Digital Estate Planning refers to the planning of your digital assets and accounts upon your death. Digital assets include your various cryptocurrency (Bitcoin, ADA, Ethereum), social media accounts (Instagram, Facebook, Tick Tock, Snapchat), emails (Gmail, Yahoo!, Hotmail and AOL), online bank accounts, credit card reward accounts and all other online accounts.
Why Do You Need to Engage in Digital Estate Planning?
Digital Estate Planning is very important and often overlooked by many planners.
First, it would make your loved ones lives easier when trying to access these accounts and transfer it to the right beneficiaries. You might have made your life easier by opting out of hardcopy statements to e-copies, but that has made it harder for your loved ones to track down your assets. Without proper planning, certain digital assets, such as bitcoins, could be lost forever, while others (like photos in cloud storage) could be found through a time consuming process with the Court.
Second, without any planning the current law does not give your loved ones sufficient rights to access the contents of your social media or email accounts. This means, your photos on instagram, your messages in emails and messenger apps, your unfinished work on google docs, e-gift cards and any other electronic assets you can think of would not be accessible without an additional Court order.
Third, you might want to designate specific beneficiaries, and the only way to do that is with advanced planning.
Fourth, you might want to protect certain appreciated assets from taxes, or protect those assets from your loved ones’ creditors, divorces or irresponsibility.
Finally, there might be accounts you DON’T want your loved ones to find. Your privacy should not be jeopardized due to an untimely demise.
To avoid loss of your digital assets, it is critical that you create a digital estate plan.
How Do I Create a Digital Estate Plan?
There are a few options, but the first step is to take a look at all your online accounts. This might surprise you, but some credit card rewards could be inherited. The second step is to discuss with an estate planning attorney how the assets should be distributed upon your demise.
Can I Have a Trust for my Digital assets?
The answer is, “it depends” on how the digital assets are categorized.There are digital assets that are personal properties or those that are simply licensing agreements. Personal properties mostly could be placed inside a trust, A licensing agreement, however, depends on the use of the account and terms of service between you and the company. The agreement could specify that the property could terminate upon your death, in which case it may be difficult to transfer the asset to your Trust.
For some licensing accounts, the company allows Trust ownership and Trustee users similar to an online banking account. WIth other companies that hold your digital assets, such as a cryptocurrency wallet, it is probably best to assign the interest in that account into a Trust, effectively making the Trust the owner of the digital assets.
In fact, digital assets might benefit by being in an irrevocable trust if you believe your estate will incur New York or Federal Estate taxes. This could happen if your estate is valued at $5.93 million dollars in New York or $11.7 million for Federal (Please note that as of the date this article was published the House Ways and Means Committee released a new tax proposal, which could lower the Federal Exemption to approximately $6 million by 2022.)
Do I Need a Digital Executor?
It is best to have a Digital Executor. This should be a trustworthy person as they will have information regarding your digital assets and online accounts. The Digital Executor will also be working with your loved ones to smooth the process of succession.
There are other options besides a Digital Executor. There are online services that allow you to store digital account information, and “cold storage”, which simply means storing the information on your own devices. Whether it be a Digital Executor or the other options, they all have their risks. The option you choose is based on your preferences. You might want to discuss it over with your estate planner to get a better idea of which you prefer.
What is the Difference Between a Digital Executor and an Executor for the Rest of my Assets?
Digital Executors are simply someone you picked and entrusted with your online accounts and digital assets information. A nominated executor under your Will is a title that carries fiduciary obligations. The Executor will likely be the same person to probate your Will in Court, and work with the Digital Executor to locate and collect all your assets after your demise. Of course, your Digital Executor and executor could be the same person.
What Happens After?
Inheriting digital assets and accessing online accounts is not an easy task. The law is still catching up at the moment, and proper planning will allow your executor and/or trustee to have the power to collect your digital assets, access your accounts and pass it to the appropriate beneficiaries. Or alternatively, you might want them to destroy it.
Whether you want to keep it or destroy it, at the end of the day, it might be advantageous to speak with someone regarding your rights to your own digital assets and accounts.
Feel free to give us a call with any questions regarding digital estate planning. We’re here to help!
This post written by Ada Chan, Esq.
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