Estate Planning for Digital Assets: Protecting Your Online Accounts and Personal Data
If you’re leaving property to your heirs, much of it will no doubt come in tangible form: real estate, investment portfolios, jewelry, artwork and automobiles. But increasingly, assets of value (either monetary or sentimental) are in digital format. These might include domain names, digitally stored photos and videos, social media accounts, non-fungible tokens (NFTs) or cryptocurrencies, and even gaming avatars in possession of digital items with monetary value. In the absence of a good plan, your heirs may be left unable to retrieve many of these digital assets when you pass away.
Even access to more traditional assets may be stored digitally. It’s not uncommon today for us to store financial records in our phones and computers, or the cloud. For financial accounts managed electronically, these too can be locked up in the event of an untimely death or a lack of planning.
How Does Digital Inheritance Work?
On paper, digital assets pass to heirs just like any other property. The problem comes when heirs attempt to access these assets. Digital property laws are still evolving, and it’s nearly impossible to understand the implications without specialist help. To gain access to digital assets, heirs will need all the complex login and authentication data. (And it’s hard enough keeping track of your own, let alone some else’s!)
Tips for Estate Planning for Digital Assets
Experts recommend that you build a plan to pass on digital assets in the same way you would plan to pass on physical property. This includes:
Leaving access to passwords. While an expert may be able to bypass the need for a password in some cases, it’s not a guarantee, and other types of accounts are literally impossible to access without passwords. Without password, access to crypto or NFTs stored in a crypto wallet will become impossible, and your heirs would lose those assets. Now is the time to be certain that your heirs will be able to access all your passwords, keys, authentication challenges or other requisite access credentials. It’s critical that you leave this information behind because your heirs could set themselves up for legal problems if they attempt to access accounts in what is perceived to be an unauthorized way.
Data encryption. To keep your data safe, many platforms use data encryption to ensure that no one without authorization accesses it. While this may keep you from losing assets to theft, it will also keep your heirs out if they don’t possess the correct authorization for access.
Data privacy. Many companies – social media companies in particular – follow strict data privacy rules and won’t release an account to heirs without the proper authorization, leaving your loved ones unable to gain access to content such as photos, email messages, videos or other information stored in the cloud. While they could try to pursue access through legal means, the cost of doing so would likely be prohibitive.
How to Make Your Digital Assets Accessible
Make a list of your digital assets, including locations, account numbers and password and authentication information. Store it somewhere secure, such as a safety deposit box your heirs have access to. You can also use the services of a digital safety deposit box, which is an accessible way to store digital backups of scanned documents such as financial account statements, birth certificates, insurance policies, passwords, estate planning documents and more.
Consult with an Expert
Arizona-based Prime Wealth Advisors is a full-service tax, retirement planning, estate, and wealth management firm that can craft a robust wealth protection plan that will cover you, your business and your heirs. Call 623.77.PRIME or visit our website for more information.