How to Protect Digital Property

When people built wealth, assets were usually tangible: real estate, investments, cash, or jewelry. However, the last year has seen a huge jump in digital assets, which includes cryptocurrency and NFTs (Non-Fungible Tokens). Combine this growing asset class with the coming biggest wealth transfer in history, says the article “What happens to your NFTs and crypto assets after you die?” from Tech Crunch, and the problems of inheriting assets will take more than a complete search of the family attic.

One survey found only one in four consumers have someone in their life who knows the details of their digital assets, from the location of the online accounts to passwords. However, digital assets that require two factor authentication or biometrics to gain access may make even this information useless.

There are many reports about people who purchased digital assets like Bitcoin and then lost their passwords or threw away their computers. More than $250 million in client assets vanished when a cryptocurrency exchange founder died and private keys to these accounts could not be found.

Digital assets need to be a part of anyone’s estate plan. A last will and testament is used to dictate how assets are to be distributed. If there is no will, the state’s estate law will distribute assets. A complete list of accounts and assets should not be part of a will, since it becomes a public document when it goes through probate. However, a complete list of assets and accounts needs to be prepared and shared with a trusted person.

Even traditional assets, like bank accounts and investment accounts, are lost when no one knows of their existence. If a family or executor doesn’t know about accounts, and if there are no paper statements mailed to the decedent’s home, it’s not likely that the assets will be found.

Things get more complicated with digital assets. By their nature, digital assets are decentralized.  This is part of their attraction for many people. Knowing that the accounts or digital property exists is only part one. Knowing how to access them after death is difficult. Account names, private keys to digital assets and passwords need to be gathered and protected. Directives or directions for what you want to happen to the accounts after you die need to be created, but not every platform has policies to do this.

Password sharing is explicitly prohibited by most website and app owners. Privacy laws also prohibit using someone else’s password, which is technically “account holder impersonation.” Digital accounts that require two factor authentication or use biometrics, like facial recognition, make it impossible for an executor to gain access to the data.

Some platforms have created a means of identifying a person who may be in charge of your digital assets, including Facebook and more recently, LinkedIn. Some exchanges, like Ethereum, have procedures for death-management. Some will require a copy of the will as part of their process to release funds to an estate, so you will need to name the asset (although not the account number).

A digital wallet can be used to store access information for digital assets, if the family is reasonably comfortable using one. A complete list of assets should include tangible and digital assets. It needs to be updated annually or whenever you add new assets.

Consult a qualified estate planning attorney about how to protect your digital assets. They will be able to help you create a plan to assure your assets are protected properly.

Reference: Tech Crunch (April 5, 2021) “What happens to your NFTs and crypto assets after you die?”

The Next Wave in Retirement Planning: Digital and Cyber Assets

You’ve worked hard for decades, saving and planning for retirement. Don’t put it at risk by delaying having an estate plan created by a qualified estate planning attorney, advises The Press of Atlantic City in the article “Estate planning for your digital and cyber assets.” But here’s the thing: even when you have a comprehensive estate plan in place, meaning a last will and testament, a power of attorney, a health care power of attorney and the appropriate trusts, you’re not quite done.

That’s because today we have an entirely new type of property that must be dealt with in estate planning. Unlike tangible property that people have been handing down for centuries, this is a relatively new kind of property: digital assets. One of the problems with digital assets is that, unlike paper documents, your family members can’t simply sift through decades of physical records to find out what you own. The online world is endless, and if they don’t know what websites to look at, there’s simply no way that they can find your digital assets.

What is a digital asset? They include such things as:

  • Mobile devices, like cell phones, laptops, tablets
  • Email accounts—all of them
  • Social media profiles including Facebook, Instagram, Twitter, LinkedIn, etc.
  • Sites that contain music, photos, and other personal information
  • Your personal desktop
  • Online banking, investment accounts, cybercurrency
  • Online gaming accounts
  • Online bill paying, like utilities, EZ-Pass, and any automatic payments
  • Websites or blogs

You’ll want to let your executor know what you want to be done with your digital assets. Some platforms have the ability for you to express your wishes for your digital assets, like Facebook. What do you want to happen to your pages when you are gone? Do you want people to be able to see your pages, or to post on them? Would you want them to be taken down a month after you pass, or left up permanently?

You’ll need to list out all your digital assets, your username and your passwords, and provide a directive to specifically state what you want to happen to each website. Yes, it will take time and it may be tedious, but imagine how challenging it will be for your family members to try to track down all your digital assets. Speak with your estate planning attorney as to how to share this information—but don’t put it in a will, because your will becomes a public document if your estate goes through probate (which happens to most wills).

Just as you have taken the time to have an estate plan created, making sure to have a digital assets plan is a gift to your loved ones. With these details taken care of, your family will be able to focus their attention on taking care of each other, dealing with your estate, and going through the grief process. You’ll have spared them a lot of additional stress and expenses.

An estate planning attorney will be well worth the investment. You can be confident that your will is going to be prepared in accordance with the laws of your state, and that your family will be protected as you wished.

Reference: The Press of Atlantic City (July 4, 2019) “Estate planning for your digital and cyber assets”

Estate Planning for Digital Assets

Every password-protected account that you own is a digital asset. They should not disappear into a void when you pass. They need to be protected, just as much, and maybe even more, than tangible assets. They can be stolen by cyber-criminals, who can loot bank accounts, retirement funds and more. You can direct that they be transferred, preserved or destroyed, says the Valdosta Daily Times in the article “Preparing an estate strategy for digital assets.”

Digital assets include information on phones and computers, content uploaded to social media sites like Facebook, Instagram and others, creative/intellectual content in digital property and records from online communications, including emails and texts.

Do these accounts really have any value? Yes—according to security software provider McAfee, the average American’s digital assets are worth about $55,000.

Estate strategies for digital assets require an awareness of new and changing laws about digital assets. Almost every state has now passed some version of the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA), which has defined a path for the future of digital accounts, when the owner passes. RUFADAA has set a hierarchical structure for the transfer of digital assets.

First, if the service provider has a means of permitting the transfer of the asset to a designated party of the original asset owner’s choice, that takes priority. Gmail and Facebook have a means of creating a directive to state the owner’s wishes.

If no such directives are on the website, then the instructions denoted in traditional estate documents must be followed, assuming that those documents are prepared properly.

If none of that is in place, then the service provider’s Terms of Service Agreement (TOSA) takes priority.  If the providers TOSA says that the account is a nontransferable lifetime lease, its ownership may not be transferred to another person. However, as a result of RUFADAA, the owner has the right to appoint a fiduciary to access, manage or close out an online account. The power may be exercised, if you are dead or if you are incapacitated.

However—you must name this fiduciary and grant the legal power to an individual through your will, power of attorney or trust agreement. Otherwise, no such authority can be given.

What else should you do? Leave a digital road map for your executor: accounts, passwords and username. Note that if the platforms use facial recognition or other biometric markers, they may not be able to gain access to the accounts. Check with social media and merchant websites to see what policies are for transferring or maintaining digital assets, when the owner dies. You should also look at reward points and credits to see how they can be transferred, and find out how pending transactions, like automatic orders, can be handled.

Consider your executor. Are they comfortable with the digital world, or a technophobe? If they may not be able to manage the digital assets, consider naming another person to handle this task. Your estate planning attorney will be able to include them in your estate planning documents.

Reference: Valdosta Daily Times (May 26, 2019) “Preparing an estate strategy for digital assets”