An important step in estate planning is creating an inventory of your assets and making that inventory available to your executor, or the person you designate in your will to carry out your last wishes. In today’s landscape, however, many assets only exist in digital form. If not properly planned, family members may end up locked out of your digital assets forever after you pass.
Here are some of the challenges involved with passing along digital assets to your heirs and what you can do to avoid these obstacles.
Digital assets pose some interesting challenges:
• No access without passwords. Many records are moving from paper form to digital form. So to access accounts, your executor will need access to your computer and any passwords to gain access to online accounts. The challenge is even more complicated with face ID passwords and data encryption of keepsakes and databases. Your data, photos or other assets may be stored in the cloud or on a particular device, but without a password it may be impossible to unscramble your device’s encryption. And if you approach an online service after the death of a family member, many sites will automatically lock the account and require virtually impossible hoops to jump through to obtain access.
• Criminal laws. State and federal laws both prohibit unauthorized access to electronic devices and certain personal data. While these laws may serve to protect you against fraud and identity theft, they also may make it impossible for your family members to gain access to your digital assets without the proper authorization.
• Privacy laws. Federal data privacy laws generally prohibit online service providers from disclosing the contents of your electronic communications to anyone other than the owner without the owner’s consent. This may mean that photos, documents and other messages stored in the cloud via an online service provider won’t be accessible by family members unless you give your permission.
What you can do
Fortunately, it’s relatively easy to avoid these potential challenges with a little planning. Consider the following ideas:
• Create a list. Start by creating a list of all your digital assets, where they are stored, and all passwords. If you protect passwords with additional encrypted apps such as two-factor authentication, also include the master access information. Most importantly, keep your list updated when you change passwords.
• Be comprehensive. Add URLs, usernames and passwords for non-financial accounts (such as your email and online storage sites) to your inventory. These accounts can be essential for retrieving invoices, statements and other paperwork for which you’ve chosen electronic-only delivery.
• Don’t forget device access. The physical assets you use to access your digital data include your phone, tablet, and computer. That means your executor will need passwords and file names to access those devices. Also, list the location and encryption information for offsite or standalone storage devices, like external drives.
• Provide consent in legal documents. Work with a professional to update your estate planning documents, including wills, powers of attorney, and any trusts, to include giving consent to family members for accessing websites, devices, and all digital assets. Consider including language that allow family members, executors, and other fiduciaries to bypass, reset, or recover your passwords.
When it comes to estate planning, dealing with digital assets is still a relatively new phenomenon. This means that it’s more important than ever to have a digital asset plan in place, as the laws dealing with this area are still frequently changing.
One of my primary objectives is to help you achieve your financial goals through a holistic approach that is tax-efficient in my wealth management and tax resolution practice. For more information, visit www.fredtfoxiii.com.
Fred T. Fox III is a Lawton resident who owns his own business.