More than just 0s and 1s: Accounting for digital assets in your estate plan

In today’s digital world, estate planning goes beyond physical property and financial accounts — it must also address your digital assets. From online banking and investment accounts to social media profiles, cloud storage and even cryptocurrency, these assets can hold both financial and sentimental value.

Without proper planning, your loved ones may face significant legal and logistical challenges in accessing or managing them. By taking steps now to inventory your digital assets and incorporate them into your estate plan, you can help ensure a smoother transition and protect your legacy in the digital age.

What digital assets do you possess?

The first step in planning for digital assets is to identify all online accounts and digital property you own. Financial accounts, such as online bank and brokerage accounts, should be listed alongside nonfinancial assets like email accounts, social media profiles, subscription services and cloud storage. Don’t forget emerging asset classes such as cryptocurrencies or monetized digital content.

For each asset, detail how to access it, including usernames, passwords and any multi-factor authentication methods. This sensitive information should be stored in a secure location, such as a password manager or encrypted document, rather than directly in your will.

How do you want the assets to be handled?

You may want certain accounts memorialized, deactivated or deleted altogether. Many platforms, including Facebook and Google, allow users to designate legacy contacts or set instructions for account management after death. Taking advantage of these tools can simplify the process for your loved ones.

Also consider designating a family member or friend to manage your digital assets. You can give this person, sometimes referred to as a “digital executor,” the authority through your will or a separate legal document, depending on your state’s laws. His or her role is to carry out your instructions, access accounts and ensure that digital property is handled appropriately. Be sure to discuss your wishes with this individual in advance so he or she understands the responsibilities.

Any legal considerations?

Laws governing access to digital assets vary by state, and service providers often have their own policies that limit what can be shared. Fortunately, there are laws that govern access to digital assets in the event of your death or incapacity. Most states have adopted the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA), which provides a three-tier framework for accessing and managing your digital assets:

1. The act gives priority to providers’ online tools for managing the accounts of customers who die or become incapacitated. For example, Google offers an “inactive account manager,” which allows you to designate someone to access and manage your account. Similarly, Facebook allows users to determine whether their accounts will be deleted or memorialized when they die and to designate a “legacy contact” to maintain their memorial pages.
2. If the online provider doesn’t offer such tools, or if you don’t use them, access to digital assets is governed by provisions in your will, trust, power of attorney or other estate planning document.
3. If you don’t grant authority to your representatives in your estate plan, then access to digital assets is governed by the provider’s Terms of Service Agreement.

To ensure that your loved ones have access to your digital assets, use providers’ online tools or include explicit authority in your estate plan.

More questions?

By taking a proactive approach to digital asset planning, you can reduce uncertainty, avoid unnecessary complications and provide clear guidance for your loved ones. A well-structured plan can protect the financial value of your digital property and help ensure that your personal legacy is handled according to your wishes.

There are also important income tax compliance issues.  Digital assets are treated as property, not currency, and all gains/losses must be reported. 

We can answer your questions on properly addressing digital assets in your estate plan as well as for income tax planning & reporting purposes. Contact us today to learn more.