Does your estate plan include instructions on how to access your online bank and brokerage accounts? What about your social media accounts and electronically stored photos? And if you own blockchain assets, they could be permanently lost if your professional advisor or beneficiaries don’t have the private key to unlock them. The bottom line: It’s important to include digital assets in your estate plan and keep password lists updated.
Laws lag developments
The laws in the area of digital asset ownership are still evolving — and legal remedies vary from state to state. Some jurisdictions haven’t enacted any legislation about digital rights, particularly for newer types of digital assets, such as cryptocurrency and nonfungible tokens (NFTs).
But that doesn’t mean you can afford to leave the disposition of your digital assets to chance. You should think about how your electronic records should be handled after your death. Do family members or a trusted friend have passwords and access to your accounts? Will bills that you’re automatically paying online continue to be paid? What happens to information you consider to be confidential?
Making a list
To account for your digital assets, conduct an inventory. Include any computers, servers, handheld devices, websites and other places where assets are stored. Next, talk with your estate planning advisor about strategies for ensuring that your representatives have immediate access to your digital assets should something happen to you.
Although you might want to provide in your will for the disposition of certain digital assets, a will isn’t the place to list passwords or other confidential information. For one thing, a will is a public document. For another, amending your will each time you change a password would be expensive and time-consuming.
One solution is writing an informal letter to your executor or personal representative that lists important accounts, website addresses, usernames and passwords. The letter can be stored in a safe deposit box, with a financial or legal advisor or in some other secure place. However, the problem remains that you’ll need to update the list each time you open or close an account or change your password, a process that’s cumbersome and easily neglected. One potential solution is to establish a master password that gives your representative access to a list of passwords for all your important accounts — either on your computer or through a Web-based “password vault.” Another option is to use one of several online services designed for digital asset estate planning.
Tricky issues
Other steps to consider include reviewing social media agreements. Read the fine print about your participation in social media sites and other online accounts. If you’re not satisfied with the terms upon closer inspection, you might terminate your account. Be especially wary of restrictions on the use of a power of attorney.
Also, it’s important to note that although there are ways your legal successors will be able to gain access to many types of accounts after your death (even without a password), blockchain accounts aren’t among them. Only someone who knows the private key — usually a long password — will be able to claim your cryptocurrency and NFT assets. Unfortunately, there are many real-life examples of heirs who haven’t been able to touch money stored on the blockchain because the password died with their original owner.
Your advisor’s role
Discuss options for including digital assets in your estate plan with your estate planning advisor. Your advisor can help you decide where to document assets and how to keep passwords current.
You might consider using a digital storage unit. Cloud services are available, or you could save information using encrypted files on your computer or on an external drive. Wherever it’s kept, be sure to share the location of the information and the password for the files with a trusted individual who’ll need to access the data on your behalf.
Contact Judith Barnhard via our online contact form for more information.
Councilor, Buchanan & Mitchell (CBM) is a professional services firm delivering tax, accounting and business advisory expertise throughout the Mid-Atlantic region from offices in Bethesda, MD and Washington, DC.
