Decades ago, a digital estate was something unheard-of. However, the world now lives and works online, which means a huge portion of your assets, and your legacy, are digital.
It's more important than ever to consider what that legacy entails and how you’d like it to be managed after you’re gone. That’s where digital estate planning comes in. Read on to find out what digital estate planning is, how to inventory and value your digital assets, and get strategies on protecting sensitive information and controlling access to your digital assets.
Key Takeaways
A digital estate encompasses all your online accounts, digital assets, and electronic records.
It's crucial to include an inventory of your digital assets and instructions in your will to ensure they are passed down to your loved ones, or disposed of, upon your death.
The best way to manage your digital estate is to use a secure digital storage solution that enables you to update your assets and share access with relevant parties.
Identifying and Inventorying Your Digital Assets
Before you can start organizing your digital estate, you’ve got to take stock of the digital assets your estate contains.
What is a digital asset? Simply put, a digital asset is anything created or stored digitally that possesses some form of value. That value can be monetary, sentimental, or a combination of the two.
When it comes to different types of digital assets, you’re looking at a fairly wide range of things that combine to form your digital estate.
David Greiner, founder of David J. Greiner Law Corp. in Victorville, California, explains: “A digital estate encompasses all of your online accounts, digital assets, and electronic records. This includes things like email accounts, social media profiles, photos, videos, domains, websites.”
In addition to aspects of your daily online presence, your estate may include intellectual property, digital currencies, or crypto assets.
In terms of intellectual property, this could mean illustrations, manuscripts, animations, or anything in between. Meanwhile crypto assets refer to cryptocurrencies like bitcoin, non-fungible tokens (NFTs), or security tokens.
After identifying what counts as a digital asset in your life, the next step toward creating a digital inventory is to make a list of all of your digital assets. Make sure you include:
The name of your digital asset.
The type of asset.
The location of your asset.
Necessary login credentials to access each asset.
Once you develop a digital inventory of all your assets, you can organize and manage those assets in a way that makes sense to you.
Best Way to Manage and Organize Digital Assets
According to Miles Brooks, a CPA and director of tax strategy at CoinLedger, the methods you need to deploy to manage your assets will depend on how you’ve chosen to categorize them. He explains:
“For example, for financial assets, it is important to have a centralized password manager and grant access to a person you trust in your estate plan. It is also wise to use two-factor authentication and have offline records in a secured location for important information.
"For personal assets, consider using cloud storage, and use a clear naming convention. Store your informational assets in a digital filing cabinet. Remember to scan the copies and share a folder with your family.”
When you onboard a digital asset into your Trustworthy dashboard, you’ll benefit from its Autopilot feature.
It uses artificial intelligence to analyze and understand hundreds of document types to generate document summaries, extract key information, and provide suggestions on how to categorize your asset and what to name the file.
This makes life a whole lot simpler when it comes to digital asset management. It’s easy to tag and search for documents, update accordingly, and share secure access with family members, your attorney, estate planner, or medical practitioners.
Ready to learn more? Take a look at Trustworthy’s range of features to explore how it can help you streamline the management of your digital assets.
How to Assign Value to Digital Assets
Because your digital estate covers such a broad spectrum of asset types, assigning a value to each asset isn’t always as simple as it sounds.
If you’re working with financial assets like cryptocurrencies or NFTs, you can use a market-based approach by looking at the current sale value of similar assets on the open market.
In the case of cryptocurrencies, the process is even easier because there are often global exchange rates that tell you the value of each crypto asset in fiat currencies like US dollars (USD).
But after you’ve assigned a value (or cataloged the market value) of your financial assets, the process gets a bit more arbitrary. CoinLedger's Brooks explains:
“Creative and intellectual property involves a more complex approach. If the property generates income, e.g., licensing fees or pay from music, I use the income approach to estimate future cash flow and discount to get present value. …
“For assets that have been sold, I use a market analogy, which sometimes involves comparing the creative work to almost similar work that has recently been sold to get a value range. For unique assets that are not actively traded, the cost approach can do the trick. Informational assets often have sentimental value and no intrinsic value.”
When in doubt, it’s worth contacting your accountant or estate planner for support in valuing your digital assets. They’ll likely have more experience in assigning a market value to various assets, enabling you to establish the overall value of your broader digital estate.
Establishing a Plan for Social Media Accounts
One aspect of your digital estate that might have less monetary value is your social media accounts. But they will have strong sentimental value and help to form a key component of your digital legacy after you’re gone.
That’s why it’s essential you communicate to loved ones how you want your accounts handled if anything happens to you.
Brooks advises: “Having a plan ensures your online presence is handled as you would have wished upon death, thus avoiding confusion and reducing the stress of having to decide for you.
"It also ensures your privacy is respected as social media accounts often have a lot of personal information and acts as a way for commemoration if you decide you want the account to be memorialized.”
Some social media networks like Facebook have simple processes in place for transitioning a user’s account after they’ve died. They enable an estate to request that an account is either scheduled for deletion or turned into a memorialized version that clearly states the former user has passed away.
If you have a preference for how this component of your digital estate is handled after your death, it’s important to include explicit instructions in your will. This ensures everybody is on the same page and that your wishes will be honored moving forward.
Protecting Sensitive Data and Intellectual Property
When it comes to managing your digital estate, security and protection are paramount, particularly when it comes to controlling access to sensitive personal information and your intellectual property (IP) rights.
That’s why Brooks says it’s important to deploy multiple security measures to keep your assets safe. As you might expect, the ideal measures can vary depending on asset type. He says:
“Protection begins with understanding the risks your personal information is susceptible to. Educate yourself on common attacks like phishing, using public Wi-Fi, proper disposal of used devices, etc. Using strong passwords, 2FA, and encryption will protect your personal information.
"Protecting your IP rights is a little different. You should consider getting a patent, copyright, or trademark to get legal protection on your creative works or brand names. It is also important to have people you work with sign nondisclosure agreements to bind them and keep your work a secret. Consider watermarking your IP and storing the property securely with restricted access.”
Again, this is where it pays dividends to invest in a digital family vault designed to keep a range of digital assets secure at all times.
For example, Trustworthy deploys a combination of measures, such as password recipes, two-factor authentication (including hardware keys), and AES 256-bit encryption, to create multiple layers of asset security for all digital documents. This ensures your digital assets are under lock and key at all times and only you have the power to award access to each document on a case-by-case basis.
How to Integrate Digital Assets Into the Overall Estate Plan
Digital asset management is a unique (and fairly new) component of estate planning. However, it’s important to remember that your digital assets represent just part of your overall estate.
That’s why it’s critical to consider how your digital assets fit into your overall estate plan.
Generally speaking, one of the best ways to ensure digital assets are integrated into your estate plan is to include your digital asset inventory and detailed instructions regarding how you’d like each asset treated or disposed of after your death in your will.
It’s important to ensure the executor of your will has access credentials to act on your instructions as required.
There’s also legislation in the U.S. that guarantees your executor access to relevant digital assets after your death. The Revised Uniform Fiduciary Access to Digital Assets Act provides a framework to ensure that companies hand over access to your accounts or other digital assets to your executor or trustees.
The process of passing on or disposing of your digital assets is relatively straightforward. However, if you’re feeling stuck or confused at any point, it’s often worth seeking professional guidance.
Ben Michael, an attorney at Michael & Associates in Dallas, advises:
“It is a smart decision to get the help of a lawyer for your digital estate management. Digital estate management is complicated and confusing, and it’s imperative that all of your bases are covered and that you’ve done everything correctly. A lawyer who specializes in this type of estate planning will know exactly what to cover and how to set everything up exactly the way you want.”
Frequently Asked Questions
Why is it important to include digital assets in my estate plan?
Your digital assets can both form your online legacy as well as represent wealth that could be passed on to your loved ones. Inclusion in your estate plan guarantees these assets are addressed appropriately.
Whom should I choose as my digital executor?
When appointing a digital executor, you should choose a friend, family member, or professional that you trust with access to all of your personal online information.
How can I provide my digital executor access to my accounts?
One of the best ways to provide your executor with access to your accounts is by using a secure digital storage solution and sharing it with the relevant parties.
How often should I review and update my digital estate plan?
Because the digital world moves so quickly, it’s important to update your digital asset inventory and estate plan annually to ensure everything is up to date.
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Trustworthy is an online service providing legal forms and information. We are not a law firm and do not provide legal advice.
