Digital assets are playing an increasing role in the estate planning process. Despite their growing prevalence, digital assets are often overlooked by many people as they begin to organize their estates. Below is a look at the reasons why it's so important to have a plan in place for your digital assets and three simple steps you can take today to get the process started.
What Exactly Is a Digital Asset?
"Digital asset" means an electronic record in which an individual has a right or interest. The term does not include an underlying asset or liability unless the asset or liability is itself an electronic record." - Texas Revised Uniform Fiduciary Access to Digital Assets Act
Before diving into digital estate planning, it's helpful to know what constitutes a digital asset. In a nutshell, the term refers to an electronic record that belongs to a person. As the world continues its digital evolution, many people have multiple types of digital assets. The majority of these can be classified as one of the following four types:
Personal Assets
If you own a computer, smartphone, tablet, or another digital device, then you likely have personal digital assets stored on your device. Examples include anything you have uploaded or downloaded and stored, such as documents, email messages, text messages, photos, and even music playlists.
Financial Assets
A growing number of Americans use virtual currencies. Examples include Bitcoins, Linden Dollars, and Peercoins. Other financial assets to consider include accounts with mortgage providers and utility companies.
Business Assets
If you operate a business and have important or confidential information stored online, then this would be considered a business asset. Examples include addresses, phone numbers, and other identifying information about customers or patients. Spreadsheets containing a company's business plan or performance data would also be considered a business asset.
Social Media Assets
The social media sites you have are considered digital assets. Examples include Facebook, Twitter, LinkedIn, YouTube, Pinterest, and Reddit. Depending on the nature of these sites, they could generate revenue through sales or advertising, thereby boosting their worth. Many people store photos, information, and videos on these sites as well.
Why Do You Need an Estate Plan for Your Digital Assets?
You may wonder why it's so important to prepare a detailed plan for your digital assets - especially if you don't have very many. However, having a plan in place now can make things a lot easier for your loved ones and other beneficiaries in the future. Here are just a few reasons why you need an estate plan for your digital assets:
Reason #1: To Make Things Smooth and Seamless for Your Family and Beneficiaries
If you have ever tried to gain access to another person's email if you don't have that person's ID and passcode, you likely know you are fighting an uphill battle. Gmail, Yahoo!, and others have a strict obligation to protect users. Without the proper information and credentials, your relatives and beneficiaries could possibly find themselves facing a lengthy court battle in an effort to gain access to your email. By having a plan in place and organizing your information, you make it easier for your loved ones to handle your digital assets.
Reason #2: To Prevent Expenditure of Time and Money
The last thing most people want is for their loved ones to have to spend time and money handling their estate after they pass away. But without a detailed plan for your digital assets, your loved ones could be faced with unplanned and unwanted court expenses. Dealing with the court system can also be time-consuming and unpleasant, highlighting the need to have a plan in place.
Reason #3: To Avoid Financial Loss
If you regularly handle online transactions and suddenly pass away or become incapacitated, the payments may stop due to your lack of responsiveness. But if you have an estate plan that specifies a person to step in and handle these transactions, you can help prevent financial loss to your estate. Designating a person to handle your online accounts is also important because any outstanding fees can be paid without accruing interest or fees that could erode your estate.
Reason #4: To Prevent Confidential Information From Being Released
Many people have secrets and private information stored on their devices. The only way to safeguard against the release of this information is to specify who you wish to handle your electronic documents, email, and other confidential online assets.
What Are Some Common Myths About Digital Estate Planning?
Despite the many reasons to focus on digital estate planning, many Americans neglect this aspect of their future. Sometimes this occurs due to procrastination or oversight. But in other cases, people simply don't treat it as a priority. Here are a few common myths that cause people to put digital estate planning on the back burner.
Myth #1: "I Don't Have Any Digital Assets."
While it is technically possible that you don't have any digital assets, the likelihood is extremely slim. For starters, if you are among the nearly 80% of Americans with a social media account, then you already have at least one digital asset. And if you also own a personal computer, tablet, or smartphone, then you likely have multiple digital assets.
Myth #2: "My Information Is Safe and Sound on My Personal Computer."
You may think your information is safe and sound on your computer. But in reality, there is always a risk that your information may fall into the wrong hands - even if you are the only person who knows your passwords. Digital Assets and Special Needs Planning cautions that computers and paperwork can be stolen and encryptions can be broken. Hackers can also gain access to your digital information.
Myth #3: "My Children Know Where My Passwords Are, So They Can Sort Through Things if I Pass Away."
Passwords can easily be changed or lost, making it difficult to access your online information. And even if your children are able to access your digital assets, they may have no idea how to carry out your wises without an estate plan that specifies exactly how you want them to handle each asset. This lack of a plan can potentially lead to confusion and disagreements.
What Three Steps Can You Take Today To Get a Plan Started?
Clearly, there are many reasons to have a detailed estate plan for your digital assets. But if you are like many Americans, this task may sound overwhelming or you simply may not know where to start. Fortunately, putting yourself on the path to a comprehensive estate plan is easier than you may think. Below are three simple steps you can take today to get the process started.
1) Make a List of Your Digital Assets
Carve out some time to sit down and make a list of all of your digital assets. Be sure to include your login information, IDs, passwords, and any other details required to access your computer, email, and all online accounts. Be sure to keep this list in a secure location and provide a copy to your attorney or a trusted relative.
2) Think About What You Would Like To Happen To Each Asset
Now that you have a list of your assets, it's time to think about how you would like each of them to be handled if you should pass away or become incapacitated. While this task may seem simple, remember that some of your digital assets may have a monetary value to them. In these cases, you'll need to specify who you would like to manage them and how you would like to distribute any associated cash values.
3) Contact an Estate Planning Attorney
Once you have organized your digital assets, it's wise to contact a lawyer. A skilled lawyer can review your list in detail with you and ensure it's complete. They can then help you create a digital estate plan that will be recognized as valid in the state of Texas. It only takes a few seconds to call or reach out to an estate planning attorney online. Many top estate planning attorneys offer complimentary consultations, so there is no excuse for delaying this step.
What Is the Key to a Solid Estate Plan for Your Digital Assets?
Crafting an estate plan for your digital assets is critical to ensuring that your private information does not fall into the wrong hands. The single best way to ensure that you craft a solid estate plan for your digital information is to reach out to a Texas estate planning attorney. With the guidance of an experienced legal expert, you can enjoy peace of mind knowing that your digital information is handled according to your wishes.
Please contact our office for a free consultation regarding your digital assets.
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