The Role of Digital Assets in Your Estate Plan

Digital assets are no longer the exception when it comes assets we need to address in your estate planning. If you own cryptocurrency, you must have an inventory of your wallet information and asset locations that is kept with your documents. Unlike your estate plan documents that require formalities to be signed correctly, this is an informal document that you can keep and update as you wish. Beyond digital currencies, you'll likely want to ensure that access to your social media accounts, digital photos and videos, and other assets is planned for in your estate plan.

What Are Digital Assets?

When we talk about "digital assets" there can be a variety of things for you to consider. Some of the more common assets:

• Email accounts: Personal and business communications often contain critical information.
• Social media profiles: Platforms like Facebook, Instagram, LinkedIn, and X hold personal memories and interactions.
• Cryptocurrency holdings: Bitcoin, Ethereum, NFTs, and other blockchain-based assets.
• Online banking and investment accounts: These are financial platforms used for transactions or investments.
• Digital media: Intellectual property such as e-books, music, videos, or patents.
• Subscription services: Streaming services like Netflix or Spotify.
• Cloud storage accounts: Platforms like Google Drive or Dropbox contain personal documents and photos.

These assets can hold significant financial or sentimental value. Failing to address them in your estate plan may lead to loss of access or disputes among heirs.

Why Include Digital Assets in Your Estate Plan?

If you don't include digital assets in your estate plan, you can leave some challenges for your family to deal with, like:

1. Access Issues: Many online platforms have strict terms of service agreements that prevent unauthorized access. Without proper planning, loved ones may struggle to retrieve important accounts.
2. Financial Loss: Cryptocurrency wallets or intellectual property can be valuable but may become inaccessible without proper documentation. Make sure you are keeping a list of your wallet keys and the seed phrases for recovery purposes.
3. Emotional Distress: Social media accounts or digital photo libraries carry sentimental value. Families may want to preserve these memories but lack the means to do so.

By proactively including digital assets in your estate plan, you ensure that they are not overlooked and are managed according to your wishes.

Steps to Incorporate Digital Assets into Your Estate Plan

When you're ready to get started, I've got 7 steps for you to review and consider for your estate plan:

1. Create an Inventory of Digital Assets. The first step is to compile a comprehensive list of all your digital assets. Include:
       •    Account names
       •    Login credentials (usernames, passwords)
       •    Security questions
       •    Access keys (e.g., private keys for cryptocurrency wallets)
   Store this inventory securely using password management tools or encrypted documents. You can download a cryptocurrency inventory to get started.
2. Appoint a Digital Executor. A digital executor is responsible for managing your digital assets after your passing. Choose someone who is both trustworthy and tech-savvy. Ensure they are legally authorized by naming them in your will or other estate planning documents.
3. Provide Clear Instructions. Detail how each asset should be handled:
       •    Specify whether social media accounts should be memorialized or deleted.
       •    Outline how cryptocurrencies should be transferred or liquidated.
       •    Provide guidance on managing intellectual property or domain names.
   Clear instructions minimize confusion and ensure your wishes are honored.
4. Include Digital Assets in Legal Documents. Explicitly mention digital assets in your will or trust documents. Many jurisdictions now have laws like the Uniform Fiduciary Access to Digital Assets Act (UFADAA), which grants executors access to certain digital accounts if authorized by legal documentation.
5. Secure Private Keys and Sensitive Data. For cryptocurrency holders, safeguarding private keys is crucial. Without these keys, accessing wallets becomes impossible. Use secure storage solutions such as hardware wallets or encrypted backups and be sure to keep your seed phrases available for recovery purposes.
6. Work with Your Attorney and Financial Advisor. Estate planning for digital assets involves navigating complex legal frameworks. Work with an attorney specializing in estate planning to ensure compliance with local laws and address tax implications and coordinate your plan with your financial advisor as well.
7. Keep Your Documents Updated. As you acquire new digital assets or change account information, update your inventory and estate plan accordingly. Regular reviews ensure that no asset is overlooked.

Special Considerations for Cryptocurrency

Cryptocurrency presents unique challenges due to its decentralized nature:

• Unlike traditional financial accounts, cryptocurrencies lack institutional oversight, making them harder to trace without explicit documentation.
• Private keys or seed phrases are essential for access; losing them renders the assets inaccessible.
• Tax implications for transferring cryptocurrency can vary widely depending on jurisdiction.

To address these challenges:

1. Document all wallet addresses, private keys, and exchange accounts.
2. Consider creating a trust or LLC structure for managing cryptocurrency holdings.
3. Work with experts familiar with crypto inheritance planning to avoid costly mistakes.

Protecting Your Digital Legacy

In addition to your financial assets, there can be significant emotional attachment to your digital assets like family photos and videos. Your family will likely want access to these assets:

• Social media platforms often allow users to designate legacy contacts who can manage their profiles posthumously.
• Cloud storage services may require specific instructions for transferring ownership of files.
• Intellectual property rights should be clearly outlined in legal documents to prevent disputes among heirs.

By taking these steps, you safeguard both the emotional and financial aspects of your digital legacy.

The Cost of Neglecting Digital Estate Planning

What if you don't do anything about your digital assets? Not having anything in place is a strategy, but it can lead to issues for your legacy like:

• Cryptocurrencies may be lost without the wallet or seed phrase.
• Legal battles over ownership rights among your family members.
• The emotional toll if your cherished memories are stored online and ultimately inaccessible.

Need Help With Your Estate Plan?

If you would like help with digital assets for your estate plan, let's schedule a Legal Strategy Session online or by calling my Edina, Minnesota office at (612) 294-6982 or my New York City office at (646) 847-3560. My office will be happy to find a convenient time for us to have a phone call to review the best options and next steps for you to work with an estate planning attorney.