Intellectual property and intangible assets used to be niche fields. For most people, pretty much everything they owned could be held, sorted and doled out by their estate lawyer. Today that’s far less true. From e-mail and social media accounts to websites, photos and the simple contents of a hard drive, almost all of us hold a vast amount of intangible, digital assets. As a result, managing those assets has become an important part of modern estate planning. This is known as “digital estate planning,” and here’s how it works. If you want help with your estate planning then you may want to consider working with a financial advisor.
What Is Digital Estate Planning?
Digital estate planning is the process of including your online and digital assets in your estate. This is a simple definition, but it describes something potentially quite complicated. A digital estate can include assets including, but not limited to:
- Social media accounts
- Websites and domain names
- Online stores and businesses
- Software and other code
- Pictures, video and other media
- Financial records or financial assets held digitally
- Contents of any hard drives, phones or other devices
- Contents of any cloud storage
Essentially, anything you store online or on your devices is considered part of this “digital estate.” Digital estate planning, then, is the plan for how you’ll handle these assets after your death. Who will get access to your social media accounts, for example? Who will you give your files and photos to and who will take over any websites that you run?
Despite the name, a digital estate is not separate from your ordinary estate. You make these assignments as part of your overall estate planning. For most people, this means including terms for digital assets in your will and discussing the matter with your executor. In addition, many states have adopted versions of a law known as the Revised Fiduciary Access to Digital Assets Act, which ensures that fiduciaries such as your executor have legal and authorized access to your digital assets.
Don’t let their ephemeral nature fool you though. Today, someone’s digital estate can be some of the most important assets that they leave behind. Phones are the photo albums of the 21st century and websites are often the family business. Forgetting to handle your digital estate would be like leaving photos, heirlooms and stock certificates to languish in a forgotten storage unit.
What Should You Prepare For In A Digital Estate?
In broad strokes, preparing a digital estate is no different from managing the rest of your affairs. You need to clarify who will take possession of specific accounts, devices and logins and you need to clarify who will take the remainder of your estate after the specific bequests have been made.
However, there are a few essential differences. Some of the most important issues to consider in your digital estate include:
Passwords and Logins
It’s no use leaving someone an iPhone filled with treasured photos if they can’t unlock the device. Nor will your next-in-line be able to take over an online business if they can’t log on to the website. You will need to make sure that your heirs have access information for all of the devices and accounts that you want to leave behind.
This can be easier said than done. At this point, passwords have become the bane of information technology everywhere. The sheer volume of them, combined with the complexity of modern passwords, makes it hard to keep track of login information even for your own accounts.
You can make this process easier by using the same e-mail address for all important online accounts. That way, even if your will includes out-of-date passwords, as long as you keep the e-mail password updated your heirs can still recover those accounts. For devices, which often don’t have a password recovery feature, you may need to keep a secured record. Online password storage can serve this purpose, but it is also vulnerable to hacking. Keeping a written logbook of important usernames and passwords and storing it securely with other important documents, is often a good solution.
There are a surprising number of laws about who can access information systems. These laws have only gotten broader over the years as companies use them not to combat piracy but to shut down competition. Laws like the DMCA, for example, are the reason that old media like DVDs work across any manufacturer’s device but streaming titles only play on their own platforms.
For estate planning, this means that you need to make sure your will is clear on who can access important information systems. If their access isn’t clear, they may be considered unauthorized users. That will be frustrating enough if your heirs are trying to access old photos. It can be a big problem if they’re trying to access valuable or financial data.
It’s best to consult a lawyer to make sure you’ve done this right. Make it clear in your estate who will inherit your accounts and online access. Otherwise, your heirs may be considered unauthorized users and blocked from your accounts.
Distribution and Rights
Finally, it’s common for people to keep digital assets stored across a wide variety of sites, devices and platforms. It’s also common for their rights in those assets to vary widely. In both cases, the result is that your digital estate can wind up scattered and disorganized. It’s worth spending some time to try and fix that upfront.
When it comes to assets that you particularly care about, such as important documents and photos, it can be wise to consolidate them into single locations. Make backups of your documents and media to an external hard drive, for example or a single cloud storage service. This can keep your heirs from having to chase down numerous accounts and logins to retrieve everything you meant to leave them.
In the process, clarify your rights to various digital assets. One of the growing problems with digital assets of all kinds is that many companies today sell indefinite licenses disguised as purchases. You may think you own something only to discover that you’d merely rented it for an up-front price. On Amazon Prime, for example, that button marked “Buy” disguises what is in fact an indefinite license that the company can end at its discretion.
This matters because any such licenses will almost certainly expire at your death. So if something is important to hand down, for example, media or software that a business website relies on, make sure you own it or acquire it as part of your estate planning.
The Bottom Line
Digital estate planning is the process of planning for what will happen to your digital assets, media and online accounts after your death. It can be a legally and technically complicated field, but it’s increasingly very important. If you plan on investing in digital assets then it’s important that you protect those assets in the right way as part of your overall estate plan.
Tips for Estate Planning
- Whether you should invest in digital assets or not or need help establishing your estate plan are both things a financial advisor can help you with. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- The nature of digital assets keeps growing, from entertainment to money and now real estate.
Photo credit: ©iStock.com/Hiraman, ©iStock.com/GlobalStock, ©iStock.com/Sitthiphong