Are Your Digital Affairs in Order?

If you’re like most people, you store all kinds of information and content online — far more today, no doubt, than even just a few years ago. Together, these resources are known as “digital assets.” Items such as digital copies of family photographs, PDFs of legal documents, important emails in your inbox, and even cryptocurrency are included in a digital assets portfolio.

Have you recorded information about these assets — what they are, where they are, how to access them — and made it available to your executor? If you’re not sure, you’re not alone. With digital accounts only seeming to grow in volume over time, keeping tabs on all those details, and keeping them updated, can be a challenge. But doing so is crucial to protecting your digital assets and legacy.

In this A Closer Look, we review the essentials of organizing your digital assets so that they are included in your estate plan, properly secured, easily identified by and accessible to your executor and/or trustee, and ultimately distributed according to your wishes.

What Are Digital Assets?

To take a complete inventory of your digital assets, it’s important to understand what falls under the umbrella of this asset class. Digital assets usually represent some kind of value to the owner. This could mean items of emotional value — for example, family photos stored on an online album platform like Google Photos or digitized copies of children’s artwork or college essays stored in the cloud.

Other assets might have a more practical value, like digitized health records or tax documents. Add to that the accounts almost everyone has with email providers, social media companies, travel providers, and shopping websites — many of which can store funds.

And then there are the digital/online tools designed specifically to store funds that often have a measurable market value. Online bank accounts — with some companies offering banking services only online — may be the most obvious. But cryptocurrencies, such as Bitcoin (virtual money created by and stored on global computer systems), and non-fungible tokens, or NFTs (unique digital images), also classify as digital assets and may have significant monetary value. (The economics of cryptocurrency and NFTs are highly complex and fall outside the purview of this article.)

Conversation-based online formats such as blogs and podcasts can also have meaningful financial value. (Online retail giant Amazon in 2021 acquired certain rights to the popular podcast “Smartless” for an estimated $80 million.¹ ) Biographies, novels, and screenplays, along with evidence of copyrights, trademarks, licenses, patents, and other potentially remunerative assets — all of this intellectual property might be stored online and be part of your digital asset portfolio.

There’s also the nascent online world of the “metaverse,” an immersive digital realm that’s accessed largely through virtual-reality and augmented-reality headsets. Ways to monetize the metaverse are few at present — do you have a “virtual character,” or avatar, you’d like to sell? — but it’s reasonable to assume that in time there will be increased opportunities via the metaverse or an as-yet-unknown digital platform that will make it even more important to remain on top of your digital assets.

Last but not least, also under the category of digital assets are smart phones, computers, and the like, since these devices can hold all kinds of data, including passwords, that provide the means to access and store assets on the internet.

As you can see, the scope of digital assets is vast, and it’s expanding all the time. The old ways of searching through file cabinets or checking the mailbox for statements from investment companies to find important information may prove inadequate, especially if you’ve chosen a “paperless” option. This is why it is vital to leave a list of assets, locations, login credentials, and other details, such as two-factor identification — and update it on a regular basis.

Organizing Your Digital Assets

The following are some key steps for creating an inventory of your digital assets:

Create a list of your digital assets. Include the following:

• What those assets are (don’t assume your executor will know). Take into consideration the digital assets listed above and note how each is accessed. For example, some digital assets are accessed through biometrics that are unique to you (see below for further discussion).
• Where each asset is stored: URLs, or web addresses, for home pages or sign-in portals.
• Login credentials, including usernames and passwords. Keep your credentials updated as passwords change. (This is easier said than done, as discussed below).
• Answers to security questions.
• Identify the smart phone or email account (and login credentials) where two-factor codes are sent, including the passcode to such devices.

Consider options for where to store your list:

• Keep it in a secure physical or online location, and be sure to inform a family member or your executor where it is and how to access it. (Beware of safe deposit boxes, which are harder to access after death and can cause inadvertent hardships should a key be lost or its location forgotten over time.)
• Leave the list with a highly trusted family member or the executor you name in your will. Be sure to let your executor know who has the list in their possession if you choose not to store it with your nominated executor. Consider naming an individual or institution with technological expertise for the roles of executor and trustee. You might include your digital assets list, along with authorization for someone to access your digital info, in a stand-alone letter of wishes, separate from a will (see “Sharing Your Vision and Values: Exploring Letters of Wishes”).
• Take advantage of legacy contact tools whenever possible (see below “Setting Up a Legacy Contact”).
• Note that none of these options is failproof, though each paves a clearer path forward for your executor, other designated representative, and loved ones.

Planning options for digital assets with significant financial value:

• Consider retitling them in the name of your revocable trust to facilitate their management and ease of transition; a professional advisor can help you with this process.
• If you’ve created intellectual property, such as books, screenplays, or music, consider hiring an attorney with expertise in the area.

Some challenges you (or, later, your executor) may encounter:

• Your digital presence has grown over the years and will continue to grow. Have you included every new account and its accompanying login credentials in your list?
• Is there two-factor information on an account? Where is the one-time-use code sent?
• Where you use biometrics for access to digital assets, contact each account company and inquire about succession plans for these assets, including protocols for access, such as if a bypass exception may be granted.
• When it comes to the disposition of your digital assets, timeliness matters. Some online companies automatically terminate accounts after a period of disuse, and that could mean losing valuable information. With up-to-date information, your executor should be able to act in an expedient manner.

Potential Pitfalls Along the Way

Keeping track of your digital accounts. As mentioned, the internet allows us to accomplish so much, so quickly, from almost anywhere, at almost any time — it’s a convenience surely unheralded in human history. But there is a burdensome side: You have to create a username and password for almost every account. True, they’re meant to protect your data. But when you have dozens of accounts, each with a different login protocol (ideally), having to keep track of them all can feel annoying.

On top of that, more providers now require two-factor identification: You input your account details, they send you a code for access. Some may ask for answers to security questions you set up, possibly years ago. (“What WAS my first pet? Hammy the hamster or Rebel the dog?”) There’s also the growing use of biometric gatekeepers, such as a fingerprint scans or facial scans, that trace back to a single individual and cannot be shared as easily as “ilovecats123.”

Bottom line: Keeping all these records straight can be a Herculean task. But keeping your information up to date is vital — for yourself and especially for your executor, trustee, or attorney-in-fact under a power of attorney, those you trust to manage your affairs during your lifetime and after you have passed away.

Ownership. Some digital custodians view themselves as legal owners of anything on their servers. Those photos, songs, documents, and movies that you uploaded onto their computer systems? It’s not your property, they may say, it’s theirs. (Each company’s definition of legal ownership is usually laid out in a “terms of use” contract, the kind that many of us agree to without actually reading.) Be aware that this can complicate attempts to sort out your digital estate.

Permissions. Some of those custodians have processes in place that permit you to designate a trusted legacy contact (see above), someone who could gain access to an account after your death or a long period of disuse. These are helpful resources that you might consider using, but most go only so far: A custodian may turn over only information relevant to settling an estate, potentially thwarting full access to your complete online profile.

State laws. Each state has its own laws regarding access to an individual’s assets after death or incapacity. Any attempt to access assets from a digital custodian absent explicit instruction in a legal document, such as a will, may violate state law and constitute a crime. Plus, federal law applies to all assets, on top of state law. You or your assigns should ask an attorney familiar with digital laws about the Revised Uniform Fiduciary Access to Digital Assets Act, otherwise known as RUFADAA, and other applicable legislation.

No two ways around it, all of these roadblocks can be a challenge for your executor and dispiriting for your family, especially if the digital assets you have left behind have financial or emotional value. While major digital companies may become more flexible in the future, most current terms of use and ownership policies may present limited options for the full recovery and, ultimately, disposition of your digital assets.

Estate Planning for Your Digital Assets

For your digital property to pass in accordance with your wishes, it must be incorporated into your overall estate plan. Attorneys have largely adapted to the digital landscape and have language that can and should be added to your estate planning documents. Chances are, if you signed your documents in the last 10 years, that this language is already there. If, however, it’s been years since you executed or reviewed your estate planning documents, now is a good time to do so. Your estate planning attorney can assist you with this process.

But what happens to any digital property — which may be highly personal or highly valuable — that your fiduciary fails to access or that you did not incorporate into your estate planning documents?

• The assets may be in limbo for years, or lost forever, as some digital custodians shut accounts down after a period of disuse.
• Your executor may need to track down your digital assets, assuming they are aware of your digital asset portfolio in the first place, potentially at significant expense to your estate.
• Without proper legal permission (given in a will, for example), and depending on state and federal law, your executor may face criminal charges for accessing certain accounts — a bank account, for instance.
• Your executor may need to spend many hours seeking legal permission in court to access your digital assets.
• In the worst-case scenario, the digital asset and its value may be irretrievably lost. For example, if you owned cryptocurrency of which your executor was not aware and left no instructions for the location of the key (a unique login code used for cryptocurrencies), then that asset and its value would, for all intents and purposes, “disappear.”

Conclusion

It’s almost inevitable that your digital presence has grown over time. New financial accounts and digital currencies, new shopping and email accounts, new storage options in the cloud — moving more of your life online can help improve the quality of your life offline, some might say.

At the same time, finding and recovering digital assets after death seems to have grown only more complicated. This increases the importance of following the estate-related steps above: Consider keeping a detailed list of assets, locations, and login credentials and keeping it updated and secure; choose people you trust to manage your assets, according to your wishes, when you’re gone; set up legacy contacts where you can; and ensure that your estate planning documents provide instructions for what happens to your digital property. Ideally, those you choose for any of these roles will have a certain degree of technological savvy and comfort navigating these digital tools.

Accomplishing all of this can help make things much easier for your estate and keep your valuable digital assets in your family.

For more information, please contact your Bessemer advisor.