Does Your Estate Plan Address Your Digital Assets?

Estate plans traditionally focus on homes, bank accounts, investments, life insurance, and personal property. Yet many of our most valuable and meaningful possessions now exist only in digital form. Family photographs, videos, emails, financial records, online accounts, and even medical information may be stored exclusively on smartphones, computers, and cloud-based services.

Consider two common situations. A spouse becomes incapacitated during an accident, and family members cannot immediately locate health care directives needed by medical providers. Or a parent passes away, leaving thousands of irreplaceable photographs on a password-protected smartphone that no one can access. In both cases, the information exists, but poor planning makes it unavailable when it is needed most. A modern estate plan should not only address traditional assets but also the increasingly important digital ones that have become part of our personal, financial, and family lives.

Digital assets permeate modern life. They include email accounts, social media accounts and content, text messages, electronic documents, digital photographs and videos, cloud-storage accounts, financial accounts, health care portals, online business interests, software licenses, websites, domain names, cryptocurrency holdings, and numerous other online accounts and records. Today’s estate plans should not only provide for the disposition of digital assets that have financial value, but also those that have sentimental value, such as photographs, videos, correspondence, and personal journals.

Many estate plans fail to address the practical issues involved in accessing, managing, and distributing digital assets. To address them, the following are several steps you may wish to consider as part of your overall estate planning. While this article mentions certain third-party providers and services, no recommendation or endorsement is intended.

1. Consider Carrying Important Health Care Information on Your Smartphone

One never knows when an emergency will arise. You should consider taking steps to ensure that important health care information for you and your loved ones is readily accessible when needed. This information may include advance directives, living wills, health care powers of attorney, family and emergency contacts, insurance information, Do Not Resuscitate (“DNR”) orders, and Physician Orders for Life-Sustaining Treatment (“POLST”).

For example, suppose you and your spouse are hiking when your spouse suffers a serious fall, hits her head, and becomes unconscious. Emergency personnel quickly arrive and transport both of you to a hospital. Shortly after arrival, a member of the medical staff asks whether your spouse has a health care power of attorney and whether there are any directives regarding surgery, life support, or other critical treatment decisions. Unfortunately, the document is locked in a safe deposit box located several hundred miles away. Although your spouse carefully prepared the document, it may not be available when needed most.

Many smartphones allow emergency information to be accessed from the lock screen. You may wish to explore those features and determine whether storing copies of important health care documents electronically would be appropriate for your circumstances.

2. Create a Digital Asset Inventory

A comprehensive inventory is often the foundation of an effective digital asset plan. Even if fiduciaries have access to passwords, they may not know what devices, accounts, subscriptions, or online services exist. Having a list of such items, even if not kept fully up to date, can greatly assist your fiduciary in accessing and managing your digital assets.

Your inventory might include:

• Computers, tablets, smartphones, and external drives
• Email accounts
• Cloud-storage accounts
• Social media accounts
• Financial and investment accounts
• Life and disability insurance information
• Online business interests
• Domain names and websites
• Cryptocurrency holdings
• Subscription and membership accounts

The inventory should be reviewed and updated periodically as accounts are added, modified, or discontinued.

3. Designate Individuals to Manage Digital Assets

You should consider identifying one or more trusted individuals who will have responsibility for managing your digital assets in the event of incapacity or death. Depending on your circumstances, this may be your agent under a power of attorney, the executor of your estate, the trustee of your trust, or another trusted person with appropriate technical knowledge. Many technology companies offer digital legacy tools that allow users to designate a trusted individual to receive access to certain digital assets or account information after death. Because access is not always granted automatically, users often must affirmatively select and configure these settings during their lifetime.

You may also wish to provide instructions regarding which digital assets should be preserved, transferred to loved ones, memorialized, or permanently deleted.

4. Provide for Digital Assets in Your Revocable Living Trust or Will

Another important step is to address digital assets in your revocable living trust, will, or both. Depending upon a person’s circumstances, a revocable living trust may offer advantages with respect to privacy and administration. Regardless of the planning vehicle selected, estate planning documents should provide fiduciaries with authority and guidance concerning the management and disposition of digital assets.

Whether you choose to use a trust, a will, or both, these documents can provide fiduciaries with authority and guidance concerning your digital assets and your wishes regarding their disposition.

5. Maintain a Secure List of Usernames and Passwords

Sorting through devices and online accounts can be a daunting undertaking. Without relevant account information, a fiduciary may face significant obstacles in locating or accessing digital assets.

Accordingly, you should consider maintaining a secure record of usernames, passwords, passcodes, and other access credentials. This information should be kept in a secure location where an authorized fiduciary can obtain access if necessary.

Some individuals choose to use password-management services such as 1Password, Bitwarden, Dashlane, Apple Passwords, or Google Password Manager. Others prefer to maintain secure written records stored in a safe or other protected location.

Regardless of the method selected, attention should be paid to both security and accessibility.

6. Utilize Available Legacy-Access Tools

Many technology providers offer tools that allow users to plan for incapacity or death. For example, certain services allow users to designate trusted contacts who may receive limited access to information after death or after a prolonged period of inactivity. Other services permit accounts to be memorialized, transferred, or deleted pursuant to the user’s instructions. It is important to be mindful of coordinating these trusted contacts with the fiduciaries named in your various estate planning documents.

Reviewing and implementing the legacy-planning features available through major technology providers can substantially reduce difficulties for surviving family members.

7. Maintain Backups of Important Digital Assets

It is important to periodically back up information stored on computers, smartphones, tablets, cloud-storage services, and other devices. Backups may be maintained on encrypted external hard drives, USB drives, or reputable cloud-storage services. The objective is to ensure that important information remains available even if a device is lost, damaged, stolen, or becomes inaccessible.

For digital assets having sentimental value, such as photographs and videos, maintaining multiple backups may be particularly important. You may also wish to share copies of treasured photographs and videos with family members during your lifetime.

Consider the following example. Suppose your 90-year-old mother passes away and her will leaves you all photographs and videos stored on her iPhone. Unfortunately, you do not know the passcode to the device and cannot locate any backups, password records, cloud-storage credentials, or other devices containing the images. Although the photographs and videos may have tremendous sentimental value, gaining access to them could prove difficult, expensive, or even impossible. Regular backups and appropriate planning can significantly reduce the likelihood of such a result.

8. Do Not Overlook Cryptocurrency and Other Digital Property

Cryptocurrency and other blockchain-based assets present unique planning challenges. Unlike traditional assets, access may depend entirely upon possession of private keys, seed phrases, or other credentials.

If this information is lost and no authorized person can locate it, the assets themselves may effectively become inaccessible. Individuals who own cryptocurrency should ensure that their estate plans address both the existence of such assets and the secure transfer of the information needed to access them.

Conclusion

As more aspects of our lives move into digital form, digital asset planning has become an essential part of comprehensive estate planning. Taking the time to organize important information, maintain secure access records, designate trusted fiduciaries, utilize available legacy-access tools, and incorporate digital assets into your estate planning documents can help ensure that valuable financial and personal assets remain accessible when they are needed most.

Careful planning today can spare family members significant expense, delay, frustration, and heartache tomorrow.

This publication is intended for general informational purposes only and does not constitute legal advice or a solicitation to provide legal services. The information in this publication is not intended to create, and receipt of it does not constitute, a lawyer-client relationship. Readers should not act upon this information without seeking professional legal counsel. The views and opinions expressed herein represent those of the individual author only and are not necessarily the views of Clark Hill PLC. Although we attempt to ensure that postings on our website are complete, accurate, and up to date, we assume no responsibility for their completeness, accuracy, or timeliness.