Helping Your Loved Ones Navigate Murky Waters:  An Estate Plan for Digital Assets

Lately, the story of Gene Hackman and his wife Betsy Arakawa made headline news after Arakawa (age 65) passed away in their home a week before Hackman (age 95) did.  While their unfortunate end has garnered widespread sympathy, from a financial planning perspective their situation also serves as a cautionary tale about the importance of thoughtful estate planning.  Hackman and Arakawa had not updated their estate documents in 20 years, which allegedly contributed to an assortment of problems, including the trustee and successor trustee of Hackman’s trust predeceasing him, Betsy’s assets being left to a charitable trust without naming specific charitable beneficiaries, and, not surprisingly, a lack of estate planning provisions for their digital assets.

While providing guidance for your digital assets may be less weighty than appointing an executor, beneficiaries, and a power of attorney, it is an increasingly essential piece of estate planning, which can significantly impact your loved ones in the days, weeks, and months immediately after your death.  So many aspects of our lives are lived online, and we can alleviate significant stress and headaches for our loved ones by anticipating their need to access our digital assets, giving them the authority to do so, and expressing our wishes for how they handle our digital assets once we pass away.

What are digital assets?  Anything of value—financial or sentimental value—that you access with a computer is considered a digital asset.  This encompasses many items that you may want to safeguard in the case your death, including email accounts, social media accounts, digital photos and videos, digital movies and music, online banking accounts, online medical accounts, digital payment accounts, rewards points, and cryptocurrency.

What are the risks or problems that may arise if I do not make a plan for my digital assets?  If you neglect to make provisions for your digital assets prior to passing away or becoming incapacitated, your loved ones may lose financial assets that should otherwise be part of your estate (e.g. rewards points, cryptocurrency, and digital payment account balances), they may lose items of sentimental value (e.g. emails and photos), and/or they may endure major logistical headaches as they try to manage and close out your estate.  For example, imagine your loved ones are just trying to pay the water bill for your house as they prepare to sell it, but they do not have the password for your Fairfax Water account and the legal authority to use it, or perhaps they do have the password for the water bill but not for your email account, so they are stymied by dual factor authentication.

Even you have anticipated the need for loved ones to have a list of countless usernames and passwords after your death, having a third party access your accounts could violate civil and criminal laws without legally valid authorization.  In many cases, unauthorized access could be considered identity theft, fraud, or a violation of privacy laws.  Even if a platform does not pursue legal action, it could block or terminate the relevant account, which still results in losing the digital asset.

How do we protect our digital assets and the loved ones left to administer our estate?  There are a number of steps that you can take to safeguard your digital assets and those who are trying to manage them:

1. Make an inventory of your digital assets and share the credentials for those assets with your executor and successor executor—or with your “digital executor,” as discussed below.  This checklist from U.S. Bank provides a helpful template for starting this process.  (Note, however, that the inventory must be shared and stored carefully since losing credentials for online accounts could result in identity theft while you are still alive.)
   • Consider using a password manager (e.g. LastPass, Dashlane, or 1Password) to store all of your passwords, so your digital executor only needs to be aware of a single set of online credentials.  In that case, you only need to notify him or her of any future password changes for the password manager, rather than for any of the individual accounts contained therein.  Alternatively, you could use a digital vault to securely store not just usernames and passwords but also electronic tax documents, financial statements, digital photos, etc.
2. Include provisions for digital assets in your will.  Name a “digital executor” or “digital fiduciary,” who will have access to and be in charge of administering digital assets after you pass away.  Provide the digital executor with your inventory of digital assets as well as instructions on your intent for the use or disposition of each digital asset after you pass away.  (Note, too, that you could appoint a different person as digital executor in your will than the one named as executor if you have any concerns about the executor’s comfort managing digital assets or any privacy concerns.)
3. Investigate whether any online platforms that you use have a tool that dictates how and by whom your account can used after death (e.g. Google’s “inactive account manager” or Apple’s “legacy contact” tool).  If they do, make sure that the tool reflects your wishes in terms of who can access your account and for what purpose.  It is important to abide by any platform-specific policies because a service provider’s online tool has primary authority in many cases (even over the will and other estate documents) in determining who can access someone’s digital assets after he or she passes away. 
   • Some platforms do not provide any procedures for enabling users to transfer account access to loved ones after death.  Instead, their terms of service dictate that an account will be closed upon the death of the user (e.g. certain social media and rewards platforms).  In this case, make sure to use the digital assets or capture any desired photos, posts, contacts, or other data from that platform and save them through another medium prior to death.

If your estate planning documents are more than a decade old, they likely do not include any provisions related to digital assets.  We suggest reaching out to your estate planning attorney and following the three steps above (steps 1 and 3 can be completed without the attorney’s help) to avoid your loved ones having a difficult time managing and protecting your digital assets after you pass away.