When you hear the term “estate planning,” you probably think of managing traditional assets such as real estate holdings, bank accounts, automobiles and other personal property. But in this day and age, individuals are storing personal information online and purchasing assets that exist only in a digital format more than ever before.
If you conduct any business online – personal or otherwise – you have a portfolio of electronic possessions. This might include Internet-based photo galleries, eBooks and media files, as well as email, social networking and financial accounts. Though the value of these assets may seem more sentimental than monetary, a global study conducted by McAfee found that private consumers still value their digital assets at an average of $37,438.
Unfortunately our courts’ ability to legislate around the handling of these digital assets is being far outpaced by the technology community’s ability to innovate. For example, when Donna Johnson’s father passed away unexpectedly, she was shocked to learn neither she nor her mother, Claudia, were entitled to access any of his online accounts, even though Donna was the executor of his will.
Stories such as these are becoming much more commonplace as lawmakers scramble to address issues surrounding digital asset management; currently only a handful of states have laws in place regarding digital assets and estate planning. That’s why it’s more important than ever to consider the management of your digital assets as a critical step in your estate planning process.
There are three key questions you need to consider in the initial stages of crafting a digital estate plan:
- What is my digital footprint?
Create a digital inventory of your online assets. In addition to the basics – social media, financial and email accounts – be sure to include electronic media files, as well as any business-related websites and accounts.
- Who should govern my online assets?
Once you have a complete list of your digital assets, determine who should be designated as the estate trustee for your online accounts and electronic possessions.
- What access will my trustee need?
With an inventory of your digital assets and your digital estate trustee in mind, outline what credentials they will need in order to effectively manage your accounts.
How to document your wishes
You can preserve your digital estate plan for execution in a number of ways, but the two most common methods are:
- Outlining a digital asset plans in your will
When creating your will, the inclusion of a digital assets clause will enable an executor or designated trustee to manage your digital estate. In this clause, you will need to explicitly define what a “digital asset” is, provide a detailed list of account credentials and outline what actions you want taken.
- Creating a Digital Asset Trust
If you do not wish to include your digital estate plan in your will, another option is a Digital Asset Trust. This new breed of asset protection creates a trust that gives an assigned “digital executor” the ability to receive and manage intangible digital properties.
Bring in the experts
The field of digital estate planning is still very much in its infancy, so it’s okay to ask for help –everyone’s digital asset management needs are unique. An experienced financial planner will not only be able to answer any questions you may have, they will also be able to find the digital estate planning solution that works best for you.
It may be tempting to wait and see how estate law evolves to accommodate digital assets – this is especially true since there is much debate as to whether granting executor access to online accounts is a necessary legal adaptation or an erosion of consumer privacy. When it comes to digital estate planning, however, you shouldn’t wait for the lawmakers. Because, if you’re online, there is no time like the present to think about what kind of digital footprint you want to leave behind.