Recent advances in digital technology have made many aspects of our lives exponentially easier and more convenient. But at the same time, digital technology has also created some complications when it comes to estate planning. If you haven’t properly addressed your digital assets in your estate plan, there’s a good chance that most of those assets will be lost forever when you die.
There are several special considerations you should be aware of when including digital assets in your estate plan. Here we’ll discuss the most common types of digital assets, along with some practical tips to ensure your digital property is properly accounted for, managed, and passed on in the event of your incapacity or death.
Types of Digital Assets
Digital assets include a wide array of digital files and records that you have stored in the cloud, on smartphones and mobile devices, or on your computer. When it comes to estate planning, your digital assets will generally fall into two categories: those with financial value and those with sentimental value, which could mean far more to the people you love (and your future generations) than the assets with monetary value.
Digital assets with financial value include cryptocurrency like Bitcoin or Ethereum, online payment accounts like PayPal or Venmo, loyalty program benefits like frequent flyer miles or credit card reward points, domain names, websites, and blogs generating revenue, as well as other intellectual property like photos, videos, music, and writing that generate royalties. Such assets have real financial worth for your loved ones, not only in the immediate aftermath of your death or incapacity but potentially for years to come.
Digital assets with sentimental value include email accounts, photos, video, music, publications, social media accounts, apps, and websites or blogs with no revenue potential. This type of property typically won’t be of any monetary value, but offers sentimental value and comfort for your family following your death and inform future generations in ways you may not have considered.
As an example, I cherish an image of one of my ancestors from the 1920s. I wish I knew more about him to inform my own understanding of life. Imagine if your future generations can use your digital assets to learn from your experiences as a direct result of how you handle those assets in your estate plan.
Do You Own Or License The Asset?
Although you might not know it, you don’t own many of your digital assets at all. For example, you do own assets like cryptocurrency and PayPal accounts, so you can transfer ownership of these items in a will or trust. But when you purchase some digital property, such as Kindle e-books and iTunes music files, all you really own is a license to use it. In many cases, that license is only for your personal use and is non-transferable.
Whether or not you can transfer this licensed property depends almost entirely on the account’s Terms of Service Agreements (TOSA) to which you agreed (or more likely, simply clicked a box without reading) upon opening the account. While many TOSA restrict access to accounts only to the original user, some allow access by heirs or executors in certain situations, while others say nothing at all about transferability.
Review the TOSA of your online accounts to see whether you own the asset itself or just a license to use it. If the TOSA states the asset is licensed, not owned, and offers no method for transferring your license, you’ll likely have no way to pass the asset to anyone else, even if it’s included in your estate plan.
To make matters even more complicated, though your loved ones may be able to access your digital assets if you’ve provided them with your account login and passwords, doing so may violate the TOSA and/or privacy laws. To legally access such accounts, your heirs will have to prove they have the legal authority to access them, a process which up until recently was a huge legal grey area.
The good news is most states have adopted laws that help clarify how your digital assets can be accessed and disposed of in the event of your death or incapacity.
The Law of the Digital Land
Until very recently, no laws were governing who could access your digital assets in the event of your incapacity or death. As a result, if you died without leaving your loved ones your usernames or passwords, the tech companies who controlled the platforms housing the assets would often delete the accounts or leave them sitting in a state of online limbo, inaccessible to your family and friends. The federal government finally stepped in to find a solution to this problem. The Uniform Law Commission passed the Uniform Fiduciary Access to Digital Access Act (UFADAA) was passed in 2015 and revised in March 2021. That law has been adopted in all but four states. The law lays out specific guidelines under which fiduciaries, such as executors and trustees, can access your digital assets. The Act allows you to grant fiduciary access to your digital accounts upon your death or incapacity, either by opting them in with an online tool furnished by the service provider or through your estate plan.
The Act offers three tiers for prioritizing access. The first tier gives priority to the online provider’s access-authorization tool for handling accounts of a decedent. For example, Google’s “inactive account manager” tool lets you choose who can access and manage your account after you pass away. Facebook has a similar tool that allows you to designate someone as a “Legacy Contact” to manage your personal profile.
If an online tool is not available or if the decedent did not use it, the law’s second-tier gives priority to directions given by the decedent in a will, trust, power of attorney, or other means. If no such instructions are provided, then the third tier stipulates the provider’s TOSA will govern access.
The bottom line: If you use the provider’s online tool—if one is available—and/or include instructions in your estate plan, your digital assets should be accessible per your wishes in almost every state under this law. However, it’s important that you leave your fiduciary detailed instructions about how to access your accounts, including usernames and passwords, because, without such information, your executor or trustee won’t be able to even access, much less manage, your digital assets if something happens to you.
Make a Plan for Your Digital Assets
Given that leaving detailed instructions is the best way to ensure your digital assets are managed in exactly the way you want when you die or if you become incapacitated, in the second part of this series, we’ll offer practical steps for properly including your digital assets in your estate plan. Meanwhile, contact us if you have any questions about your digital property or how to include it in your estate plan.
The Dark Side of the Internet