Tech Talk: Estate Planning for Digital Assets
By Anthony DeLuca, Partner, Smith Pauley
The landscape of estate planning and asset transfer has transformed significantly over the years and that change has accelerated over the last decade. Now, well into the digital age, it is not just physical or traditional financial assets that individuals have to consider; digital assets have become an integral part of estate planning. Effectively managing and securing digital assets for future generations should be a component of every modern estate plan.
What are Digital Assets?
The term "digital assets" may sound like it belongs in a sci-fi novel, but it refers to a broad range of online or digital properties an individual owns. These include social media accounts, blogs, emails or other electronic communications, digital photographs, e-books, music, website domains, online bank accounts, cryptocurrencies (e.g., Bitcoin, Ethereum, etc.), and even rewards points accumulated from various online platforms.
Why is Estate Planning for Digital Assets Important?
As our lives have become increasingly digitized, so too have our assets. A recent survey suggested that the average person has digital assets worth over $55,000, but many people don't even consider these assets when planning for their estate. Unfortunately, these assets can become inaccessible upon death or incapacity if proper planning has not taken place, causing significant delays in accessing these assets as well as the potential loss of sentimental and economic value.
The Revised Uniform Fiduciary Access to Digital Assets Act
The Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA) was developed by the Uniform Law Commission and most states have enacted a version of the RUFADAA. Nebraska’s version was adopted in 2016. This law permits individuals to grant a personal representative, trustee or other fiduciary with access to such individual’s digital assets - provided specific consent, instructions and direction are provided. This consent and direction can be provided in a will, trust or power of attorney. If no instructions for the management of an individual’s digital assets are provided, access to those assets will most often be governed by the asset custodian’s Terms of Service.
How to Include Digital Assets in Your Estate Plan
Inventory Your Digital Assets: Start by creating a comprehensive list of your digital assets. This should include things like social media accounts, digital files (including photos, music etc.), website domains, blogs, e-mail accounts, online subscriptions and digital currencies. Keep this list with your estate planning documents.
Determine Their Value: While some digital assets may have only sentimental value (e.g., digital photos or social media accounts), others may have significant monetary value (e.g., cryptocurrencies, non-fungible tokens (NFTs) or online businesses). Valuing these assets is critical to proper estate planning and will save your fiduciaries and family significant time and effort.
Provide Access: Make sure your personal representative, trustee or agent acting under a power of attorney can access and manage your digital assets in the event of incapacity or death. This person should be tech-savvy and capable of managing the potentially complex nature of digital assets.
In addition to providing proper access to these assets in your estate planning documents, tools like password managers and digital legacy services can help make access more efficient. Platforms such as Facebook, Instagram and Google have tools that allow users to designate someone to access and/or memorialize their account(s) after a period of inactivity or death.
Include Specific Instructions: Leave clear instructions about what should happen to each digital asset, including whether it should be transferred, archived, memorialized or deleted.
Consult an Attorney: An experienced estate planning attorney can ensure your digital assets are properly planned for and that your wishes are carried out. Remember, laws regarding digital assets (including what qualifies as a digital asset) can vary based on jurisdiction, making proper legal assistance important.
The continued rise of digital assets adds a layer of complexity to traditional estate planning. Proper planning is crucial to ensuring your digital assets are handled in accordance with your wishes. If you have questions regarding your estate planning, including planning for your digital assets, the attorneys at Smith Pauley LLP are ready to help you navigate this important topic.
Anthony DeLuca is a partner with Smith Pauley. He provides practical and approachable estate planning, post-death estate and trust administration, and business succession planning services by helping clients understand and navigate technically complex and inherently personal subject matter to create and implement comprehensive estate plans designed to meet targeted objectives. Anthony’s practice focuses extensively on holistic estate planning services ranging from the design and implementation of traditional estate plans (e.g., wills, trusts, powers of attorney and advanced directives) to more complex strategies involving wealth transfer and transfer tax minimization. At every step, Anthony focuses on learning and understanding his clients’ unique objectives to deliver estate plans that work.