What Is a Digital Estate Plan?

Traditional estate planning is step one, from creating a will to setting up a durable power of attorney and health care proxies. However, when you and your estate planning attorney create a comprehensive estate plan, you’ll now need to include digital estate planning. A recent article titled “Digital Estate Planning: 5 Things to Do Now to Make Things Easier in a Crisis” from Consumer Reports provides a step-by-step process.

First, get your important information organized. Create a document and either store it in a fireproof, waterproof safe in your home or share it with a secure digital password manager. Include complete contact information for doctors, estate planning attorneys, business partners, financial advisors, family members and important friends. Include land line and cell phones numbers and email addresses. Next, list your medical information, health conditions, prescriptions and pharmacies. Add information for your workplace, schools, houses of worship and community organizations. Anyone you interact with on a regular basis should be included.

Provide information for personal documents, including your birth certificate, Social Security card, estate planning documents, passport and Medicare or other health insurance information.

Your estate planning documents include your advance care directives, including a living will, durable power of attorney and healthcare proxy.

Financial information including bank accounts, account numbers, investments, credit cards, mortgages and car loans or leases should be listed. Make a note about all recurring bills when they are due and how you pay them.

Password sharing with trusted family members. Someone will need access to your online accounts. Ideally, share this information with two people—one who lives with you and one who does not—just in case one cannot help. Phone and computer passwords should be written down or write down a hint you know will easily be understood by someone who knows you well. You can also use a password manager. However, be careful to select one with extremely good security.

Create a legacy contact for major online accounts. A handful of major online platforms now provide an option to name a person who can access your accounts, if you designate a “legacy contact.” Apple, Facebook and Google are among those who offer this important feature. In the future, other platforms may follow.

Add digital assets to your will. Major platforms without a legacy contact feature have strict access requirements. Microsoft says it must be served with a valid subpoena or court order to provide access. LinkedIn and Instagram can memorialize accounts but require legal documentation or proof of death for an executor to gain access to the accounts. Go through all platforms and find out what your executor will need to do to obtain your digital assets. Make sure that they are added to your will. However, don’t include account numbers or passwords, as the will becomes part of the public record during probate.

Digital assets are still tricky. The Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA), which has been adopted by most but not all states, allows people you designate in your will to access digital property. However, it is not a complete solution. RUFADAA doesn’t allow for access to the content of emails and other digital communications because of privacy laws. Your will needs to have language clearly stating your wish for your fiduciary to be able to access and read your emails.

Call a planning meeting with your family. Talk about your wishes, the planning you’ve done and your expectations for who will handle your affairs. It’s not the easiest conversation, and some family members may be more comfortable than others, but when the inevitable occurs, they’ll be ready.

Reference: Consumer Reports (May 4, 2022) “Digital Estate Planning: 5 Things to Do Now to Make Things Easier in a Crisis”

Is Bitcoin Part of an Estate?

Few bitcoin owners have seriously considered what will happen to their bitcoin when they die. A recent article titled “The Importance of Having an Estate Plan for Your Bitcoin” from Bitcoin Magazine, strongly urges owners to create a legally sound plan of action ensuring both the sovereignty and privacy of these holdings. However, many owners don’t expect to die very soon, and even those who have an estate plan haven’t considered the nuances of estate planning for digital assets. Among all digital assets, there’s no asset requiring more planning for custody and conveyance as bitcoin.

Can you use an irrevocable trust for bitcoin? This type of trust is an excellent tool for your estate plan and beneficiaries. However, for bitcoin, a revocable trust may be the better alternative. The revocable trust does not protect your assets from creditors, but it provides complete control to the grantor, the person creating the trust.

Bitcoin cannot be treated like dollars in your estate plan. If your crypto is held on an exchange like Coinbase or Gemini, your executor may not have as much of a battle to uncover and access your money. However, what if they are not? Would your executor know what to do with the seed phrases buried in the backyard, or “how to interpret BIP39 punched into steel?” These are things known only to bitcoin owners.

Digital asset estate planning requires a level of technical competence and understanding.

Most states have adopted the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA) or plan to in the near future. RUFADAA, in most instances, empowers the executor of your estate with the authority to request access to most digital assets, taking into account your privacy interests and the terms of service agreements with big tech companies. However, when it comes to decentralized money like bitcoin, RUFADAA will be of little use.

In many cases, a living or revocable trust is the best choice. This will allow you to maintain access to your assets in the same way you do while living, but if the unexpected occurs, like death or incapacity, the assets won’t be lost, forgotten or misused.

With a revocable trust, you may act as the trustee of your digital assets. As both the grantor and trustee, you can make as many changes as you want to the trust. The property is not protected from creditors and does not receive any special tax treatment while you are living. However, the revocable living trust can be created to convey bitcoin to your heirs without limiting your own use of the assets while you are living.

How you store bitcoin during your lifetime is your choice. Many use a non-custodial cold storage solution, which provides great privacy but requires technical competency to manage. The bitcoin you wish to pass to your heirs needs to be documented correctly legally and technically. Talk with your estate planning attorney to be sure your digital assets are as protected as your traditional assets.

Reference: Bitcoin Magazine (April 17, 2022) “The Importance of Having an Estate Plan for Your Bitcoin”

Make Sure Your Estate Plan Protects Digital Assets
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Make Sure Your Estate Plan Protects Digital Assets

Today’s estate plan needs to expressly declare an “agent” or a “fiduciary” to gain access and control of “digital assets” in case of incapacity or death. If your estate plan has not been updated in the last four or five years, it’s likely that your digital assets are unprotected, advises the article “Properly addressing digital assets on your estate plan” from Southern Nevada Business Weekly.

Digital assets have value not only to owners, but to family members, beneficiaries and heirs. Some assets have sentimental value, like videos and photos, while others, like business records, URLs and gaming accounts, have financial value. Failing to address these issues in an estate plan could result in your executor and heirs being denied access and control of digital assets during incapacity or death.

Here are some examples of digital assets:

  • Email accounts–contain communications and history, including information about other digital assets.
  • Social media accounts/apps: Facebook, Twitter, Pinterest, YouTube, TikTok, etc.
  • Photo Sharing Accounts: Instagram, Shutterfly, Snapfish, Flickr, etc.
  • Gaming and Gambling Accounts/Apps: DraftKings, Esports Entertainment
  • E-Commerce Accounts/Apps: Amazon, PayPal, Etsy, PayPal, Venmo, etc.
  • Financial Accounts/Apps: Banks, Scottrade, E*Trade
  • Retail Accounts: Any store, online shopping that has a username and a password
  • Security Information: Two factor authentication, mobile phone PIN/PW, facial recognition, etc.

Here’s a little-known fact: without the proper legal authority to access these assets, the “agent” or “fiduciary” could be committing a crime. The Consumer Fraud and Abuse Act provides that it is a federal crime to access a computer and obtain information without authorization or when exceeding authorized access.

Most states have adopted the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA 2017). The Act contains specific language to be used in wills, trusts or power of attorney to name a “designated recipient” or “fiduciary” to access, control, transfer, or close digital assets upon incapacity or after death. RUFADDA also provides specific procedures for companies to disclose digital assets to a designated recipient or fiduciary.

If your estate planning assets do not address the issue of digital assets or do not use the specific language of RUFADDA, or generally if your estate planning documents were created before 2017, it’s time for a review that includes digital assets.

Even if all you have is a personal email account, you have digital assets to protect. It’s not a big problem to address them in your estate plan but can become a bigger program if they are neglected.

Reference: Southern Nevada Business Weekly (Sep. 17, 2020)“Properly addressing digital assets on your estate plan”