Does Your Estate Plan Protect Your Digital Assets?
Each year presents a new opportunity for you to revamp your estate plan. When the calendar turns over, take a peek at your strategy once again. Life circumstances and tax laws change annually, and you should view your strategy through those new lenses.
More subtle changes should play a part in your planning sessions. Environmental changes are slow to build but leave strong impressions, and if your strategy ignores the world’s rapidly changing environment, your loved ones may be left in a lurch when you die. Ten years ago, digital assets garnered little attention, but today, they must be protected and should be discussed during the estate planning process.
What Are Digital Assets?
Digital assets are electronic data stored online or in the cloud. For most of us, that means that we have digital assets just about everywhere. They can include items like:
- Financial accounts (brokers, banks, retirement accounts)
- Social media profiles
- Domain names
- Software licenses
- Digital music, movies, and photos
- Emails and email accounts
- Digital files stored in the cloud (Dropbox, Google Drive, OneDrive)
- Passwords and login information to phone, laptops, and tablets
Digital assets are easily overlooked in the estate planning process, although they shouldn’t be. They can hold just as much monetary value as physical assets, and quite often, they hold sentimental value, as well.
Why Do Digital Assets need to be Safeguarded Differently than Physical Assets?
Although many modern wills cover digital assets, wills even just a few years old may not. If your existing will or testament does not address digital assets, you will need to file an addendum so that those assets are protected. Your executor can safeguard your data when you die, or you can name a separate “digital executor” to do the job.
Digital assets are also protected by law. Both state and federal laws restrict access to sensitive and personal data in order to protect against fraud and prevent identity theft. Data privacy laws like the European Union’s General Data Protection Regulation (GDPR) protect all individuals – EU citizens and visitors alike – from data misuse, and sweeping legislation like this is becoming more common across the globe.
And lastly, digital assets have different inherent risks than physical assets do. When physical assets are stolen, you discover the loss quickly and typically have records of what you owned. When digital assets are stolen, especially in times surrounding an individual’s death, it may take weeks or months for anybody to notice. By the time the loss is discovered, it may be too late to retrieve those funds.
How Can You Protect Your Digital Assets?
There are a few easy steps you can take to ensure your digital assets are safeguarded after your death.
- Contact an estate attorney. Estate attorneys will know how to protect digital assets. Find one that is familiar with the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA), a state-level law that tells fiduciaries how they should handle the digital assets of their charges.
- Make a list of your digital assets. A thorough checklist will help your heirs know where to find your assets and how to access them. Mark the assets that will need to be managed after death (like your bank accounts or subscription services) and those that can be easily let go (like licensed software or music).
- Dictate what you want to be done with your digital assets. Just like physical property, direct how your digital property should be handled, and appoint somebody you trust to follow your directives. Consider selecting an unrelated third party to comb through your more sensitive documents like e-mails and text messages.
- Create a master list of your passwords. And then store it safely with your attorney or in a lockbox of some kind. Update this list regularly.
- Back up your systems frequently. Protect your electronic files by backing them up in the cloud. If your digital executor cannot gain access to your phone or laptop, they should still have access to your files via the cloud.
- Set up an appointment with your Certified Public Accountant (CPA). Your CPA will know the tax implications of passing digital assets onto the next generation, and they can help you establish a plan that will minimize your tax bill. Thorough estate plans begin well before death, and it is never too soon to consult a professional.
If you have questions or need assistance with an estate planning issue, Klatzkin can help. For additional information please call us at 609-890-9189 or click here to contact us. We look forward to speaking with you soon.