If you have started the estate planning process, you likely know how you want your retirement accounts distributed and who you want to inherit family heirlooms. However, have you thought about who will have access to your cryptocurrency or the photos on your smartphone and social media accounts? These assets are referred to as digital assets, and are frequently overlooked during estate planning, despite most people having them. Unless you have completely disengaged from technology, you have digital assets. Some of these digital assets can hold a lot of value, financial and sentimental; it’s important not to neglect them during the estate planning process.
What is a Digital Asset?
According to the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA)—which has been adopted by many states—a digital asset is: “an electronic record in which an individual has a right or interest. The term does not include an underlying asset or liability unless the asset or liability is itself an electronic record.” Under this definition, digital assets include:
Cryptocurrency
Non-Fungible Tokens (NFTs)
Domain Names
Social Media Accounts
Blogs
Email Accounts
Loyalty Program Benefits (airline miles, hotel points, etc.)
Electronic Files (photos and videos stored in the cloud, etc.)
This list is by no means exhaustive, as the types and numbers of digital assets are seemingly boundless.
Planning for Digital Assets
As with all assets, it’s recommended to plan for how your digital assets will be used and managed in the event of your death. Yet, planning for digital assets may be a little different than typical asset management. There are a variety of laws, rules and contracts which need to be observed. Additionally, due to the relatively novel nature of digital assets, laws governing access are still evolving and may contradict each other. This state of affairs can make planning for digital assets confusing and overwhelming. However, if you follow a systematic approach to cataloging and planning for your digital assets, the process will be more manageable.
Start the Planning Process
It’s a good idea to start the planning process with something basic, like taking an inventory of your digital assets. While taking an inventory, take note of the following traits for each asset:
Type of Asset
Name of Asset
Name of Custodian
Contact Information of Custodian
Arrangements in Place for Management Following Death
Any Other Relevant Information
Next, make sure you specify how you want each asset handled following your death. For digital assets, such as social media and email accounts, simply request for them to be deleted or give access to a specified party. For digital assets with monetary value, such as cryptocurrency and domain names, identify to whom you want them transferred. It’s important to communicate your wishes clearly, so they can be effectively carried out.
Finally, determine who should manage your digital assets. It’s common for people to choose their general estate’s executor as their digital executor. However, if you have especially complicated digital assets or if you want to keep them separate from the rest of your estate, you can designate a separate digital executor. You can even appoint different parties to manage different digital assets.
Laws Governing Digital Assets
While going through the planning process, it’s important to consider a multitude of evolving contracts and laws. Contracts and laws which pertain to digital asset planning include: Terms of Service Agreements, state laws and federal laws. As previously mentioned, many of these contracts and laws are currently in a state of flux and may contradict or overlap with each other.
To gain an understanding of access to your digital assets, first look to the Terms of Service Agreement established with the service or account provider of your digital asset. The Terms of Service Agreement is a contract you entered into with your service or account provider, and it governs your relationship with the provider and your digital assets. For instance, when you sign up for a social media platform, you must agree to certain privacy notices as part of the Terms of Service Agreement and many of these agreements include who has ownership over what you post. Terms of Service Agreements will vary amongst providers. It’s important to read these contracts when planning for your digital assets, as they may mandate who can access your assets, if you can share passwords or if your account will be deleted upon death.
Navigating state and federal laws is where the process can get a little more complex and confusing. Most states have adopted laws for digital assets, yet these laws can differ; not all states have adopted RUFADAA. State laws also do not alter legal rights or restrictions put in place by Terms of Service Agreements.
Federal laws primarily pertain to privacy in relation to digital assets. For example, it is a federal crime to gain unauthorized access to or to exceed authorized access to obtain, alter or prevent authorized access to a service facility housing a digital asset. Federal laws restrict a variety of other actions involving access to digital assets.
Even if an individual does not commit a criminal action under state or federal law, they may still violate a Terms of Service Agreement, which can result in the loss of a digital asset. This is why it is important to understand the Terms of Service Agreements which govern a digital asset.
How We Can Help
Due to the variety of contracts and laws governing digital assets, including digital assets in your estate planning can be a daunting task. Even if you follow a series of steps to catalogue and plan for your digital assets, you need to make sure your plans do not violate Terms of Service Agreements or state and federal laws. If you are concerned about the contracts and laws which govern your digital assets, it’s a good idea to get in touch with a professional to walk you through the process. Our KerberRose Trusted Advisors have the expertise to ensure your wishes for your digital assets are carried out to the fullest extent of the law.
Tip: Apple has recently added a feature to iPhones so a person can name a legacy contact. A legacy contact is an individual you choose to have access to your phone after your death. This is an easy, secure way to give someone you trust access to all of the digital assets stored in your phone.
To set up a legacy contact on your iPhone, iPad or iPod touch:
Go to Settings, then tap your name.
Tap Password & Security, then tap Legacy Contact.
Tap Add Legacy Contact. You might be asked to authenticate with Face ID, Touch ID, or your device passcode.
Tap or click Continue to learn more and choose how to share the access key with your Legacy Contact.
Your Legacy Contact will need the access key and your death certificate to access your iPhone.
If you have questions about your digital assets or how to begin planning, reach out to a KerberRose Trusted Advisor today.