Avoiding 4 Main Obstacles to Digital-Era Estate Planning

Identifying the digital property you own and managing it is more necessary than ever. From smart home devices to online investments and bank accounts, we’ve gone way beyond using the internet to email family and social media to connect with friends.

In a recent survey, Americans said they value their digital assets at an average of $119,516. Despite this, more than three-quarters of respondents said they have little to no knowledge about digital asset planning.

Today, understanding which digital information and accounts you can legally leave to your loved ones is crucial to protecting your assets, while laws governing these online assets continue to change. However, legally gaining access to digital assets and encoded financial data can present challenges for anyone other than the original owner.

Four main obstacles will hinder access to a family member’s vital personal data and digital assets:

1. Passwords

Without knowing your passwords, personal representatives and family members may not be able to access your data and property stored on a computer or smartphone, or in the cloud and in online accounts. While experts can easily bypass some passwords, others – like for cryptocurrency wallets – can be practically impossible to recover.

2. Encryption

Your digitally stored data often undergoes encryption for an additional layer of protection. Encryption can happen at many levels, from a single file on your device to large amounts of stored information in the cloud. In particular, smartphone technology may be difficult to decrypt, so if you have not transferred your data to an external hard drive or USB and shared it with other family members, the digital information may not be accessible.

3. Privacy laws

In general, federal data privacy laws prohibit turning over electronic communications by online account service providers unless you are the owner or have the owner’s legal consent. Therefore, social media sites and digital storage companies may lock down content without legal documentation sharing the circumstances under which trusted friends or family members can access it. Taking a digital service provider to court to retrieve treasured data is generally cost-prohibitive, so lawful consent from the owner can prove critical.

4. Criminal laws

State and federal laws do not allow unauthorized access to computer systems and private data. These laws protect consumers against identity theft and fraud, but they also can create enormous obstacles for loved ones who need to gain access to a decedent’s digital information and assets. If you do not give express permission to your fiduciaries, representatives, or family members in your estate plan, they may never be able to access it.

Ways to Access Digital Assets After a Death

Make a list of your digital assets and include important online accounts (social media, banking, bill pay), passwords, and digital property, including cryptocurrency, money transfer apps, and domain names. Store this list in a secure place and maintain its accuracy. Numerous reputable password management apps, such as LastPass and Dashlane, are free and available to make this task easier. On your social media accounts and smartphone, you should also consider setting up legacy contacts.

Many digital assets you think you own, you may not. For example, we tend to carelessly accept end-user license agreements (EULAs) without understanding that a “purchased” item is a nontransferable license to use, but not own, the asset. If you use software of virtually any sort, from PayPal, Instagram, and Google apps to Netflix and Kindle and beyond, your loved ones will not automatically have a right to those accounts after your death.

If you store data in the cloud, it is wise to back it up in another location. Secure online safe deposit boxes or digital vaults tied to your banking institution store identification, legal documents, business contracts, finance, tax, and insurance information. By adding emergency contacts, you can generally make it easier for those individuals to access your documents after your death.

You may also want to scan electronic copies of paper records to store on an external hard drive and in a secure location to keep items updated and permit fiduciary, representative, and family access with fewer obstacles. Relying only on the cloud for backup can create future problems.

Consult With an Estate Planning Attorney

You may have more digital assets than you think. Aside from social media, banking, and other, more common types of digital assets, remember to include any:

• Digital videos and photos
• Digital rights to theatrical works, motion pictures, musical, and literary compositions
• Blog content
• Income-producing websites and their domain names
• Virtual currency, including cryptocurrency like Bitcoin or loyalty points you may have earned through different retailers, airlines, or hotels
• Non-fungible tokens (NFTs)
• Online video channels that monetize content and produce advertising revenue
• Online gaming avatars offering services on goods online that may be worth actual money

As you create your estate plan, consider it essential to account for your digital property. Our online lives have become pervasive, and laws regarding our digital properties and their inheritable promise continue to evolve.

Your estate planning attorney can help you understand which online assets need to be part of your plan. They also can develop the necessary legal documents that will give consent for online providers to divulge your electronic communication content to legally named individuals, including your fiduciaries, representatives, and loved ones. You may want to tailor which people have access to chosen online information rather than a blanket approval.

Of course, keep in mind that estate planning includes other important documents, such as financial and medical powers of attorney, a last will and testament, and, in some cases, a trust. Speak with your estate planning lawyer to execute a comprehensive plan that best suits your unique circumstances.

For further essential reading on estate planning, be sure to check out the following articles:

• The Most Important Estate Planning Documents
• How Life Insurance Is Involved in Estate Planning
• Durable Power of Attorney: A Key Document
• Inheritance Tax: What States Have It and When It Applies