One of the biggest estate planning mistakes that people make is they forget to protect digital assets. Cryptocurrency and NFTs are becoming more and more popular and, though some coins are super-expensive, others are quite affordable. Crypto exchanges and the like have given people all over the world a chance to own coins with blockchain technology.
And, because these digital assets have value, they should be included in your estate plan. This article will consist of a brief overview about how to protect digital assets when estate-planning. As always, contact an estate planning attorney with experience in managing these digital assets if you have questions.
What Constitutes a Digital Asset?
Pretty much everyone owns a digital asset. Digital assets are personal property kept online or in the digital world. Technically, domain names, electronically-stored videos and photos, emails, and social media accounts are al digital assets. When it comes to estate planning, these digital assets matter.
But, in the context of today’s day and age, we’re referring to cryptocurrency and other personal property with value. Digital assets are just like real-life assets. You can inherit them, but, if your estate plan doesn’t provide for them properly, your heirs will not be able to access them. As people have more and more of a digital presence, digital asset estate planning is taking on a new importance for estate-holders of all ages.
Four Steps to Note
Obviously, everyone’s digital assets are different, so this “four step plan” is not a hard and fast rule. These steps are just ways to, in general, organize your digital estate plan. An attorney can help you with each. The steps are as follows:
1. Make a list. The first thing you want to do is actually name the digital assets you own. That way, your loved ones know where to find your assets. Possible assets include important passwords, social media and email accounts, and digital property like virtual currency, money transfer apps (Venmo, CashApp, etc.), and domain names. Store this list in a secure location when you have finished it. Make sure your family members know where it is and how to access it. You can even use apps like LastPass and 1Password, which help you manage your accounts, to help make this task easier.
2. Ensure you own the assets. You may have thought you purchased a digital asset, but double-check to make sure you didn’t just buy a nontransferable license to use the asset. For each of the digital assets on your list, make sure you can track down ownership documents to both ensure and prove that you are the true owner.
3. Back up cloud-stored data. FidSafe, a free, secure online safety deposit box, is one example of this extra layer of protection. If you have digital assets stored within the cloud, you should back them up onto a storage device or local computer. Do this regularly so that your fiduciaries and family members can access them without running into many obstacles.
4. Provide consent. This is where a qualified estate planning attorney, preferably one with experience with digital assets, comes in. Work with the lawyer to update your estate plan to give lawful consent for asset providers to divulge electronic communications to authorized people. Consider what information you want to be available, as a blanket authorization might not be appropriate.
Benefits of Digital Asset Estate Planning
When you create this estate plan, you’re ensuring that your digital assets are secured not only for your heirs, but also from hackers, fraudsters, and identity thieves. It is just as important a part of estate planning as anything else is. You can even set up different tools, such as a Digital Asset Protection Trust, which act similarly to other trusts. There are a lot of options for digital asset planning and protection out there.
Hopefully, this short guide has helped give you some insight into digital estate planning. As these assets become more and more common, it would not be surprising to see estate planning and digital assets turn into an even bigger topic than it already is. Get ahead of the curve and formulate your plan today. Call WFP and get the help you need.