Many online activities create digital assets that have become an essential part of our lives. Yet, when creating an estate plan, clients tend to overlook these often valuable assets, which can pose a challenge for an executor when administering the estate. Many clients don’t realize just how many digital assets they have until they start accounting for them.
What are digital assets?
A digital asset is anything in digital form that can create value. These assets can include:
- accounts with social media platforms, such as Facebook, Instagram, YouTube, Reddit, Pinterest, TikTok and LinkedIn, as well as email and cloud storage accounts;
- financial accounts, such as online banking accounts, payment platforms such as Paypal, investment accounts and cryptocurrencies;
- accounts with subscription services, such as Netflix, Crave, Amazon Prime Video, Spotify and Apple Music;
- loyalty rewards, such as Air Miles, PC Optimum points and hotel points;
- digital media content, such as purchased e-books, music, videos and photos stored online;
- intellectual property, such as digital patents, trademarks and copyrights;
- other properties, such as web domains, blogs, online shopping accounts, online dating accounts and gaming accounts.
Why should clients include digital assets in their estate plans?
A client’s digital assets may exist in many forms and in many locations online, so they can be difficult to locate. Even if family members are aware of the assets, gaining access and obtaining them can be difficult.
Overcoming barriers to access
Most digital assets require a password to access information or log in to the account. Without the proper credentials, getting access to the digital asset can be impossible. A digital asset that cannot be accessed — for example, a large cryptocurrency account — essentially no longer exists. So, recording and storing all login and password information securely is of utmost importance.
Clients also should be aware of laws that may restrict access to anyone other than the owner of the account. Certain social media platforms, for example, prohibit anyone from having access to the accounts unless the original owner provided permission. Family members could be prevented from accessing photos, videos and other stored information.
Assets with monetary value
Some assets have financial value. They include cryptocurrencies such as bitcoin and ether, non-fungible tokens (NFTs), digital artwork and domain names.
Other assets that can have significant value include digital books published by the client and blogs that generate revenue through subscriptions or sales. Further examples include social media accounts with large followings, such as a YouTube channel, and accounts with TikTok and Instagram that generate revenue.
Loyalty rewards can hold significant monetary value, as well. Many people accumulate points for many years, which can result in accounts holding considerable value. Most clients would want these assets to be passed on to their heirs.
Loyalty programs each have terms and conditions regarding the transfer of these assets, so it is important for clients to be aware of the ways these assets should be dealt with. For example, some programs’ rewards expire upon death, although a transfer during the lifetime of the member may be allowed.
Without proper planning, there could be legal issues in accessing and administering these assets. Clients must be proactive to ensure they have included their intention concerning these assets in their estate planning documents in order to minimize the risk of losing access to these valuable assets.
Assets with sentimental value
Some assets, such as family photographs and videos, hold personal and emotional value to clients and family members. They may be stored on computers, mobile devices, social media accounts or cloud accounts. Other sentimental assets can include emails and messages that capture meaningful moments.
These memories may be permanently lost without usernames and passwords. Some better-known service providers have legacy programs to assist heirs with accessing accounts that may hold sentimental assets.
Creating a digital asset inventory
Clients should create a comprehensive document that lists of all their digital assets along with information on how to access those assets, including logins and passwords.
They must note all credentials, including security questions and answers, and details of two-factor authentication. Include encryption keys or recovery phrases for crypto wallets.
Password managers, which are becoming a common way to store all credentials, can often be shared with a trusted person. Clients may choose to keep physical copies of the document in safe places such as an at-home safe, a safety deposit box at a bank, with the client’s estate lawyer or in a safe spot in the home. Another option is to store the inventory securely in a cloud account.
This is not a one-time effort. This digital asset inventory should be updated as the client creates accounts, changes passwords and acquires new digital assets, or if any information changes. The inventory should be reviewed annually to ensure the information is up to date.
Digital assets and the will
Your client’s executor is responsible for managing and administering the digital assets after their death. The will should have a clause or additional language that specifically addresses the client’s digital assets and gives the executor directions and powers to administer the assets. However, the actual digital asset inventory should be a separate document, both to protect the client’s privacy and enable them to update the inventory informally as the need arises.
Given the digital age we are in, clients must take these assets into consideration and make them a part of their estate plan. The role of the executor is already difficult, and they can face further hardships when they are unaware of what assets exist and how to access them. Clients must stay proactive in updating their digital inventory and keeping up with the terms of service for various service providers.
Source: Advisor.ca
