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Digital Assets: The 21st Century Estate Planning Challenge

Estate, Gift, & Trust Planning

When it comes to estate planning, the fundamentals have changed very little over the past 50 years. Most people use wills, trusts and other legal documents to protect their assets and pass them to loved ones.

What has changed, particularly in the 21st century, are the types of assets for which you now must plan. Along with cash, investments, real estate and other tangible property are now digital assets — including passwords, websites, cryptocurrency, social media accounts and even intellectual property you’ve developed. And if you haven’t included these assets in your estate plan, they may not go where you want them to after you’re gone.

Ask Questions

To start the digital asset planning process, ask a few questions: How will your electronic records be handled after your death? Can family members easily obtain passwords and access your accounts? Will the bills you’re automatically paying online continue to be paid? And what happens to other information you consider to be confidential?

If you don’t have ready answers to those questions, it’s time to act. Just keep in mind that the laws in this area are still evolving. Another complication is that legal remedies vary from state to state and some jurisdictions haven’t enacted any legislation for these critical issues.

Inventory Your Holdings

To account for your digital assets, conduct an inventory, including where computers, servers, handheld devices and websites can be found. Next, talk with your Lenox Advisor and estate planning attorney about strategies for ensuring that your representatives have immediate access to your digital 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 definitely isn’t the place to list passwords or other confidential information. For one thing, a will is a public document. For another, amending your will each time you change a password would be expensive and time consuming.

One solution is to write 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 — not to mention, easy to forget.

A better solution might be to establish a master password that gives your representative access to a list of passwords for all your important accounts, either on your computer or through a Web-based “password vault.” Another option is to use one of several online services designed for digital asset estate planning.

Attend to Details

Other steps to consider include reviewing social media agreements. Read the fine print about your participation in social media sites and other online accounts. If you’re not satisfied with the terms upon closer inspection, you might want to terminate your account. Be especially wary of restrictions on the use of a power of attorney.

Finally, consider using a digital storage unit. There are online services available, or you could save information using encrypted files on your computer or other device such as an external drive. Wherever it’s kept, be sure to share the location of the information, and the password for the files, with a trusted individual who’ll need to access the data on your behalf. Communication is key.

Special Issues

Although these steps can help address common issues surrounding access to your various accounts, you may need additional safeguards if you own assets such as cryptocurrency and NFTs or if you’ve created digital properties, such as software. Be sure to discuss anything out of the ordinary with 
your estate planning advisor.