Estate Planning for Digital Assets

Now more than ever, we live much of our lives online. The proliferation of technology and web-based services has greatly increased our digital footprint – with elements of our social, financial, professional, and consumer lives being played out on the web. The result? A wide variety of digital “assets” that accumulate over time. As with most assets, it is crucial to plan for the treatment of these assets in the event of your incapacity or death. Accordingly, many estate plans are evolving to include instructions for the handling and disposition of digital assets. Failure to include such provisions can lead to inconveniences, delays, and interruptions in service. Unsurprisingly, this has also become a pertinent topic for financial planners; indeed, we consider this an important element of the financial planning process.

Take an example:

John lives alone. He receives his electrical utility bill via email; he pays the bill through his bank’s online bill-pay feature. When a health event leaves John hospitalized and unable to attend to his finances, Bill’s power of attorney – Richard – starts paying John’s bills. Without access to John’s email, Richard doesn’t receive the electric bill. Without being able to quickly access John’s online bank account, he can’t review recent bill pay activity. The result? Late payments, late fees, and possible suspension of service.

So – what to do? Most states’ property laws have now recognized a person’s digital footprint as an asset. Recognition of that asset as “property” means that it can be managed, conserved and, with your permission, accessed by trusted third parties like family members, your power of attorney, or other fiduciaries. This represents a crucial element of your estate planning discussion. To prepare for this discussion, you will need to document your digital footprint and decide who should have access to it, or to parts of it.

  • Itemize your Digital Assets. Create an inventory listing your email accounts, banking and investing accounts, social media profiles, utilities/billing, entertainment/streaming platforms, and digital/cryptocurrency. Documenting their existence is an important step towards planning.
  • Identify those platforms enabling ‘designated agent.’ In other words, some sites allow you to appoint a user to act on your behalf (should they need to). Take advantage of this option where possible.
  • Organize your Usernames and Passwords. Store this information securely with a secure password manager – a secure app/site that safely stores and organizes your usernames and passwords.  Some examples: Dashlane, LastPass, 1Password.
  • Identify the person(s) best suited to manage your digital assets. Have conversations with these people about the way you’ve structured your digital life.
  • Finally, take the appropriate steps to legally document the above. Work with your estate attorney and financial planner to update your estate documents, complete any necessary designations, and communicate your plans to the appropriate parties.

The Bottom Line:  As our lives have become increasingly electronic, so too should our estate plans. A few simple measures can go a long way in securing the smooth handling of your digital assets. Questions? Talk to your financial planner or estate attorney to get the ball rolling.


A Note for Residents of Massachusetts 

The Revised Uniform Fiduciary Assess to Digital Assets Act (RUFADAA) has created a common set of standards for the administration and stewardship of digital assets throughout the country. This has been adopted in most states; only Massachusetts, Pennsylvania, Oklahoma, and Washington, DC have not adopted this uniform law. A recently introduced bill in Massachusetts is making its way through the State House and State Senate. If you are concerned about your digital assets, contact your representatives and show your support for the bill (House Bill 3368 and Senate Document 1147).

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