Digital Assets and Estate Planning

As our lives become more entwined with the digital world, accessing and transferring online accounts, computer-based records, and other assets stored digitally has become a key issue in estate planning. Without proper planning and legal guidance, digital asset recovery will pose significant hurdles for a person’s loved ones after their demise. Incorporating electronic information in the estate planning process, with the help of an attorney, ensures that your online memories and assets will be preserved.

Types of Digital Assets In Estate Planning

Digital possessions commonly dealt with in estate planning or probate include:

• Cryptocurrency and NFTs
• Email accounts
• Computer logins
• Social media profiles, whether for businesses or those assets with sentimental importance

If you don’t have a clear strategy for the transfer of digital assets, these assets (and any documents within) risk being lost forever, leading to potential disputes and complications after your passing.

Estate planning documents should now include provisions for digital assets, ensuring their seamless transition to designated individuals. Attorneys and estate planning professionals can guide you through the process, helping you create a comprehensive estate plan that addresses both traditional and digital assets.

Incorporating Digital Assets Into Your Estate Planning

To address digital assets, begin by inventorying all your important accounts. Consider online banking accounts, social media profiles, cryptocurrency holdings, and computer passwords.

Once identified, you can designate heirs or beneficiaries for individual assets, coming up with clear and offline instructions on their management or transfer. 

You can also use password managers or encrypted files to securely store login credentials and access instructions, ensuring a smooth transition of their digital legacy.

Many companies, including Facebook and Apple, now offer services for managing digital assets, so explore options that align with your wishes.

Additionally, disclose your digital asset handling processes in your will or a designated form, providing clear instructions.

Digital assets can be a significant part of your estate. Plan ahead to safeguard your online presence, preserve its important parts, and ensure that your intentions are respected even in digital matters. The executor of your estate can be your digital asset executor as well.

The Role of the Fiduciary Access to Digital Assets Act

All but 3 states (California, Louisiana and Oklahoma) have passed a version of a model law known as the Fiduciary Access to Digital Assets Act.

This law introduced standard terminology and procedures for online platforms dealing with the treatment of a deceased person’s accounts. Attorneys and fiduciaries can leverage it to access sentimental digital assets such as family photos, or assets with significant monetary importance like tax records. Platforms subject to this law need to disclose account information to a deceased user’s authorized representative, which may include passwords and an inventory of digital assets.

Do Estates Report Digital Assets to the IRS?

Reporting your digital assets to the Internal Revenue Service (IRS) is crucial in ensuring compliance with tax laws. Whether it’s a cryptocurrency, an online investment, or any other digital property, both the IRS and the probate court will require your estate to treat these holdings like any other property. Therefore, it’s crucial to collaborate with an attorney or tax professional who can accurately report your digital assets and ensure compliance, even after your passing.

By taking these steps, you can maintain control over the parts of your legacy that are online – and provide your designated beneficiaries with a clear roadmap for winding down your online presence and accessing your digital wealth.