Special considerations in digital asset estate planning
This article looks at why an estate plan needs to address digital assets, especially encrypted ones.
Digital assets, from social media accounts to Bitcoins, can have either sentimental and financial value. As with any other asset, they need to be addressed by a comprehensive estate plan, particularly with a will. However, digital assets differ from tangible assets in a few key ways, most importantly over the fact that digital assets can be difficult to access even for the heirs they have been legally given to. Below is a look at why any estate plan needs to address digital assets and how to avoid some potential pitfalls.
Digital assets with sentimental value
As Fox Business reports, there are two types of digital assets: sentimental and financial. Sentimental digital assets would include digital data that has sentimental value, such as online photos, videos, messages, and emails, but not much financial value. It is important that loved ones know what rights they have to these assets after one’s passing.
For example, Facebook allows users to choose whether their account will be deleted or memorialized after they die. If memorialized, a custodian can be designated who will be able to post to the deceased’s Facebook profile, such as by leaving condolences or informing friends about memorial services.
A digital asset estate plan should include directives about what happens to these sentimental assets. It is especially important to consider privacy protections. Some people may not want their emails preserved after they die, while others may leave instructions for who gets access to emails and other personal communication.
Passwords and digital assets
Financial digital assets, like PayPal accounts, Bitcoin, and even online rewards accounts, can be worth a lot of money. However, it is not enough that a will simply state how such assets are to be divided. That’s because even if heirs legally own certain digital assets, it can be difficult and sometimes impossible for them to take possession of them if they don’t have the corresponding usernames and passwords.
As CBS News reports, this problem is especially the case with Bitcoins and other cryptocurrencies. Every Bitcoin is highly encrypted and can only be accessed with a private key known only to the owner of the Bitcoin. There is no corporation or central authority that stores these keys, so if the Bitcoin owner dies without leaving instructions about how to access their Bitcoins, then their heirs will essentially be locked out of what could be a substantial asset.
Estate pla nning help
As the above article shows, it is necessary to periodically keep one’s estate planning documents up to date. An estate planning attorney can help clients ensure that their estate plan allows them to take control over how their assets will be distributed to friends and loved ones after they pass on.