or change your password, a process that’s cumbersome and easily neglected.
A better solution is to establish a master password that gives the representative access to a list of passwords for all your important accounts, either on your computer or through a Web-based “password vault.”
It should come as no surprise that several companies now offer online services for passing on digital assets to your loved ones. Popular services include:
- Digital Beyond, and
Each service establishes procedures for releasing passwords and other information about digital assets to a designated beneficiary in the event you die or become incapacitated. Some require a death certificate or other confirmation, while others send you periodic e-mails and release information to your designated representative in the event you fail to respond.
Addressing who’ll receive the assets
In addition to identifying digital assets and giving family members access to them, your estate plan must address ownership issues involving these assets. Consider working with your us to create a trust that provides the trustee with the authority to manage digital assets and transfer them to your beneficiaries according to your wishes.