Not long ago, digital assets played virtually no role in estate planning. Today, however, leaving an electronic mess can be one of the most costly mistakes in the process. Failing to account for digital assets and electronic lives can result in a long list of problems for your heirs to deal with before they receive their inheritance.
Nowadays, this can be easily avoided, since for the time being estate planning law has finally caught up to technological developments. Most states have enacted the Uniform Fiduciary Access to Digital Assets Act or something similar. This law makes it possible for executors to manage virtual currencies, web domains, computer files, and more unless a document specifically prohibits access. However, the law has its limits. Here’s how you can facilitate the process of passing digital assets to your heirs:
Create a Basic Strategic Digital Inheritance Plan
Importantly, current legislation does not allow an executor to access email, text messages, social media accounts, and similar social media accounts with express permission through a legal document. Heirs may have to engage in extensive legal proceedings to gain access to these electronic assets from the account administrator or otherwise hire experts to help get access to them.
This highlights the importance of being clear in your will, power of attorney, and trust about who has access to which assets and accounts. When you provide direct guidance, you can avoid a lot of hassle down the road and avoid potential issues like missed automatic payments or unintentionally closed accounts.
One of the most common strategies is to provide usernames and passwords for personal items like cell phones, social media accounts, and email to a friend or family member. Then, this person can forward relevant information from these accounts to the executor without allowing the executor unfettered access to personal data.
Generally, it makes sense to give the executor unhindered access to financial accounts and assets necessary for settling the estate. Some people find it easier giving an executor who has authority to log into every account, since that will avoid any potential confusion and make the transition as simple as possible. This entails finding someone you trust and are extremely comfortable with.
Create a Thorough Inventory of All Digital Assets
There is more to the digital inherence process than selecting who has access to your various accounts. Take account of your digital life and create an inventory of assets, which means any account or service protected by a password. This could mean anything from your smartphone to medical records stored online. Remember automated payments, as these will also need to be accounted for to avoid interruptions in service.
Your inventory should include clear instructions for accessing these accounts. Be sure to set up access to your phone that does not rely on biometrics. Two-factor authentication means that most accounts will be inaccessible without using the phone.
The other thing to think about is how you will store and pass along digital financial assets, including both cryptocurrency and NFTs, should you choose to invest in them. These sorts of assets are especially interesting. You not only need to designate someone to inherit them, you also need to ensure that they are stored safely in a digital wallet that protects them from ill-intentioned hackers.
Then, you need to provide whoever will inherit these assets the information necessary to access that digital wallet. Because investing on the block chain can be complicated even if you only own a couple of different investments, it is important to keep a record from the very beginning and update it with each new acquisition. That way should something unexpected occur, for assets are not lost.
Streamline the Process of Granting Account Access to Heirs
Many online service providers let you designate who has access to the services after you pass away. This includes Google, Apple, and Facebook. Using these features will make it easier to transition ownership, so make sure you have your heirs identified—both with service providers and on your own legal documents.
You should also note which assets do not pass on to heirs. For example, the books, movies, and music you buy online generally do not pass on. This is because you purchase a license to access those assets that expires with your death, rather than the assets themselves. However, executors should still know about these properties to avoid any sort of recurring charges associated with them.
Another best practice to consider is using a password manager to save access to your various digital assets. This way, you just need to grant access to the manager, rather than each individual asset. However, you should still have directions for accessing the assets saved somewhere in case something happens with the password manager.
Remember to keep password managers updated with any new accounts that you open. The downside of these password managers is that you may need to create multiple accounts if you do not want the executor to have access to all accounts, or if you intend to give different people access to specific accounts.