When you sit down and write your will, you’re likely thinking about who should get your house or the heirloom set of china that has been passed down for three generations. It doesn’t occur to most people to include their online or digital data and accounts.
But according to Daniel McLennon, advanced planning attorney for Northwestern Mutual, it’s critical that people plan for their digital assets in their estate plans because more of the things we consider to be valuable are moving to a digital format.
McLennon, for example, stores all his family photos online and included them in his will because he doesn’t want his family to lose them should something happen to him.
“If you upload things like photos onto an online drive, your family might not know where they are or be able to access them when you die,” McLennon said. “These types of digital assets are extremely important to families, and losing them could be devastating.”
Digital assets that you might want to plan for could include Facebook accounts or cloud services that store files or family photos that are valuable for sentimental reasons, but these assets might also include things that have a financial value, like online businesses or Paypal accounts with money in them. One digital asset that McLennon believes is important to include in an estate plan is your email account since it often has a functional value to your estate in addition to any sentimental value it might have.
“Email accounts are critical to plan for since more companies are now paperless,” McLennon said, “and so things like bills or insurance policies are often being sent out via email. An executor working to wrap up someone’s final affairs could need access to his or her email in order to close all the accounts.”
When it comes to planning for your digital assets, McLennon suggests three steps to take in order to ensure your digital assets will be dispersed and used according to your wishes.
1. Keep a list. McLennon recommends that you keep track of the digital assets you own and want to pass down so that nothing of sentimental or monetary value gets overlooked.
“Think about what you can access only via a computer or your phone,” said McLennon, “and write all of those accounts down.”
While there are computer programs that keep track of your accounts, the easiest way to do this is to keep a hard copy of the information and to store it with your will. Update your usernames, passwords and answers to security questions regularly so that the information is accurate.
2. Decide what you want to happen to your assets. The next step is to decide what you want to happen to these digital assets when you die and to include instructions in your will.
Perhaps you want some accounts deleted. Or maybe you want certain things published or memorialized. Facebook, for example, allows families to memorialize a Facebook page, delete it or leave it active, and you can state your preference in your estate plan.
It’s also important to list whom you want to be given ownership of your accounts and to give them and your executor permission to access those accounts. This step is key since the laws around leaving digital assets to your heirs are still in their infancy.
“We have centuries of established law for passing down non-digital assets,” said McLennon, “but the law moves slowly, so the fact that digital assets are relatively new means we don’t have a lot in place to help people easily transition these assets if they are not included in a will.”
But even if you include your online assets in your will, your estate might still run into problems.
“That’s because,” said McLennon, “many terms of service agreements for things like email accounts don’t allow you to let others access your accounts—let alone allow others to assume ownership of these accounts.”
This problem got significant publicity when the family of a soldier who died overseas asked Yahoo for access to his email account. Yahoo refused, saying that their terms of service agreement required that they protect the soldier’s privacy. A court order later granted the family access.
Luckily, state law is working to address this and is granting executors, trustees and family members the ability to access digital assets should they have permission in a will. While only a few states have instituted legislation allowing for this, many more states are in the process of drafting new laws.
For this reason, McLennon suggests you discuss the best way to plan for digital assets in your state with your attorney when you’re making your will.
3. Speak to your family. Speaking to your family about your digital assets is the final step in planning for them.
“You might do this by speaking to them beforehand,” said McLennon, “or including this information in a letter that your executor gives them.”
This is important because your heirs might not understand how to access or use the services or accounts you’re leaving them for a number of reasons—like if they aren’t skilled at using computers or if they’re not familiar with the account.
Also, since not everyone understands the financial value of assets like domain names or Ebay seller accounts, it’s critical that you share the value of your assets with your heirs so that they can take advantage of them by selling or using them. If your online assets are extremely valuable, you might also decide to hire financial advisors and experts to help your heirs manage or sell them.
Planning Is Key
Since digital assets are new and the legislation around leaving them to heirs is still in the process of being created, it’s important that you work with your attorney to look into your state’s laws about including digital assets in estate planning. You should also read through terms of service agreements for your accounts before creating your will to help you understand what you can legally do with your accounts.
Planning for your digital assets might require a bit more time and effort when you’re creating your will, but it is worth it for families who take the time to do it.
“Just knowing that all of your memories, your important information and your correspondence will be left to your heirs is incredibly comforting,” said McLennon.
The Northwestern MutualVoice Team is a group of professionals who share insights and opinions from experts and industry leaders across the enterprise. Our vision is to inspire others to take action and plan for their financial future through topics ranging from financial planning, retirement planning and distribution strategies, wealth accumulation and preservation, to leadership, philanthropy and innovation.