What Are Digital Assets And Why They Are Essential For Proper Estate Planning?

November 28, 2024

In today's digital age, we have more than just physical possessions to consider when planning for the future. Digital assets are electronic records that hold monetary value or sentimental importance, such as cryptocurrencies, online accounts, photos, videos, and documents. Additionally, these are assets that are acquired throughout one’s life and are often irreplaceable. Personally, I have acquired substantial digital assets throughout my life that are of great sentimental value to me, such as digital photos of my family. I’m sure most of you are in the same position.


Here are some of the reasons why digital assets matter for estate planning:


Digital currencies that operate independently of central authorities, like Cryptocurrency, may have significant monetary value. They are stored in digital wallets that require keys, passwords, or codes to access. Additionally, this should be included in your estate plans and provided to the executors or trustees with the necessary information to access them; otherwise, they may be lost forever or inaccessible to your heirs. Further, these are more difficult to track than standard currencies since they are not stored in a traditional bank like most currencies. It's best to make the management of digital currencies as easy as possible for your heirs.


Digital assets are also vulnerable to data breaches, hacking, or theft. These types of breaches can become increasingly elaborate with technology and time. Therefore, without proper planning, you may lose access to valuable or sensitive digital assets, such as bank accounts, investments, or personal information. To prevent this, ensure secure storage and documentation of their digital assets and provide their executors with the means to access them. Moreover, they should also review the terms of service and privacy policies of the custodians of their digital assets, such as online platforms, cloud services, or apps, to understand their rights and obligations regarding their digital assets. Additionally, paid third-party assistance can also be used for assistance with breaches. I have personally experienced invasive breaches of digital assets and it’s a headache to deal with. Your heirs would appreciate not having to deal with these obstacles in a time of grieving.


The Importance of digital photos cannot be understated. In our interconnected world, most of our cherished memories are captured digitally. This includes things like family photos, videos, and personal documents. You may want to preserve them for posterity, share them with loved ones, or even delete them for privacy reasons. Moreover, these photos can be on many platforms or cloud devices, such as Facebook or Google Drive for example. You should include them in your estate plans and provide the executors or trustees with the instructions and access to them. I personally have thousands of photos and I would be devastated if they were lost or inaccessible.

How to Plan for Digital Assets in Your Estate Plans


To ensure that your digital assets are properly handled and distributed according to their wishes, you should follow these steps:


- Declare Digital Assets in Your Will or Trust: The first step is to explicitly list the digital assets that you own and want to include in your estate plans. This will ensure that your heirs are aware of their existence and can take the necessary steps to access them. Moreover, it also avoids any confusion or disputes among the heirs or with the custodians of the digital assets .They will be grateful for this as these assets can be difficult to locate. I have loved ones who passed away and wished they had a convenient list of their assets that I could access without the burden of locating them.


- Provide Detailed Information: The second step is to provide essential details about the digital assets, such as:


- Digital Keys and Account Information:  For cryptocurrencies, you should share all the relevant crypto keys, account credentials, and security codes that are required to access their digital wallets. The value and location of their cryptocurrencies should also be detailed. Many people have significant cryptocurrency assets; therefore, this is something that should taken seriously.


- Safe Storage: For all digital assets, you should consider maintaining a secure document in a safe deposit box that contains this information. This document should be accessible only to their executors, trustees, or other trusted persons. Alternatively, you can use a digital asset management service or platform that allows them to store and share their digital assets securely and conveniently. Additionally, these services can allow maintaining records of important accounts and passwords, such as email, social media, online banking, shopping, gaming, streaming, or subscription services, as well as any digital files that they want to include in their estate plans. Keep in mind, however, that these are often paid services with varying quality. I have tried a few of these services myself with varying results.


- Specific Instructions:  The third step is to clearly outline how the digital assets should be distributed among the heirs or beneficiaries. Moreover, you should specify any wishes or preferences regarding their digital assets, such as who should inherit them, how they should be used, or whether they should be deleted or destroyed. Further, they should also indicate any special instructions for their social media accounts, such as whether they want them to be memorialized, deactivated, or deleted. It's possible that there are private or embarrassing details that they don’t want to be viewed by their heirs.

Conclusion


Digital assets are among the most forgotten, but often most valued. These assets have the advantage that they can last as long as technology allows them to. The downside is they are often forgotten about or are a burden to recover. Planning ahead will allow your heirs to manage and enjoy your digital assets. In today’s age, almost everybody has some form of digital assets, therefore, planning for this is essential. While this information may not be surprising or complicated, it serves as an important reminder for proper planning for digital assets, that is often neglected by even the most prepared.

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