Why You Need To Include Digital Assets In Your Estate Plan
Why You Need To Include Digital Assets In Your Estate Plan
Think you don’t need to worry about digital assets or include them in your estate plan?
You may have the wrong idea about digital assets and may not even realize that you own them because, odds are, you do.
This article will explain what digital assets are and discuss simple ways to ensure your estate plan accounts for them.
You Probably Have More Digital Assets Than You Think
First, let’s make sure we are thinking about the right thing. When someone thinks of a digital asset, we generally start thinking about digital currency.
Most of us don’t think about the 13,479 photos saved to our iPhones as digital assets. We also don’t think about the Nirvana album we downloaded in 2005 or the Space Jam video we added to our collection when it moved from VHS to digital download. We certainly don’t consider all of our information on Facebook (or is it Meta?) as a digital asset. In reality, those things are precisely what a digital asset is.
Just like everything you have physically accumulated, there are several different digital assets that you should be thinking about having in your estate. Some of those things include:
- All of your email accounts;
- All of your social media accounts;
- Your photos, music, videos, and digital content;
- Books purchased on various app stores;
- Gaming accounts;
- And any other asset you have purchased digitally. As our world becomes more digital and cloud-based, we need to account for those assets like your IRA or investment accounts.
These assets and your passwords will need to be dealt with when you pass. That becomes significantly easier if it's written down within your estate plan; otherwise, your family will be left trying to guess passwords and figure out how to access your accounts. Remember, they may not even know what you have stored digitally, so this could be a HUGE source of stress for them while dealing with your passing.
One simple reason to create a digital estate plan is that it takes the burden off your loved ones. Creating an estate plan shows that you took time and care to plan for your family.
A great example of this is a client, we will call him Alex, who has spent significant time planning for his estate. He is young, wildly successful, and conscious of the repercussions of not planning a material estate. What he had no idea of, was his digital presence. He had 100s of digital photos of his family that had already passed. In his eyes, those are more important possessions than a sports car in the garage. If he doesn’t plan for that, what happens to those family heirlooms?
Simple Steps to Modernize Your Estate Plan
To ensure your digital assets are protected and dealt with in the way you want, follow these steps:
- List out ALL the digital assets you can think of (investments, NFTs, personal website, etc.).
- Compile a password list for each digital asset (the assets won't be helpful if no one can access them).
- Back up your digital assets in the cloud and/or on a hard drive — then note where each asset on your list can be found.
- Designate your digital executor (who do you want to own and/or take care of these digital assets?).
Most of us can barely remember the password to our email account because the computer recognizes it for us. Truthfully, it is easy to forget how vast our digital presence is. It may seem like a daunting task, but the first step to modernize your digital estate is to make a list.
Think of every digital nook and cranny in which you have information stored or a password created. An added benefit to this exercise is that you may even be able to do a little “spring cleaning” with your digital presence and delete apps and accounts that you no longer use.
Once you have done this, make another list with all of the passwords for each account.
Why is this so important? Since you probably do not want your content, photos, or information to be accessible to anyone and everyone, you almost certainly have it locked behind a password. Without those passwords, your family will have a difficult, if not impossible, time accessing it after you pass. Including your passwords in a list will make their lives much more manageable.
Once you have compiled a list of assets, backup anything you can to the cloud and/or a physical hard drive, I know it sounds a bit extreme, but if we can learn anything from 2020, the world has become a little extreme.
Once you have backed up any content you can, it is time to decide what you want to be done with them when you pass so that you can leave clear instructions in your will.
Next, decide who you trust to handle your digital presence. This is where you want to determine who you trust to take care of and distribute information in a way you would like. Some platforms, like Facebook and Google, allow you to designate a representative to handle this right on their site. This person should be named in your will or trust.
Lastly, you will want to write down instructions in your estate plan that clearly spell all of this out - the list, the passwords, how you want it handled, and who will do it.
If you own crypto currency and non-fungible tokens NFTs, this process becomes more complicated. Cryptocurrency has no record of ownership, and NFTs don’t have a standard way to be passed down. Regardless, you want to include this information in your estate plan to dictate what is done with the asset.
Talk To Us At First Dakota Wealth & Trust
Currently, the law does not explain exactly how to deal with digital assets, but that doesn’t mean you should wait to get these assets into your estate plan. Even if there is some uncertainty, First Dakota Wealth & Trust is here to help you navigate the waters.
We understand that planning your estate is difficult at best, and we are here to make that process a little less strenuous. After you have your list and have named a digital executor, come to us, and we can help you properly execute your wishes.
Set up a call with us today!
First Dakota Wealth & Trust is the fiduciary investment department of First Dakota National Bank with trustee powers to serve clients during their lifetime, during incapacity, and after death. We help clients develop a financial roadmap to help simplify their financial future.
Please note that neither First Dakota National Bank nor First Dakota Wealth & Trust Department, or its employees provide tax or legal advice. This is intended for informational purposes and is not intended to constitute legal or tax advice. Please consult your attorney and/or tax professional for advice related to your specific situation.