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Don’t Forget to Include Your Digital Assets In Your Estate Plan—Part 2

Don’t Forget to Include Your Digital Assets In Your Estate Plan—Part 2

In the first part of this series, I discussed the importance of including your digital assets in your estate plan. Here, I’ll talk about the best ways to get started with this process. 

Today, estate planning encompasses not just tangible property like finances and real estate, but also digital assets like cryptocurrency, blogs, and social media. With so much of our lives now lived online, it’s vital you put the proper estate planning provisions in place to ensure your digital assets are effectively protected and passed on in the event of your incapacity or death.

However, because many types of online assets have only been in existence for a handful of years, there are very few laws governing how they should be dealt with through estate planning. And due to their virtual and often anonymous nature, just locating and accessing some of these assets can be extremely difficult for those you leave behind.

Given these unique challenges, in the first part of this series, I discussed some of the most common types of digital assets and the legal landscape surrounding them. Here, I offer some practical tips to ensure all of your digital property is effectively incorporated into your estate plan.

Best practices for including digital assets in your estate plan
If you’re like most people, you probably own numerous digital assets, some of which likely have significant monetary and/or sentimental value. Other types of online property may have no value for anyone other than yourself or be something you’d prefer your family and friends not access or inherit.

To ensure all of your digital assets are accounted for, managed, and passed on in exactly the way you want, you should take the following steps:

  1. Create an inventory: Start by creating a list of all your digital assets, including the related login information and passwords. Password management apps such as LastPass can help simplify this effort. From there, store the list in a secure location, and provide detailed instructions to your fiduciary about how to access it and get into the accounts. Just like money you’ve hidden in a safe, if no one knows where it is or how to unlock it, these assets will likely be lost forever.
  2. Back up assets stored in the cloud: If any of your digital assets are stored in the cloud, back them up to a computer and/or other physical storage device on a regular basis, so fiduciaries and family members can access them with fewer obstacles. That said, don’t forget to also include the location and login info of these cloud-based assets in case you don’t have a chance—or forget—to back them all up.
  3. Add your digital assets to your estate plan: Include specific instructions in your Will, Trust, and/or other Estate Planning documents about the heir(s) you want to inherit each asset, along with how you’d like the accounts managed in the future, if that’s an option. Some assets might be of no value to your family or be something you don’t want them to access, so you should specify that those accounts and files be closed and/or deleted by your fiduciary.

    Do NOT provide the specific account info, logins, or passwords in your estate planning documents, which can be easily read by others. This is especially true for Wills, which become public record upon your death. Keep this information stored in a secure place, and let your fiduciary know how to find and use it. Consider a service such as Directive Communication Systems to support you here.

    It’s also a good idea to include terms in your estate plan allowing your fiduciary to hire an IT consultant if necessary. This will help him or her manage and troubleshoot any technical challenges that come up, particularly with highly complex and/or encrypted assets.

  4. Limit access: In your plan, you should also include instructions for your fiduciary about what level of access you want him or her to have. For example, do you want your executor to be able to read all of your emails and social media posts before deleting them or passing them on to your heirs? If there are any assets you want to limit access to, I can help you include the necessary terms in your plan to ensure your privacy is honored.
  5. Include relevant hardware: Don’t forget that your estate plan should also include provisions for any physical devices—smartphones, computers, tablets, flash drives—on which the digital assets are stored. Having quick access to this equipment will make it much easier for your fiduciary to access, manage, and transfer the online assets. Since the data can be wiped clean, you can even leave these devices to someone other than the person who inherits the digital property stored on it.
  6. Check service providers’ access-authorization tools: Carefully review the terms and conditions for your online accounts. Some service providers like Google, Facebook, and Instagram have tools in place that allow you to easily designate access to others in the event of your death. If such a function is offered, use it to document who you want to have access to these accounts.

    Just make certain the people you named to inherit your digital assets using the providers’ access-authorization tools match those you’ve named in your estate plan. If not, the provider will probably give priority access to the person named with its tool, not your estate plan.

Truly comprehensive estate planning

With technology rapidly evolving, it’s critical that your estate planning strategies evolve at the same time to adapt to this changing environment. With me as your Estate Planning Attorney I can help you update your plan to include not only your physical wealth and property, but all of your digital assets, too.

I know how valuable online property can be, and unlike many lawyers, I have the experience and skills to ensure these assets are preserved and passed on seamlessly.  Moreover, I can do this while respecting and protecting your privacy rights. Contact me at (858) 432-3923 today to get started.

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Don’t Forget to Include Your Digital Assets In Your Estate Plan—Part 1

Don’t Forget to Include Your Digital Assets In Your Estate Plan—Part 1

If you’ve created an estate plan, it likely includes traditional wealth and assets like finances, real estate, personal property, and family heirlooms. But unless your plan also includes your digital assets, there’s a good chance this online property will be lost forever following your death or incapacity.

What’s more, even if these assets are included in your plan, unless your executor and/or trustee knows the accounts exist and how to access them, you risk burdening your family and friends with the often lengthy and expensive process of locating and accessing them. And depending on the terms of service governing your online accounts, your heirs may not be able to inherit some types of digital assets at all.

With our lives increasingly being lived online, our digital assets can be quite extensive and extremely valuable. Given this, it’s more important than ever that your estate plan includes detailed provisions to protect and pass on such property in the event of your incapacity or death.

Types of digital assets
Digital assets generally fall into two categories: those with financial value and those with sentimental value.

Those with financial value typically include cryptocurrency like Bitcoin, online payment accounts like PayPal, domain names, websites and blogs generating revenue, as well as other works like photos, videos, music, and writing that generate royalties. Such assets have real financial worth for your heirs, not only in the immediate aftermath of your death or incapacity, but potentially for years to come.

Digital assets with sentimental value include email accounts, photos, video, music, publications, social media accounts, apps, and websites or blogs with no revenue potential. While this type of property typically won’t be of any monetary value, it can offer incredible sentimental value and comfort for your family when you’re no longer around.

Owned vs licensed

Though you might not know it, you don’t actually own many of your digital assets at all. For example, you do own certain assets like cryptocurrency and PayPal accounts, so you can transfer ownership of these in a Will or Trust. But when you purchase some digital property, such as Kindle e-books and iTunes music files, all you really own is a license to use it. And in many cases, that license is for your personal use only and is non-transferable.

Whether or not you can transfer such licensed property depends almost entirely on the account’s Terms of Service Agreements (TOSA) to which you agreed (or more likely, simply clicked a box without reading) upon opening the account. While many TOSA restrict access to accounts only to the original user, some allow access by heirs or executors in certain situations, while others say nothing about transferability.

Carefully review the TOSA of your online accounts to see whether you own the asset itself or just a license to use it. If the TOSA states the asset is licensed, not owned, and offers no method for transferring your license, you’ll likely have no way to pass the asset to anyone else, even if it’s included in your estate plan.

To make matters more complicated, though you heirs may be able to access your digital assets if you’ve provided them with your account login and passwords, doing so may actually violate the TOSA and/or privacy laws. In order to legally access such accounts, your heirs will have to prove they have the right to access it, a process which up until recently was a major legal grey area.

Fortunately, a growing number of states are adopting a law that helps clarify how your digital assets can be accessed in the event if your death or incapacity.

The Revised Uniform Fiduciary Access to Digital Assets Act

The Revised Uniform Fiduciary Access to Digital Assets Act, which has been adopted in 37 states so far, lays out guidelines under which fiduciaries, such as executors and trustees, can access these digital accounts.  California adopted the Revised Uniform Fiduciary Access to Digital Access Act on September 24, 2016. The Act allows you to grant a fiduciary access to your digital accounts upon your death or incapacity, either by opting them in with an online tool furnished by the service provider or through your estate plan.

The Act offers three-tiers for prioritizing access. The first tier gives priority to the online provider’s access-authorization tool for handling accounts of a decedent. For example, Google’s “inactive account manager” tool lets you choose who can access and manage your account after you pass away. Facebook has a similar tool that allows you to designate someone as a “legacy contact” to manage your personal profile.

If an online tool is not available or if the decedent did not use it, the law’s second tier gives priority to directions given by the decedent in a will, trust, power of attorney, or other means. If no such instructions are provided, then the third tier stipulates the provider’s TOSA will govern access.

As long as you use the provider’s online tool—if one is available—and/or include instructions in your estate plan, your digital assets should be accessible per your wishes in states that have adopted the law. However, all 50 states are expected to adopt the Act soon, so even if the law isn’t on the books in your state, you should take it into serious consideration when planning.

Look to us for guidance
In the second part of this series, we’ll offer practical steps for preserving and passing on your digital assets in your estate plan. Meanwhile, contact me at (858) 432-3923 if you have any questions about your online property or how to include it in your estate plan.

Next week, we’ll continue with part two in this series, discussing the best ways to protect and preserve your digital assets through estate planning.

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Cryptocurrency and Estate Planning: What You Need to Know

Cryptocurrency and Estate Planning: What You Need to Know

You may have heard of Cryptocurrencies, a digital currency.  Cryptocurrencies have been making headlines lately attracting people to invest in this type of currency.  Cryptocurrencies are attractive because they are unregulated, decentralized, and anonymous. There are no financial institutions controlling it, and unless you tell someone you own digital currency, it remains a secret.

When it comes to estate planning, however, that kind of secrecy can be disastrous. In fact, without the appropriate planning protections in place, all of your crypto wealth will disappear the moment you die or become incapacitated, leaving your family with absolutely no way to recover it.  Indeed, we’re facing a potential crisis whereby millions—perhaps billions—of dollars’ worth of family wealth could potentially vanish into thin air unless you take action to protect your digital assets with estate planning.

Cryptocurrencies Explained

Cryptocurrency is a form of internet currency. Instead of a central bank regulating the funds, encryption techniques are used to regulate the amount or units of currency. These techniques are also used to verify the transfer of funds. In this manner, cryptocurrency can be transferred online without a third party. Some cryptoassets have units that are all the same (called “fungible tokens”). Bitcoin is an example of a fungible token since all bitcoins are the same as one another. Other cryptoassets have unique attributes (called “non-fungible tokens”). Cryptokitties is an example of a nonfungible token since each digital “cat” is unique.

Notably, if you lose the key (i.e., the encryption) to your cryptocurrency, you will be unable to access your digital assets. Thus, making access to your key available to your loved ones upon your death or incapacity is vital to estate planning. This is because if there is no access to the key, there is no access to the assets. Unlike more “traditional” assets, there is no third party to control or compel assets nor reset the key for access to these digital funds. The software or hardware device that holds the keys to your cryptocurrency and manages your transaction is referred to as a “wallet.”

The first step in securing your crypto assets is to let your heirs know you own it. This can be done by including your digital currency in your net-worth statement listing all of your assets and liabilities. Along with the amount of cryptocurrency you own, you should also include detailed instructions about where it’s located and how to find the instructions to access it. But you want those instructions to be kept in an absolutely secure location because anyone who has them can take your cryptocurrency.

Even if your heirs know you own cryptocurrency, they won’t be able to access it unless they know the encrypted passcodes needed to unlock your account. Indeed, there are numerous stories of crypto owners losing their own passcodes and then being so desperate to recover or remember them that they dug through trash cans and even hired hypnotists.

The best way to secure your passcodes is by storing them in a digital wallet. The safest option is a “cold” wallet, or one that is not connected to the internet and thus cannot be hacked. Cold wallets include USB drives as well as “paper” wallets, which are simply the passcodes printed on paper—and ideally stored in a fireproof safe.

Digital Asset Estate Planning

It is important to understand that cryptocurrencies are typically a non-listed, non-vetted asset category. In other words – cryptocurrencies are not like publicly traded stocks, which have a vetting process, legal disclosures, and are subject to other requirements. In short, buyer beware when it comes to digital currencies. Therefore, if you own cryptocurrency — or are thinking about investing in digital currency — understand that you will need a technical access plan (a way to ensure your successors can access your digital wealth) in addition to a legal plan in order to effectively create an estate plan that incorporates these digital assets. And because what is going on with digital currency is evolving all the time, and quickly, it is important to touch base with a knowledgeable estate planning attorney at least once a year to make sure you and your family’s needs are being met.

With your crypto assets, the only way these wallets are of any use to your heirs is for them to know where they are and how to access them in the event of your incapacity or death. So make sure these instructions are included in your estate plan and your estate planning lawyer knows about the assets and where to locate the instructions on how to access them. Just as it would be foolish to store your money in a secret safe and not tell anybody where it is or give them the combination to open it, it’s just as foolhardy not to take the appropriate steps to protect your cryptocurrency through proper estate planning.

Since digital currency is such a recent phenomenon, not all estate planning attorneys are familiar with it, but I as an experienced estate planning attorney, you can rest assured I have the knowledge and experience to help you safeguard your digital wealth just as effectively as all of your other assets.

This article is a service of Tara Cheever,  Estate Planning and Business Planning Attorney. I don’t just draft documents; I ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why I offer a Family Wealth Planning Session,™ during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. You can begin by calling my office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $750 session at no charge.

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