We live in a digital world where traditional assets like photo albums, businesses, marketing materials and financial assets are moving online. Just look around – the most valuable companies in the world are technology companies that do most of their business online.
Even money has been digitized through cryptocurrency developments. This digitalization of the world is challenging traditional estate planning techniques, and laws and best practices often lag behind technological advances.
Digital assets create a few unique challenges traditional physical assets do not have.
digital assets can be difficult to find online as there is an endless amount of information available.
accessing the assets can be challenging because most assets stored online are protected by a username and password.
ownership rights of online assets are less clearly defined than traditional assets.
So perhaps the first questions to ask is this: What are digital assets and are they important?
Digital assets are not the physical devices we use to access and store information like computers and iPhones. They are the valuable information stored on those digital devices. Your e-mail account, website, software program, cryptocurrency, credit card reward points, blog posts, Facebook and online photos are all examples of digital assets. For my ten step planning checklist for digital assets click here.
Digital assets are important for three main reasons.
There is real monetary value in digital assets. A study by McAfee showed that the average person worldwide had over $35,000 of digital assets and Americans had value of over $55,000 back in 2013.
Many digital assets present sentimental or lifestyle benefits. Emails between family members or online photos might not have substantial financial value but do have a lot of sentimental value to heirs who would want access to the assets.
Digital assets left alone after death also represent a huge risk due to post-mortem online theft or abuse. Over 70 percent of online users are concerned about identity theft or fraud when online.
I know of one family in which the husband unexpectedly died. He handled all of the couple’s finances, emails, online accounts, bill pays and even accounts with online retailers.
Once he passed away, his wife didn’t know where to go online, how to access their emails or pay bills, or how to close down any of the sites that contained contact information, bank accounts, credit cards and other personal information. In the end, services were disrupted, and bills were overdue because the couple had gone paperless and notices were only going to the email of the deceased husband.
Later on, someone hacked one of the websites and stole the couple’s information. The surviving spouse never knew until multiple new credit cards were set up in her deceased spouse’s name and bills started coming in months later.
This is a real story, and it is not an isolated incident – it’s happening to thousands of people each year because of a lack of awareness about the importance of digital asset planning and digital asset management.
So if someone says they have an estate plan in place to cover all their assets, you can rest easy knowing their digital assets are covered, right? Unfortunately, traditional estate planning techniques are inadequate to cover digital estate plans today.
First, you need to specifically track where your digital assets are online and keep track of login information. It is not as easy as just sorting through a person’s attic, drawers, garage, basement and safety deposit box to find their online accounts. One step is purely tracking and managing existing assets.
Next, you need to understand ownership rights of the digital assets. For instance, most of the ownership rights in digital assets are set when the individual agrees to the Terms of Service Agreement (TOSA) with the online service provider – you know, the agreement you scroll all the way to the bottom of and hit “I Agree” without reading anything. Unfortunately, no one reads these documents.
What does a TOSA say? Mostly, these agreements state that your online accounts cannot be transferred to anyone else upon your death, leaving these assets in a state of eternal limbo, and instead creating a non-transferable lifetime lease in the online account and service.
Another challenge for digital asset planning is that traditional wills struggle to keep track of digital assets. Because passwords change regularly and new accounts are constantly set up, in addition to the will becoming public through probate, the will is not a good place to list assets, passwords and locations of important documents and other items.
Instead, you will have to be much broader in your approach inside the will. However, there are federal laws under the Computer Fraud and Abuse Act and the Electronic Privacy Act that can make sharing passwords, if against the TOSA, a federal violation. So just keeping track of your accounts and passwords without checking and seeing if you have the legal authority to share them, could also be problematic.
Essentially, RUFADAA provides a clearer framework for how access to digital assets will be handled. First, if the service provider allows for a beneficiary-like transfer system, that will take priority. Next, traditional legal documents would have authority, but only if they are correctly drawn up. Next, if neither of the other two are in place, you would look to the TOSA. In the event that no direction is given by anyone, it is likely you would then revert to traditional state common law and estate practices.
However, it is also important to remember that RUFADAA cannot change ownership of assets as set by the TOSAs. If you agree this is a non-transferable lifetime lease when you set up the online account, it remains a non-transferable lifetime lease. This can lead to improper ownership of assets in many cases and create serious challenges for small businesses.
Instead, RUFADAA aims at allowing access to digital assets to certain fiduciaries laid forth in legal documents or through another process. This allows fiduciaries to have access to the online accounts to manage them or close them in the event of death, disability or incompetency, but only if the owner affirmatively gave the fiduciary this management control in the applicable trust agreement, will or power of attorney document.
Essentially, fiduciary access to digital assets will be treated as a “hot power,” meaning that you must specifically grant the fiduciary access to “digital assets.” Just saying your fiduciary has access to all your assets won’t work! This also means most existing wills, trusts, and powers of attorney are out of date and you should update them immediately to include current digital asset language.
While almost every existing estate planning document needs to be updated, just updating documents is not enough either. Digital asset planning also requires planning as to which accounts you want memorialized, continued, or deleted and what information you want preserved or removed. In some cases, new accounts will need to be set up or assets moved from one spouse to another or from an individual to a company. True digital asset planning will be part risk management and part ownership review.
Attorneys also need to discuss digital asset management and planning with clients. With small businesses, even a brief delay in access to their online accounts could be devastating. You also want to ensure that the client has a process for tracking their online accounts, keeping usernames and passwords safe, and, if desired, provide insight into how they want their accounts managed in the event of incapacity or death. The client might want some accounts destroyed or deleted and other accounts passed on to someone else.
Digital assets are growing in value and need to be part of your practice. Find out how your state is handling these assets, update your documents and discuss these digital assets with clients, especially those clients with small businesses.
Most clients and advisors are acutely aware of the value of a thoughtfully designed estate plan that provides for the eventual disposition of a client’s tangible and financial assets. Despite this, even the most carefully constructed estate plan often overlooks a client’s digital assets.
In today’s society, almost all clients are active online, and may have substantial digital assets with both sentimental and monetary value even if they do not realize that this is the case. Without a clear plan that specifies the client’s wishes, however, both state and federal laws can create roadblocks to accessing digital assets—making it critical that the client include digital assets in any comprehensive estate plan in order to ensure an orderly post-mortem disposition that carries out the client’s wishes.
Uniform Laws Governing Digital Assets
The concept of estate planning for digital assets actually covers an extremely broad range of online assets, ranging from email accounts and social media to PayPal, domain names, intellectual property stored on a computer and virtual currency. While some of these accounts are likely to have only sentimental value, domain names, blogs with advertising and business contact lists contained in email accounts can have monetary value, as well.
Without a clear estate plan contained in legal documents, data privacy laws can prevent the online service provider from allowing the client’s executor or family members to access his or her online accounts. The Uniform Fiduciary Access to Digital Assets Act, which has been passed in most states, provides that an owner of digital assets can specify who will be able to access and dispose of any digital assets after death.
Absent proper planning, the online provider’s terms of service agreement (TOSA) will often control what happens to the account after death. In some cases, this TOSA can even override the client’s specifications that are contained in a will or other document, especially in cases where the service provider provides specifications as to how the account owner can make his or her post-mortem wishes known.
For example, Google provides an “inactive account manager” function that allows the account owner to specify what should happen to the account after it has remained inactive for a period of time. The account owner can list beneficiaries who will be notified that the account will be closed before it is deleted, giving beneficiaries time to download any content contained in the account.
It is important to remember that the instructions the client leaves in his or her online service provider’s tools will trump instructions left in the will, so it is important to include this document among those that should be regularly considered and updated.
An Action Plan for Digital Estate Planning
After a client determines who should be allowed access to his or her digital assets after death, it is important to takes steps to ensure that the heir is able to access the relevant data. Importantly, the client’s will, trust documents and other legal documents should specify a digital fiduciary or executor who will be able to access any given digital asset after death, and should also provide that individual with the ability to reset or recover the client’s passwords.
In order for such a plan to be effective, the client should be advised to make a comprehensive list of his or her digital assets during life, which should also include instructions as to how the appointed person can access those assets after death. To facilitate easy access, the client should list usernames, passwords and the security questions associated with the account password. This information should be stored securely, but should not be included in the client’s actual will, which can be accessed by the public after death.
Depending upon the type of digital assets involved, clients may find a virtual asset instruction letter valuable in their digital estate planning. This letter sets forth all relevant information as to digital accounts and assets to allow the digital fiduciary access (or instructions that certain accounts should be deleted).
Clients should also be advised to regularly back up their digital assets on the cloud or another device, both to protect those assets from a device malfunction but also to allow easier post-mortem access to a digital fiduciary.
A client’s digital estate plan will vary in complexity depending upon the type of digital assets involved. Many clients may be unaware that their digital assets hold monetary value, so it is important that the advisor discuss disposition of digital assets with all clients, even those who do not initially foresee the need for digital estate planning.
By now, most regular readers of this column are aware of the need to make an estate plan to minimize the difficulty of conveying their financial assets and physical property after death. But what about digital assets?
These are the online accounts in your name that may include files such as images, photos, videos and text; email accounts; and social media and networking accounts such as LinkedIn, Facebook and YouTube. What happens to these when you die?
If you don’t plan for the management of your digital assets after death, your family might not be able to access critical information they need from your online accounts. Because of federal privacy laws, most Internet companies won’t be able to ensure that access unless you have taken specific steps beforehand.
Few states have passed laws to solve this problem. In many states, some of your accounts may be deleted upon your death. In others, families must obtain a court order to obtain the rights to view a decedent’s account. The process can take years, during which time the account might be deleted because of inactivity.
Some sites provide solutions. Facebook allows you to name a “legacy contact” — an individual who can post your obituary on your timeline. That individual can respond to new friend requests and update and archive your posts and photos.
Google has an “inactive account manager” feature which allows you to identify “trusted contacts” with whom to share specific data available from your Google and Gmail accounts.
Other sites have similar features, but they all require action on your part to activate them.
In order to avoid potential problems associated with digital assets, it is a good idea to create a digital estate plan. The first critical step is to make an inventory of your digital assets — financial, purchasing and social accounts — and document how to access them after your death.
List all online accounts for brokerage, insurance, banking, credit cards, loans, retirement savings, PayPal, purchasing, email and social media, as well as any blogs and personal websites. Include the usernames and passwords required to access them.
The next step in your digital estate plan should be to develop a safe place to store this information. It can be with your estate attorney, in your safety deposit box or with an organization that provides storage for this information. Your attorney should be able to identify which storage locations are consistent with state laws. There are several organizations that specialize as digital fiduciaries in this field, including Everplans, Final Roadmap, SecureSafe and others. Some have annual fees, and some have a one-time fee.
Some states allow you to specify a “digital executor” in your will. If your state does not recognize a digital executor, you should discuss this issue with your estate attorney so that a similar function can be carried out in accordance with state law. The digital executor should be trustworthy and technically competent, and have access to the necessary passwords and to the locations of all important information. He or she should have the responsibility to specify what happens to the nonfinancial digital assets based on your written instructions.
It is up to you to specify in your power of attorney, will and/or trust agreements what happens to your digital assets. Your executor, personal representative and/or trustee will have the responsibility to follow your wishes. If you haven’t discussed digital assets with your attorney, do so.
(Elliot Raphaelson welcomes your questions and comments at email@example.com.)
Our digital lives seem to know no bounds with every aspect of the way we live today having a virtual dimension should we choose it.
Financial assets are held and accessed online, social media accounts record our personal journeys through life and we relax listening to music downloaded or looking at photographs held digitally.
But after death who would have the complicated job of identifying and sorting out your intangible assets? If you bury your head in virtual sand and ignore the fact you have a digital life, in the real world it could cause chaos when you die. So the key advice is plan ahead ….
Your digital afterlife
Dr Wendy Moncur of the University of Dundee talks about her research carried out in association with the Centre for Death and Society at the University of Bath.
Protecting your legacy
1. Make a will
In a will you can name executors who will be in charge of sorting out your estate when you die – including your digital assets.
It’s a fact of life that we’re all going to die at some point. While it’s not something you probably want to think about, you can make things a lot easier on yourself (and your family) if you get everything in order now. Here’s what you need to do.
Your inevitable demise is hopefully not on your mind too often, but it’s still something you should think about long enough to get everything in order. Doing so ensures that everything in your life is organized so others can see what you want to happen after you’re gone, what you own, and how to handle a variety of situations.
If this sounds daunting, don’t worry too much: being unmarried, without children, and without a useful asset to speak of, I was able to get everything in order in about two hours (I still had a lawyer friend double-check everything to ensure I wasn’t accidentally giving my dog medical power of attorney). The more you own the longer it’ll take, but it’s not nearly as time-consuming as it looks because most of this stuff you probably already have ready to go.
Note: You can do a lot of this stuff on your own, but it’s a good idea to speak with a lawyer about your will, assets, and general estate planning. This guide is meant more to get you acquainted with terms, provide DIY options when applicable, and help you collect together what you need.
Decide What Happens After You Die
Planning for your death is actually two things: what happens after you die, and what happens if you’re ill and unable to handle decisions yourself. Let’s start with taking care of what happens after you die, starting with your last will and testament.
Write Your Last Will and Testament
Your last will and testament is a document that designates what happens with your property, guardianship of your children, and names the person (executor) who carries out your wishes after you die. If you don’t own a lot of property, a simple will is likely all you need.
It’s possible to draft up a simple will on your own, but it comes with its own set of pros and cons. These include problems with outdated information, specific state related tax issues, and how they handle specific trusts. As USNews notes, online wills are a one-size fits all solution, that can’t always account for the complicated situations of real life. However, if you only need a very basic will SmartLegalForms, LegalZoom, or RocketLawyer all provide a simple template for doing so for between $15 and $80. These laws and requirements change often, and if you don’t do it right you might unintentionally give someone more power over your estate then you want. Most simple wills have just a few sections where you can say what happens to your assets, and designate who gets any property you own.
When you’re drafting up your will, you’ll also name your executor. After you die, this is the person who handles your estate (all of your property), finances, debts, and everything else. It should go without saying this is a person you would trust to handle your estate when you’re alive. Once you die, a probate court will officially give power to your executor to handle your affairs. They do not have control over your estate until after you die.
Finally, to make the will legally binding, you’ll usually need to get signatures from at least two witnesses (who aren’t beneficiaries listed somewhere on the will), and it’s advisable to get it notarized by a notary public. You can usually find a notary public at your bank, and they act something like an official witness for legal forms.
If you have a lot of assets that you want to designate to multiple people, or to make sure your will is legally sound, you should speak with a lawyer about getting a more advanced will written up. Things start getting really tricky when finances are involved, and if you have a lot of assets it’s worth at least consulting with a lawyer (if you need help finding a reputable lawyer here’s our guide). I spoke with lawyer Elizabeth D Mitchell of Ambler & Keenan, LLC about the basics of what you can expect from an estate planning firm:
I usually start people out with a form and have them think about who they would name as their power of attorney. From there, we’d look at their assets and arrange for special circumstances. It’s important to remember that estate planning isn’t just what happens after death, it’s also about what happens if you’re incapacitated… What I always tell people is that it costs more to clean up a financial mess afterwards then it does to plan ahead.
Mitchell also adds that although it takes a little time to get everything in order, most estate planning lawyers offer some type of free consultation before they into your plan. This is because once they set up a plan with you, you’ll be dealing with them for the rest of your life so it’s important to know exactly what you’re getting into. Mitchell also recommends people at least speak with a lawyer about writing up their will even if they don’t own a lot of property because it’s possible a single mistake could mess everything up. As the New York Times points out, the law is different in every state, and something as minor as not declaring the document a will out loud will make it invalid in certain states. A lawyer is also handy to set up trusts so your family gets paid out. According to the Wall Street Journal, trusts are increasingly important:
Rick Law, founder of estate-planning firm Law ElderLaw LLP in Aurora, Ill., says estate planners increasingly recommend revocable trusts in addition to wills, since they are more private and harder to dispute. “Every will is like a compass that points toward the closest courthouse,” he says.
A revocable living trust can be changed anytime during your lifetime. After you transfer ownership of various assets to the trust, you can serve as the trustee on behalf of beneficiaries you designate. Provided you do so, there aren’t any ongoing fees.
That said, if you don’t own that much, or you don’t mind leaving it all to one person, the whole process of writing out your own will takes about 20-30 minutes. Photo by Ken Mayer.
Outline the Funeral or Memorial Service
Obviously this step is optional, but if you want something specific to happen at your funeral or memorial service after you die it’s a good idea to get it in writing, and let your family know your wishes. Doing so gets rid of the headache of planning for your family, and ensures you get what you want. You don’t need to go in and plan everything out, but here are a few things worth considering:
If you want a burial, you need to find a grave plot. You’ll need to contact a local cemetery and purchase a plot if so. If you want a specific cemetery or plot, the earlier you do this step the better.
If you want cremation, you’ll work with a funeral director, so contact a local funeral home and arrange any details with them.
Decide if you want to pre-pay for any arrangements so you don’t have to worry about your family paying for anything while they wait to get access to your money. Since the average funeral is around $6,500, so it might be helpful to pay ahead of time.
At this time, you can also decide if you want anything specific in a memorial service, how you want the wake handled, and everything else. It’s also common to add these details to the will if you want to make sure your wishes are followed. Obviously this is a very personal event, and what you want depends a lot on your religious and social background. It’s a good idea to make your wishes known to family members to take the pressure off them when the time comes.
Designate What Happens If You’re Ill or Incapacitated
Just as important as what happens after you die is what happens if you’re ill, incompetent, or incapacitated. For this you need a living will, a power of attorney, and a medical power of attorney. If it sounds a little scary, don’t worry, it doesn’t take a lot of time and by the end you’ll know that you’ll only get the medical support you want.
Designate a Power of Attorney
A power of attorney is the person who can attend to financial or legal matters if you fall ill or are unable to handle them for yourself. It’s a good idea to choose a power of attorney so that they can attend to your financial and legal issues immediately after you fall ill. The power of attorney expires when you die, and the control of your finances typically shifts to the executor you named in your will. In some cases this is the same person.
The form to designate a power of attorney varies by state, but if you want to do it yourself you can get a document from the same services where you did your will (SmartLegalForms, LegalZoom, or RocketLawyer). If you’re giving one person complete control over everything you can likely manage to fill this out yourself, but if you want to limit what they can do it’s likely best to consult with a lawyer. Photo by Andy on Flickr.
Prepare a Living Will and Designate a Medical Power of Attorney
Every state has different paperwork for your living will, and different guidelines (you can grab paperwork specific to your state here). Essentially, each form allows you to designate what type of medical care you want to receive if you can’t speak for yourself, as well as designate if you want to donate any of your organs to science. Again, you’ll usually need two witnesses when you sign, and it’s wise to get it stamped by a notary. When you’re finished, keep a copy for yourself, and give copies to your physician, a family member, and your healthcare agent (your lawyer will also keep one if you use one). Additionally, if you do not want CPR or ACLS, you want to fill out a Do Not Resuscitate order with your doctor.
Not every medical procedure known to man is covered in the living will, and for those unexpected occurrences you may also want to designate a medical power of attorney (also known as an agent, attorney-in-fact, health care proxy, or health care surrogate depending on where you live). This person can make medical choices for you if they’re not included on your living will, or if you give them the power to override your previous choices if the circumstance warrants it. Additionally, they can also get the right to see your medical records (which is helpful if you choose anyone other than direct family), apply for Medicare on your behalf, and make choices about any medical procedures when you can’t. Again, this differs by state, but you’ll often name a medical power of attorney on your living will. Of course, before you give someone the power of attorney you’ll want to go over what type of medical treatments you want and don’t want, and make sure they agree to follow your wishes.
The living will and health care power of attorney forms are important for everyone to fill out. I did mine in about 10 minutes. With these completed, you’ll have the peace of mind that you’ll get the medical care you want (or don’t want) in just about every circumstance. Again, a lawyer is helpful here if you’re unclear about anything. If you’re not sure what type of treatments you’d like when you’re incapacitated you should speak with your doctor. Photo by Social Innovation Camp.
Organize Your Finances, Life Insurance, Bills, Debts, and Everything Else
While the bulk of your assets are distributed on your will, you still have a lot of financial obligations out in the world. Naming an executor on your will and a power of attorney is just one step. You’ve probably already done this, but it’s also important to get all your finances organized so your heirs can actually find what they need. According to the National Association of Unclaimed Property, around $32.9 billion assets are currently unclaimed because the state took hold of them instead of the family. So, whether you decide to write up your will with an estate planner or not, you still need to get everything in order.
Two of the most important documents are your life insurance policy (especially policies from former employers) and retirement plans (as well as pensions and annuities), because both are easy to overlook. If your heirs don’t know these accounts and policies exist, they can’t claim them and the funds usually go to the state. So, gather up your various policies and keep them together.
If you don’t have a life insurance policy, you might want to get one, and we’ve walked you through what you need before. A life insurance policy isn’t just about covering your salary after you die, it’s about helping your family pay for funeral costs, car loans, credit cards, mortgages, and everything else.
To make the process easier on your family when you pass away, it’s also a good idea to gather together all your debts (especially big ones like your mortgage, car loans, or credit cards) in one place so your heirs can pay your bills for you while they figure everything else out. You likely already do this, but it’s good to keep everything together so they don’t have to search for it. To make the process even easier (and skip over any conflicts with power of attorney), you can add a family member to at least one of your bank accounts so they always have access to some of your funds.
If you have a lot of sources of income, it’s a good idea to meet with a financial advisor to get everything organized. You can find one through The National Association of Personal Financial Advisors. With your financial advisor you can set up beneficiaries for retirement plans, make your accounts accessible, and create spending plans for your surviving family.
Secure Your Digital Life (and Pass the Keys onto Someone You Trust)
The reason this is an important step is not just to give your heirs access to your bank accounts, it’s also so they can shut down services you don’t want around. For example, Facebook can memorialize your page if you want, but if you don’t want that digital record sticking around, you might make a request to your heirs to delete it outright. Likewise, if an heir wants access to your Google account and you don’t give them the password, they’ll need to provide a name, address, photo ID, email, and death certificate. Which is to say, it’s a lot easier for your family if you just give them your passwords.
So, when you’re putting together your list of usernames and passwords, include instructions for how you want those accounts handled, including if you want them to do anything specific with your home computer. It might seem a little weird, but if you want a little control over how your digital life is handled after you die, this is the only option. If you’re using a password manager like Lastpass then you can just look in your password vault for a full list of all your accounts and passwords. It only takes a couple of minutes to copy the ones that really matter.
Set Up a Master File of Everything
Once you have all your paperwork sorted, wills filled out, and everything else, it’s time to pack that all into master file you share with a close family member or friend. Remember, this includes everything about your life, so keep it in a safe place (or in a safe deposit box), and share it’s location with your family. After completing the steps above, you should have everything in order, but here’s what you should include (List culled together from UC Berkeley, The Wall Street Journal, and our own “In-Case-of Emergency” document):
Letter of instruction
Social security numbers/cards
Passports (numbers and expiration dates)
Driver’s licenses (number, expiration dates)
Names/address/telephone numbers of healthcare professionals
Healthcare proxies/living wills
Medications (dosages, name of prescribing physicians, pharmacy, address/telephone
Social worker or caseworker names and contact information
Passwords, web sites, and other digital information
Income sources (retirement and/or disability benefits, Social Security, etc.)
Financial assets (institution names, account numbers, address/telephone, form of ownership, current value) of cash, bank accounts, stocks, bonds, mutual funds, money market funds, retirement and pension plans, IRAs, annuities, life insurance
Real Estate (property addresses, location of deeds, form of ownership, current value)
Other assets (location of items/titles/documents/form of ownership, current value) including automobiles, boats, inheritances, precious gems, collectibles, household items, hidden valuables/items in storage, loans to family members/friends
Liabilities (Creditor institutions, address/telephone, approximate debt) of mortgages, personal loans, credit cards, notes, IOUs, other).
While some of these records need to be physical copies (like your birth certificate), others, like contact info, a copy of your will, and property information can be digital, so use whatever system you’re more comfortable with. Whatever you decide, keep everything organized in a folder together, and let a family member know where everything is.
If you need a little help getting everything organized, webapps Everplans, Get Your Shit Together, and CNN’s guide to estate planning are great resources that guide you through more of the specifics. As always, if things get too complicated, don’t hesitate to contact an estate planner for help—most will offer you a free consultation.