Asset Planning for a Digital Estate
Introduction
Computers, smartphones, and other electronic and digital devices are becoming more common and sophisticated every day, especially with the introduction of artificial intelligence. As people become more reliant on such devices, more and more of their lives are being played out online and assets are being stored digitally (think: cryptocurrency and NFTs).
Such increasingly digital lives can result in an important component of one’s estate plan being overlooked: the proper management and orderly transition of digital assets after one dies or becomes disabled.
Traditional Estate Planning vs Digital Estate Planning
Whereas traditional estate planning focuses on the transfer and management of financial accounts, ownership interests, and tangible personal assets (so-called “hard assets”), digital estate planning encompasses one’s digital possessions, including tangible digital devices (computers and smartphones) and the myriad of information stored on them. These can range from personal emails and social media accounts to valuable business data, financial information, and media collections (photos, videos, etc.).
In the digital age, accounts that hold sentimental value, such as family photos stored in cloud services or on social media platforms (think: Facebook or Instagram), can be just as meaningful as a family heirloom. Additionally, some digital assets may carry significant financial value, such as cryptocurrency holdings, domain names, or even revenue-generating online businesses. Many older clients may have accumulated significant online content, making the management of such assets just as important as traditional property.
What If I Do Nothing?
Furthermore, failing to plan for digital assets can cause unnecessary emotional distress for surviving family members and even lead to financial complications. For example, without proper access to online accounts, it may be difficult to retrieve funds from online banking or manage automatic payments that continue to deduct from a deceased individual’s account. In extreme cases, identity theft can even occur when digital assets remain unsecured after death.
What Can Be Done to Protect My Digital Assets?
In determining whether digital estate planning is right for you, one should first take a personal inventory of their digital assets.
Questions to ask oneself may include:
What digital devices and media do you have and use?
What are your important online accounts? Do any of these accounts require the payment of any fees? How do you want such accounts to be handled in the event of your death (e.g., closed or left as is)?
What valuable items would you lose if your computer or smartphone was lost or stolen today?
If you were in an accident, would your loved ones be able to gain access to your valuable or significant digital information while you were incapacitated?
If you were to die today, to what valuable or significant digital property would you like your loved ones to have access?
Do you have hard copies of important documents and pictures?
Do you have backup copies of valuable files? If so, would your loved ones be able to locate and access them?
Conclusion
As our lives become increasingly digitized, taking proactive steps to ensure that your digital assets are properly managed in the event of death or incapacitation is critical. For older, affluent individuals, the management of these digital assets may represent both sentimental value and significant financial worth.
By creating a comprehensive digital estate plan, you can ensure that your loved ones can access important information, avoid unnecessary legal hurdles, and manage your online presence according to your wishes. Working with an estate planning attorney who understands the evolving nature of digital assets can help ensure that your estate plan is complete, protecting both your physical and digital legacies.
*This article is intended for informational purposes only and should not be construed as legal advice. Individuals involved should consult with legal professionals for specific guidance tailored to their circumstances.
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