Estate planning for a digital world
The assets you’ve stored online require expanded treatment from those you’ve kept in physical form. These tips can help you ensure that your heirs and executor have access to the information they need — while protecting your privacy.
PRACTICALLY EVERY ASPECT OF OUR LIVES TODAY is inextricably tied to our devices and networks and the digital assets we’ve accumulated. They’ve become just as critical as anything we possess. We need to account for these assets in our estate plans as much as any others, taking all eventualities into account.
But what are “digital assets”? The term refers to any electronic record to which an individual has a right or interest. These can be financial assets, including bill pay sites, insurance or virtual currencies; business assets, which might include a domain name, client data or intellectual property that is stored in the cloud; personal assets like photos or email accounts; and social assets like Facebook or X (formerly known as Twitter) accounts.
It’s more than just a matter of making sure your passwords are secure and your account information is safely stored. It’s important to have a plan for how and when the people you trust can gain access to these details.
“Many people don’t fully appreciate that digital assets are different animals from traditional assets such as bank accounts.”— head of Trust and Estate Settlement Services at Bank of America Private Bank
As you’re developing that plan, consider these four tips:
Create a legal framework
At first glance, the solution seems simple: why not just give your heir, executor or fiduciary the passwords they need for access to your laptop, smartphone and other devices? Unfortunately, this strategy can weaken your personal security. And there are other potential pitfalls you may not be aware of. “Many people don’t fully appreciate that digital assets are different animals from traditional assets such as bank accounts,” says Colin Korzec, head of Trust and Estate Settlement Services at Bank of America Private Bank. “They’re often subject to terms of service agreements as well as state and federal laws, so you need to work with your estate attorney to be sure these assets are identified and granted authorized access by specific parties.” In other words, others will likely need your explicit permission to go into these accounts.
As you consider the matter of granting them access, be aware of potential trade-offs. Your personal email account, for example, might contain a trove of documents, attachments and information that could help your executor or fiduciary settle your estate. (See page 11 of Bank of America's Cyber Security Journal to learn more.) At the same time, there may be personal messages you may want to keep private. Balancing those two needs requires a thoughtful approach. You can choose to grant access to some digital accounts while excluding others or choose different people to receive access to different accounts.
Make an inventory of your assets
“Creating a road map of the assets that you own and the debts you may have could be the most important thing you can do right now.”— head of Trust and Estate Settlement Services at Bank of America Private Bank
“Creating a road map of the assets that you own and the debts you may have could be the most important thing you can do right now,” says Korzec. “Taking stock and keeping track of the items on your list will help ensure that your heirs or fiduciaries won’t miss anything.”
You can start by looking at “Checklist: The most critical digital assets” (below) Consider documenting everything from security questions and electronic devices to loyalty programs and online shopping sites. Everything you do online should be on the inventory — even things like gaming avatars. “I used to laugh when people listed these as assets, but the joke is on me because they can be worth hundreds of thousands of dollars,” Korzec admits.
Keep passwords separate
While the inventory document gives you a place to include usernames and passwords, Korzec cautions against including passwords. “For one thing, those passwords may well have expired by the time the inventory is accessed,” he says. “But it’s also important to note that the person with your inventory may not be authorized under the law or terms of service to access those accounts,” he explains. “I would rather simply know where the accounts are, period.”
Checklist: The most critical digital assets
A true digital assets inventory is exhaustive, but to get a rough feel for the size of your digital estate, just jot down the key accounts and assets you own and use, organized by type.
|Access to banking and investing accounts will not only make your heirs' or executor's life easier, but also alert them to assets they may be unaware of.
Includes: Banks, brokerages, online payment tools, credit cards, digital wallets and non-fungible tokens (NFTs).
|If you own a business, your personal and work lives might be deeply intertwined — so securing your personal digital assets might also mean securing those of your business.
Includes: Tax software and documents, bookkeeping, IP, proprietary business software, client data, domain names you might personally have registered, backups and patents.
|You might want to make some personal data available to your heirs and executor — but some you might prefer to keep private.
Includes: Email accounts, texts, contacts, medical records, photos, digital music, loyalty programs, document scanner apps, streaming service accounts and online shopping accounts.
|Some social media accounts have settings that let you designate what happens to them if you die. Nonetheless, be sure to make your wishes known to your heirs and executor.
Includes: X, Facebook, Instagram, LinkedIn, etc.
One way of keeping this information safe is to save it on a separate, password-protected document. Tools such as a password vault can serve as a secured central storage location, not only for passwords but also for key account information and documents your heirs and executors may need to ensure a smooth transition. Alternately, you can write down the passwords and store them in a locked safe, a safe deposit box or with your attorney, Korzec says.
You might also want to look into designating a contact or other authorized user to recover passwords in the event of an emergency, for contacting insurance, canceling services or other tasks. However, as Korzec notes, your provider may not allow for this type of designation.
Whatever way you choose, it’s best to keep them separate from the inventory. When a fiduciary is named, that person should be granted access to both documents. Bear in mind that failed attempts to log into some password-protected accounts or documents can lock them — which is why experts recommend that whoever is going through the physical devices should first make copies of the hard drives.
Engage experts when you need to
In some cases, it may be worthwhile to engage a digital expert. “We actually have a third party we engage who, depending on the facts and circumstances, can assist us by examining a device to understand if there is a reference to a digital wallet or an NFT somewhere,” says Korzec. “We had one client who had a relatively valuable painting on consignment that no heirs knew about — until a forensic computing expert found a reference to it stored electronically,” he adds. “It turns out it was worth a significant amount.”
Revisit your plan from time to time. Just as you update your estate planning documents every couple of years or if something major changes, like a marriage or the birth of a grandchild, you’ll want to periodically take another look at your digital asset inventory.
Keeping track of those assets “isn’t really optional anymore,” Korzec believes. “But dealing with it now will ensure that your loved ones and heirs aren’t spending an already difficult time scrambling for passwords and account access for those assets — which is probably not the legacy you intended to leave.”