Estate Planning in the Digital Age
What does estate planning mean to you? Usually, wills, power-of-attorneys, living wills, and trusts come to mind. Estate planning provides a legal means to assure that our loved ones are taken care of and that our wishes are acted upon in the event of incapacity or death. Attorneys advise us to plan for our family’s future by making sure that we have a solid life insurance policy, that our IRA and 401(k) plans have beneficiaries, and that a will or trust is in place to handle our bank accounts. Still, many of us harbor uncertainty about how to handle our digital assets such as online accounts.
We decide who gets Grandma’s diamond ring and who will use Dad’s golf clubs. But what about our digital assets? What happens to that great collection of iTunes, online photos, and electronic books? When considering how our estate plan will protect our legacy, our Facebook, PayPal, and Amazon accounts, etc. are frequently overlooked. Families expend considerable time and effort to secure their physical goods through a quality estate plan, while digital assets may fall through the cracks due to their intangible nature.
However, digital assets may contribute significant worth to an estate: monetary value, sentimental importance, security benefits, and/or executive usefulness to attorneys and beneficiaries. According to the book “Tools & Techniques of Estate Planning for Modern Families,” a broad definition for digital assets is “any electronically stored information that holds value.” In keeping with the examples above, you may already hold digital assets in the form of email accounts or software that tracks your finances. Other examples of digital assets range from online currency, such as Bitcoin, to personal manuscripts or photographs stored on the web. Surveys have found that Americans value their digital assets at between $35,000 and $55,000 on average.
As the average American continues to expand his or her online presence, digital assets will grow into an increasingly valuable proportion of a person’s estate. Failing to make provisions for the digital portion of an estate carries the immediate risk of losing assets in their entirety, including online financial holdings. If an individual fails to designate a digital executor, companies often deny access even to family members (due to their status as non-authorized persons on the account). Therefore, it is incumbent upon both estate planning attorneys and their clients to create a proactive plan for the management of any digital assets held within an estate.
The first step in digital estate planning involves the identification of any digital assets held. Convenient programs such as spreadsheets or password cataloging software may assist your recordkeeping efforts. After itemizing your digital assets, your next step will be to choose a digital fiduciary to manage the digital portion of your estate. You may choose to have the executor of your estate fulfill this function, or you may choose another trustworthy individual more familiar with technology. The final step in protecting your digital assets is to work with your attorney to create legally binding instructions regarding the digital assets in your estate.
Your attorney will take into account the changing laws surrounding electronic information when drafting your digital estate plan. Because laws adapt as technology advances, ongoing communication with your attorney is important. In 2016, North Carolina adopted the “Fiduciary Access to Digital Assets Act.” Your attorney may now grant your digital fiduciary authority – under a power of attorney or will – to manage your digital assets upon your incapacity or passing. Following these steps will keep your digital estate plan current with both federal law and your family’s wishes.
By Blaire McClanahan & Jesse Morales