Estate Planning for Digital Assets

Courtney Jones, CFP®
Posted on 
January 12, 2022

Estate Planning for Digital Assets

For most of us, our online lives are well-established. More than just your social media accounts – the way that you live day-to-day. When was the last time you wrote a paper check? Or got a credit card statement in the mail? How about paper files? If you have a business, you probably also have a domain name and a host of social media accounts under the business name.

And that’s not even the fun stuff. How about your media subscriptions? Everything from how you get news, check out library books, play video games and watch content. Everything has an account – and a password.

While protecting passwords has gotten more secure, passing on all these assets has become correspondingly more complicated as others need specific info from you, and potentially even another of your devices. Even if you have them, there may be terms of service prohibitions by the service provider or Federal data privacy laws that limit access.

Just like the estate plan for your traditional assets, the goal is to protect your loved ones, and smooth the transition.

Getting Started: Create a Comprehensive Inventory

Start with your personal accounts, but for right now don’t include accounts that have value. This is just about the daily details and activities of your life, or things that have sentimental value, like photographs.

· Social media accounts

· Subscription services

· Email accounts

· Online banking accounts

· Online payment services

· Credit card accounts

· Utility accounts

· Document or file storage accounts

· Smart Home accounts

· Accounts like Etsy or eBay where you have an established identity as a buyer

· Contact lists

· Shopping accounts

· Photo and video sharing and storage accounts

The ideal file would have the name of the service or account, your username, password, and identifying information (like answers to questions or backup accounts). You can use a password app for this, but you’ll want to export it to another, accessible file. You’ll also want to be sure you back everything up to the cloud, and this should include digital copies of your passport and other documents.

Passing on Valuable Digital Assets

Digital property with monetary value is a little different. First you need to know if you own the asset or if you have licensed it. The legal protections are different, and assets need to be properly identified. Some examples of assets with monetary value include:

· Domain names for websites

· Blockchain assets, crypto, Nfts, etc.

· Digital photos and videos or other intellectual property that you have created or otherwise own

· Digital rights to literary, musical composition, motion picture, or theatrical works

· Online video channels that create a revenue stream, like YouTube

· Social media accounts with partnerships that generate revenue

Digital Asset Law: An Evolving Area

Many states have adopted the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA), which lays out three tiers for accessing digital assets:

· Tier 1. If a digital service provides a tool to designate what happens to assets after you die, this designation guides what happens to the account. For example, if you used Google’s inactive account manager to designate a family member, this designation would guide what happens to your Google assets.

· Tier 2. If there is not any tool, then the owner’s directions in a will or legal document determine the handling of the account or asset.

· Tier 3. If neither of the first two scenarios are present, the terms-of-service agreement dictates how those accounts can be accessed. As mentioned, those agreements often restrict access to the original owner.

Essentially, these are protections, but they could result in your heirs not getting access unless you make appropriate provisions in your estate planning documents. Just like an executor, you’ll need to identify who should have access to the assets and what the circumstances are. This may be more than one person, and each will have responsibility for different types of assets. You can specify whomever you desire.

The Digital Documents

The digital estate plan is a formal document that includes the inventories you’ve created, identifies who has access and lays out what you want done. If you’ve made a will, don’t include this document in it. Wills go through the public process of probate, and for obvious reasons, you want to keep this private.  You should note in your will or create a codicil that it exists – your estate planning attorney can handle this.  

The Bottom Line

We’re seeing a shift into a digital-first world and while digital assets have existed for decades, building a plan around how to protect them is becoming more important. Incorporating everything from precious memories to digital real estate in the metaverse into an estate plan is something you may never thought you’d have to do, but times change. A financial advisor can help you get organized and build a plan around the best ways to protect and pass on your assets, traditional or digital.

Estate Planning for Digital Assets

Courtney Jones, CFP®
Posted on 
January 12, 2022
Estate Planning for Digital Assets

Estate Planning for Digital Assets

For most of us, our online lives are well-established. More than just your social media accounts – the way that you live day-to-day. When was the last time you wrote a paper check? Or got a credit card statement in the mail? How about paper files? If you have a business, you probably also have a domain name and a host of social media accounts under the business name.

And that’s not even the fun stuff. How about your media subscriptions? Everything from how you get news, check out library books, play video games and watch content. Everything has an account – and a password.

While protecting passwords has gotten more secure, passing on all these assets has become correspondingly more complicated as others need specific info from you, and potentially even another of your devices. Even if you have them, there may be terms of service prohibitions by the service provider or Federal data privacy laws that limit access.

Just like the estate plan for your traditional assets, the goal is to protect your loved ones, and smooth the transition.

Getting Started: Create a Comprehensive Inventory

Start with your personal accounts, but for right now don’t include accounts that have value. This is just about the daily details and activities of your life, or things that have sentimental value, like photographs.

· Social media accounts

· Subscription services

· Email accounts

· Online banking accounts

· Online payment services

· Credit card accounts

· Utility accounts

· Document or file storage accounts

· Smart Home accounts

· Accounts like Etsy or eBay where you have an established identity as a buyer

· Contact lists

· Shopping accounts

· Photo and video sharing and storage accounts

The ideal file would have the name of the service or account, your username, password, and identifying information (like answers to questions or backup accounts). You can use a password app for this, but you’ll want to export it to another, accessible file. You’ll also want to be sure you back everything up to the cloud, and this should include digital copies of your passport and other documents.

Passing on Valuable Digital Assets

Digital property with monetary value is a little different. First you need to know if you own the asset or if you have licensed it. The legal protections are different, and assets need to be properly identified. Some examples of assets with monetary value include:

· Domain names for websites

· Blockchain assets, crypto, Nfts, etc.

· Digital photos and videos or other intellectual property that you have created or otherwise own

· Digital rights to literary, musical composition, motion picture, or theatrical works

· Online video channels that create a revenue stream, like YouTube

· Social media accounts with partnerships that generate revenue

Digital Asset Law: An Evolving Area

Many states have adopted the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA), which lays out three tiers for accessing digital assets:

· Tier 1. If a digital service provides a tool to designate what happens to assets after you die, this designation guides what happens to the account. For example, if you used Google’s inactive account manager to designate a family member, this designation would guide what happens to your Google assets.

· Tier 2. If there is not any tool, then the owner’s directions in a will or legal document determine the handling of the account or asset.

· Tier 3. If neither of the first two scenarios are present, the terms-of-service agreement dictates how those accounts can be accessed. As mentioned, those agreements often restrict access to the original owner.

Essentially, these are protections, but they could result in your heirs not getting access unless you make appropriate provisions in your estate planning documents. Just like an executor, you’ll need to identify who should have access to the assets and what the circumstances are. This may be more than one person, and each will have responsibility for different types of assets. You can specify whomever you desire.

The Digital Documents

The digital estate plan is a formal document that includes the inventories you’ve created, identifies who has access and lays out what you want done. If you’ve made a will, don’t include this document in it. Wills go through the public process of probate, and for obvious reasons, you want to keep this private.  You should note in your will or create a codicil that it exists – your estate planning attorney can handle this.  

The Bottom Line

We’re seeing a shift into a digital-first world and while digital assets have existed for decades, building a plan around how to protect them is becoming more important. Incorporating everything from precious memories to digital real estate in the metaverse into an estate plan is something you may never thought you’d have to do, but times change. A financial advisor can help you get organized and build a plan around the best ways to protect and pass on your assets, traditional or digital.

Registered Representative of Sanctuary Securities Inc. and Investment Advisor Representative of Sanctuary Advisors, LLC. Securities offered through Sanctuary Securities, Inc., Member FINRA, SIPC.  Advisory services offered through Sanctuary Advisors, LLC., an SEC Registered Investment Advisor. Credo Wealth Management is a DBA of Sanctuary Securities, Inc. and Sanctuary Advisors, LLC. This work is powered by Seven Group under the Terms of Service and may be a derivative of the original. More information can be found here. This communication has not been reviewed for completeness or accuracy, does not necessarily reflect the views of Sanctuary Securities, Inc. or Sanctuary Advisors, LLC., and is not a recommendation or endorsement of any product, service, or issuer. For additional information, please refer to one of the following consumer websites: www.FINRA.org, www.SIPC.org.

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