Securing Your Digital Legacy: Estate Planning for Digital Assets

You may have arranged for your loved ones to inherit your home, the Steinway grand piano, your father's 88-year-old Swiss watch, or other family antiques, but as life becomes more digital, you may be overlooking an increasingly crucial type of property: digital assets.

 

If your estate plan does not adequately account for digital assets, your heirs may be unable to access them. Family images and movies may be lost forever, social media accounts may remain online long after you die, and your heirs may not receive the full amount of money you intended to leave them.

 

Brief about Digital Assets

 

Many states have enacted some version of the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA). RUFADAA defines a digital asset as "an electronic record in which a person has a right or interest." The word excludes an underlying asset or liability unless it is also an electronic record. 

 

Digital assets include domain names, social media accounts, cryptocurrency, blogs, email accounts, electronic financial information (though the underlying financial asset is not included), loyalty programme benefits (such as airline miles or hotel points), cloud-stored electronic files (including your photos and videos), online game personalities, and electronic medical records. Intangible assets, such as copyrights, trademarks, and patents, are not considered digital assets.

 

With a few mouse clicks, you can generate assets worth millions of dollars. For example, a person bought more than $69 million for a non-fungible token (NFT) that unlocks a digital artwork (in jpeg format) by the digital artist Beeple. The amount and variety of digital assets appear to be limitless, many of which were impossible a decade or so ago. To put it simply, anything created or accessed electronically can be considered a digital asset, and some of them can be quite valuable.

 

Barriers to digital access

 

As digital assets can exist in many different forms, stored in many different locations, gaining access to digital assets, and to digitally encoded financial information, can present challenges for anyone other than the original owner.

 

 In general, family members of someone who has recently died confront four major challenges when attempting to access the decedent's digital assets and critical personal information:

 

1. Passwords

 

If family members do not know your passwords, keys, or other necessary access credentials, they may be unable to access information or property saved on your smartphone, computer, online accounts, or in the cloud. Some passwords, such as the one you use to log in to your laptop or tablet, may be simple for specialists to crack; others are more difficult—and some are virtually impossible. For example: A crypto wallet stores cryptocurrency or NFTs. Because there is no central customer service team, losing your noncustodial digital wallet's password and private key may result in permanent loss of access to your cryptocurrency.

 

2. Data encryption

 

Encrypting digitally stored data adds an additional layer of security. Encryption can totally scramble data in a specific location—in a single file, on a device, or in the cloud—making it nearly impossible for anyone without the correct passcode to unscramble it. Take cell phones as an example. "New technology in cell phones can be incredibly tough to decipher," explains Beis. "Your information, memories, or personal data may be on your phone or in the cloud somewhere. However, if you have not migrated them elsewhere, family members may be unable to access them unless they have your passcode.

 

3. Data Privacy Laws 

 

Federal data privacy regulations normally prohibit online service providers from disclosing your electronic conversations to anyone without your authorization. These limits make it incredibly difficult for anyone to acquire access to social media accounts, images, email messages, and other cloud-stored data. Without your express permission, your family members will likely face a lengthy and expensive court battle before they’re able to access your accounts

 

4. Criminal legislation

 

Both state and federal laws restrict unauthorized access to computer systems and private personal information. These regulations protect consumers from fraud and identity theft, but they can also make it nearly impossible for family members to access a deceased loved one's digital assets and information. The law is expanding to keep up with the quickly changing online world, yet much remains uncertain. As a result, it's critical to ensure that your estate plan grants your fiduciaries the authority to access any relevant digital data.

 

Also Read | What are Digital Assets and How are they Managed?

 

Techniques for Digital Assets Estate Planning

 

So estate planning seems pretty crucial, right? That does not imply that it must be complex, frightening, or prohibitively expensive. In this section, we'll go over the essential tools for digital asset estate planning that safeguards your legacy and loved ones. 

 

A digital estate plan usually includes information on how to access these accounts and assets, who should have access, what should be done with the data, and how to handle any outstanding bills or liabilities associated with these accounts. The plan should be reviewed and updated on a regular basis to ensure its effectiveness. 

 

1. Help from a Professional Estate Planner

 

Perhaps most importantly, when it comes to estate planning, work with a specialist that has estate management experience in your area. Sure, you can start with an online template if your estate is quite straightforward. However, we strongly urge that a fiduciary, such as an estate planning attorney, review your papers at least once. When it comes to the wild west of digital assets, the benefit of taking this step well outweighs the few hundred dollars it will cost you to obtain this legal guidance.

 

2. The Inherit App 

 

App provides a user-friendly alternative for estate planning. With a strong awareness of the necessity of seamless inheritance planning, the Inherit app provides a platform for creating, storing, and updating your will in an encrypted, secure environment. This gives you piece of mind knowing that your ultimate intentions are safely documented and immediately available to your beneficiaries when needed.

 

Inherit differentiates apart with a feature that allows you to catalog all of your digital assets. This could range from online bank accounts and cryptocurrency holdings to email accounts, social network profiles, and cloud storage including personal memories. 

 

3. Microsoft Excel

 

Excel is more than just a tool for calculating and analyzing data. It includes a variety of features that make it an invaluable tool for arranging and planning your estate and inheritance concerns.

 

Excel lets you securely and systematically catalog and organize all of your digital and physical assets. This extensive list can be tailored to your specific requirements, including columns for full descriptions, values, and beneficiary information, ensuring that nothing is missed or forgotten. With Excel's password-protection option, you can keep your compiled estate information secure and confidential. This gives you peace of mind knowing that your important data is secure and only available to those you have given the password.

 

4. Good old pen and paper

 

The simple pen and paper method, which has been used for centuries, provides a plain, realistic approach to estate and inheritance planning. Using pen and paper, you may make a complete and orderly list of all your digital and physical assets. This tangible record provides a clear overview of your estate and can be categorized and structured as desired, including the value of each asset and its designated beneficiaries.

 

In a nutshell

 

Since digital assets are a relatively new phenomenon, the regulations governing them are continually changing. Consult with your attorney about the measures you can take right now, and check in on a frequent basis to amend your estate plan to reflect any changes in the law or your digital property. Finally, if you have significant digital assets, consider selecting a separate executor with commercial and legal competence to handle your digital assets.

 

Also Read | Types Of Digital Assets In Cryptocurrency