Although in many situations the advantages outweigh the disadvantages when selecting beneficiaries, there are always exceptions.
One aspect of your estate plan that you may not yet have taken into consideration is your digital legacy. Arranging what happens to your digital assets and information when you pass away has become an increasingly essential component of financial literacy — and comprehensive estate planning.
According to Pew Research, the number of adults in the United States who say they use the internet has grown from 52 percent in 2000 to 93 percent in 2021, with 85 percent using the internet daily. Many people rely on digital technology to socialize, work, pay bills, and manage their affairs.
Including Digital Assets in Your Estate Plan
When planning their legacies, individuals often first address their tangible assets – homes, cars, money, and personal items, like jewelry collections or photo albums. Yet it is also crucial to consider digital assets and information – which can have significant financial and sentimental value – when planning for the future.
By accounting for digital assets in your estate plan, you can protect your family, pass along things of monetary or sentimental value, make things easier for your loved ones, and preserve your legacy.
For example, suppose you pass away or suffer an accident or illness that renders you incapacitated. In that case, your loved ones might need to access your passwords to continue paying bills and handling things you can no longer do. In addition to a making a loved one your agent under a power of attorney, you need to provide clear instructions for how to access your electronic information.
Or, you might have valuable digital assets that you wish to transfer to your loved ones, just as you intend to pass on physical property. With an electronic legacy plan, you can ensure your family gets the important things you have on a computer, flash drive, or in the cloud.
What Are Digital Assets?
Your digital assets consist of anything stored electronically that provides or has value, such as online accounts or e-files, that you own or control. This may include:
- Passwords – Passwords allow you and your loved ones access any number of accounts, such as those housing your financial records or where you pay your bills, like utilities or rent.
- Encryption Keys – As passwords to digital content, encryption keys prevent outsiders from obtaining electronic information. The password to access an iCloud account and the code you must enter to get into an iPhone exemplify encryption keys.
Compared to ordinary passwords, it can be challenging to reset lost encryption keys. If you die or lose the ability to communicate without passing on your encryption keys, your surviving loved ones might lack access to your digital assets.
- Email Accounts – Email accounts can preserve important information.
For instance, a business owner might have significant and relevant company correspondence in an email account.
- Social Media Accounts – Your social networking accounts can have sentimental and even monetary value in some instances. They often contain photos or video clips of you that surviving loved ones might appreciate.
- Digital Photos and Music – Digital files, such as photos, music, and movies, can have monetary and emotional value. Just as you can pass down photo albums and vinyl records, you can transfer your digital photos and music to your loved ones. Surviving loved ones might treasure pictures, particularly as they display memories of the person they lost, while digital music can reflect a person’s unique taste and may even carry financial value.
- Art – Perhaps you have your own professional creative work, like art, recorded music, and writing, stored electronically. In addition to having great meaning to your loved ones, such work may even generate income for your family after you pass away.
Organizing Digital Assets
The first step in making a plan for your digital assets is to organize them. With organization, you can make it easier for your loved ones to handle your digital items if you need their help or you pass away.
To put your electronic possessions and information in order, start by inventorying what you have. There might be things you have forgotten about, such as unused subscriptions or old accounts, as well as electronic items that you value, like digital photos.
A password manager can help you compile and preserve your login information. These services store usernames, passwords, security question answers, Personal Identification Numbers (PINs), and other details you need to access online accounts.
When you use a password manager and choose strong passwords, rather than using the same password for multiple accounts, you can safeguard your digital estate from any bad actors. Examples of password managers include:
Writing Instructions for a Digital Executor
In your will, you can designate a loved one to handle and distribute your digital assets upon your death. Creating separate written instructions for your online executor can help you explain your wishes privately, as wills are public documents.
With written instructions, you could:
- List your devices and accounts
- Explain how to access your digital assets (for instance, detailing where to locate passwords)
- Describe what you would like to happen to each electronic possession
When you lay out what you would like to happen to your digital assets, you can determine whether you would like your loved ones to delete them, setting up a digital “death.” Or you can tell them to preserve the e-asset and transfer it to a beneficiary.
Legacy Contacts and Trusted Individuals
Your written instructions can also state your wishes for your social media and certain other online accounts.
By adjusting your social media account settings, you can set up legacy contacts to manage your accounts upon your death. For example, Facebook permits legacy contacts to manage memorialized accounts. Once Facebook preserves your account, no one can log in and post as you, but your loved ones can see your Facebook memories.
Google allows users to select a trusted individual to receive their data or erase their accounts after a period of inactivity.
Benefits of Legacy Planning for Digital Assets
While making final arrangements for your digital property and accounts might seem daunting, including your digital assets in your estate plan can benefit you and your loved ones in the following ways;
- Preserves valuable and sentimental e-property for your descendants.
- Lessens the estate administration burden on your family. With clear instructions, your loved ones can easily navigate your accounts and obtain your digital property.
- Protects your privacy by arranging the deletion of sensitive digital information upon your death.
- Also protects your loved ones from identity thieves, who could attempt to pretend to be you after you pass away, in some cases to take your loved ones’ inheritance
Although digital estate planning is a relatively novel concept, it makes sense to prepare your electronic legacy, given how prevalent technology has become. Making a digital estate plan is a crucial financial skill today. Consult with your estate planning attorney to learn more about making an electronic legacy plan.