As our society continues to advance in technology, digital assets will play an increasingly larger role in our estates. Failure to account for these assets in an estate plan may bury your loved ones in red tape when they attempt to access them after your death. Items of sentimental value may be lost, and items with monetary value could easily get tied up in probate court as the rules surrounding their access and transfer are still developing. It’s essential to leave a clear roadmap for your loved ones to access your digital assets, and wherever possible it’s best to make the transfer of digital assets legally binding.
What Constitutes a Digital Asset?
Digital assets may be financially valuable, but often they are of more sentimental value. Examples of financially valuable digital assets include:
- Virtual currencies
- Personal or professional blogs with advertising revenue
- Domain names
- Revenue-generating digital works, such as music, videos, photos, and writing
That list may also include purchased digital items such as music, movies, publications, apps, and software—but that entirely depends on whether or not you have the right to transfer the digital items. Often, digital media purchased from providers such as iTunes or Google Play are not transferrable. Physical CDs and DVDs may also have restrictions on how many times they can be digitized and copied. Check the provider’s published terms and conditions before you attempt to transfer these digital assets.
On the other side of the spectrum, examples of digital assets with sentimental value include:
- Family photos and videos
- Emails, recreational writing, and journal entries
- Social media accounts
- Personal websites or blogs
The Challenge of Dealing with Digital Assets
Digital privacy laws prohibit online account service providers from granting access to anyone other than the owner without the owner’s lawful consent. Obviously, it will be difficult to get the owner’s consent if they have passed away. To make matters worse, unauthorized access to computer systems and private personal data can be a criminal offense, so leaving your loved ones without explicit authorization and access to passwords can land them in serious trouble. This is trivial if we’re talking about accessing your Facebook account, but when it’s regarding valuable assets like digital currency and intellectual property, the stakes are significantly higher. Your loved ones may be able to hire a private security firm to bypass some of your password-protected safeguards (a practice that will be both expensive and of questionable legality), but modern devices with data encryption features are extremely difficult—if not impossible—to hack.
To alleviate the burden on your loved ones, follow these four steps to create a digital estate plan.
1. Catalog Your Digital Assets
Start by making a list of your digital assets. Be sure to include the following:
- Physical hardware, including laptops, desktop computers, external hard drives, flash drives, smartphones, tablets, e-readers, digital music players, and digital cameras
- Electronically-stored data stored in the cloud, online, or on a hard drive
- Online accounts, including social media, photo and video sharing services, and email
- Websites and blogs that you manage
- Domain names
- Intellectual property, including copyrighted materials, trademarks, and other valuable or revenue-producing digital assets
For digital accounts, be sure to notate your username, registered email address, and password. For physical assets (such as a computer or external hard drive), indicate where the asset can be found. Copyrighted materials, trademarks, and revenue-producing digital assets should have legal documentation to authenticate your ownership.
2. Plan How Each Digital Asset Should be Handled
Start by planning how to transfer your digital assets with monetary value. You may address some of these in your will, but it’s good to include these in your digital will, too. In addition to naming the beneficiaries, include special instructions as necessary. For items with sentimental value, transferring them to a beneficiary is more of a formality as they will only need your account credentials to access and download the digital assets. Lastly, you can instruct your digital executor to close certain digital accounts such as email and social media. You can also indicate if any sensitive data or files should be archived or erased.
3. Appoint a Digital Executor
An executor, or personal representative, is the individual nominated in your will to handle your affairs when you die. The executor will be given letters testamentary by the probate court to legally act on your behalf and manage the process of collecting your assets, settling your liabilities, and distributing your remaining assets to your beneficiaries. Most people name a family member such as a spouse or adult child to this position, but you could also nominate a trusted friend, business partner, or advisor.
The state of Arizona allows to you grant digital authorization to your personal representative in your will (see ARS 14-13106). If your personal representative is technologically challenged, you can informally nominate a digital executor to assist your estate’s personal representative. Whoever you nominate, be sure to provide them access to the list which you’ve compiled with your digital assets, along with your account login credentials.
4. Draft a Digital Estate Plan
Now that you have all of the pieces in place, it’s time to draft a digital estate plan. In the state of Arizona, you can include digital assets in your will; in other states, you may have to supplement your will with a codicil or a letter of instruction. However, regardless of your state’s regulations, you should exercise caution when listing digital assets in your will. Because a will becomes publicly available when it goes through probate court, you do not want your usernames, passwords, and sensitive account information to become public knowledge.
Often, the best course of action is to name your digital executor and list any monetarily valuable and publicly known digital assets in your will, but to draft a separate, private digital estate plan that lists all of your digital assets, along with their respective account credentials. Place your digital estate plan in a safe place, and inform your executor and estate attorney where they can find it when you die.
The nice thing about keep a separate digital will is that you can easily amend or replace it whenever you wish (which may happen a lot, as you open new accounts and change your passwords). In contrast, amending or replacing your will may require assistance from your attorney, which can prove costly if you have to do it regularly throughout each year.
For long-term peace of mind, contact us to set up a consultation today. We look forward to helping with your will and other estate planning needs.
Call Arizona Estate Attorney Dave Weed at (480)467-4325 to discuss your case today.