What is Digital Estate Planning and Why Do I Need it?

Ch 1: Introduction

Countless people are dying without proper digital estate plans in place, leaving billions of dollars of assets unaccounted for in the digital world. This is occurring in part because individuals are often unaware that traditional estate planning tools and techniques, such as wills, are ill-equipped to handle the unique challenges of digital estate planning. As a result, the majority of Americans are vastly unprepared for their digital afterlife, unintentionally foregoing digital estate planning altogether and leaving their assets trapped in a digital purgatory. With the ongoing growth in our reliance on technology, interaction via social media, digitization of individual’s property, and further advancement of new Internet technologies, the amount and value of our digital assets are growing exponentially.

In response to this immediate need for digital estate planning and management of digital assets, some businesses began to offer their users the ability to plan for the disposition of their digital assets upon their death. However, due to the novelty of this area of law, the business solutions currently afforded often leave more questions than answers about what happens to the individual’s digital assets, raise concerns about privacy and security, and augment disputes over their overall effectiveness in the estate plan. These pages examines the importance and increasing prevalence of digital assets, discusses the challenges facing traditional estate planning in the growing world of digital assets, and suggests a workable strategy for the creation of a well-developed and manageable digital estate plan.

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ChVI: Workable solutions

While proper digital estate planning is crucial to the management of one’s digital assets and enduring legacy, the inability of traditional estate planning techniques and online digital estate planning services to provide satisfactory solutions can leave many people at a loss. However, attorneys can still provide workable solutions to the challenges of digital estate planning. First, attorneys should inform their clients about the importance of proper digital estate planning and hopefully get the clients to consider the goals of their digital assets. Proper management of digital assets is about more than just wealth. Legacy, appearance, and family sentiments should help shape the digital asset plan. Not all of digital estate planning will be the preservation of assets. In some
instances, decisions should be made to destroy, delete, and terminate digital assets. This is especially important due to the potential never-ending nature of digital assets.

Attorneys, wealth managers, and financial planners should then help the client compile, update, and retain a comprehensive record of the client’s digital assets, login information, and the location of digital assets. By passing along electronic storage devices such as a computer, phone, camera, or flash drive, many digital assets can be transferred to the deceased’s beneficiaries in the same manner as a traditional tangible asset. However, when dealing with digital assets not stored on a physical storage unit under the individual’s control, the access information may be stored on a password-protected and encrypted digital storage device—such as a flash drive—that the estate planning attorney provides to the client. This type of digital asset management system can allow for the individual to dispose of the storage device via his or her will, but continue to use the digital assets, make changes to the access information when needed, and safely store this information.
While serious concerns still exist with online digital estate planning services,  they should not be discounted entirely. These companies can provide valuable  planning strategies and management of one’s digital assets. However, it is crucial to perform a due diligence  review of any such service before entrusting the service  with access information or details about the digital assets. It is also important to  check with digital service providers to see what their policies are with regards to assets. Knowing the ownership rights and transferability of digital assets is a crucial step. This could also lead an individual to switch service providers if one company offers better digital asset rights.

Currently, there is no quick solution for disposition of digital assets. Instead, it must be a well-thought-out and developed plan that is integrated within the overall estate plan. Keeping track of assets, determining goals, and knowing rights are the crucial steps to maintaining, managing, and securely developing an estate plan for the proper disposition of digital assets.

What Makes up Your Digital Estate?

CV V: Current Digital Assets Planning Tools

In its current developmental stage, estate planning for digital assets is being done through wills, trusts, and online digital estate planning services. This section explores these three methods of transferring digital assets and discusses their individual shortcomings.
Through the use of traditional wills, individuals may express their intentions and plan for disposition of their assets. However, disposition and transfer of digital assets through wills can be problematic, as briefly mentioned earlier. Given that the average number of specific digital assets per individual is nearly 3,000 files, providing identification and access to all of these assets can be overwhelming. Due to the continuing growth and the changing nature of the digital assets, the will provisions may become quickly outdated. The speed of the digital world seems to outpace these traditional estate planning tools, as passwords and access information can change daily, requiring constant updates to the will. Although the digital property may belong to the decedent, the third-party user agreements and term-and-condition contracts may limit or completely block a beneficiary’s right of access to the decedent’s digital assets. In addition, wills may become a public document upon the decedent’s death; therefore, security and privacy aspects of the transfer of digital assets may be compromised.

Trusts can alleviate some of the above-described concerns. Trusts provide for a more secure transfer of digital assets than wills because trust documents do not become public. Thus, key private information regarding passwords, accounts, and contents remain out of the public eye. Further, the law permits individuals to transfer digital assets into a trust while maintaining control and use of the assets for the remainder of the individual’s life. Sometimes, the trusts are subject to more relaxed formation requirements than wills, allowing for easier creation and modification. As such, trusts can more easily adapt to the changing nature of digital assets. However, very few people actually set up trusts specifically designed for digital estate planning. Although both wills and trusts can transfer digital assets from the decedent to the beneficiaries, they are becoming a tool of the past due to the speed of today’s technology. In response, several online estate planning services have developed in order to facilitate one’s digital asset planning needs. These services are designed to specifically address the digital management, location, and confidentiality of one’s digital assets during an individual’s lifetime.
As such, these digital estate planning services have latched onto the lucrative digital asset management industry—anticipated to be a $1 billion industry in 2013. While these online digital estate planning services offer a degree of efficiency that is unmatched by traditional estate planning techniques—enabling individuals to update, manage, and track their digital assets on demand—serious concerns exist regarding their reliability and sustainability as estate management tools. For example, while digital estate planning services claim to provide exceptional account security, caution is nonetheless warranted because, not unlike a traditional bank vault, these services create a large repository of wealth and property, rendering them prime targets for cybercrime and theft.

Additionally, these digital estate planning services are not regulated and are often not run by attorneys, creating concern as to who is being entrusted with the individual’s passwords, assets, and information.

Finally, there are serious stability concerns as to the continued existence of online digital estate services, as these services are relatively new and turnover in the industry has been significant. However, digital estate planning services such as Eterniam, a Seattle, Washington-based company, are beginning to realize the importance of establishing trust with clients by stressing their commitment to security, privacy, and long-term stability. Estate planning ultimately should not be a short-term solution, but rather should provide lasting peace of mind and planning options to an individual testator.