Estate planning for digital assets: still only prudent planning
We all use digital devices with associated media every day. The result is we have created our own digital history or ‘digital assets’. The important question with digital assets, as with other assets, is what happens to those assets in the event of incapacity or death? Failure to plan for incapacity or death can pose risks for digital assets. In this bulletin, we explore why and how estate planning for digital assets is simply another part of prudent planning.
What are digital assets?
Digital assets include all your online accounts and hard storage devices that contain data which can be both personal and financial information. Online accounts include social networking, email, cloud storage, pay pal accounts or other financial accounts. Hard storage devices include laptops, desktops and external storage drives locked by encryption.
Risks minimised by prudent planning
It is prudent to plan what to do with your digital assets in the event of incapacity or death so you may minimise certain risks, including;
- The prevention of required asset transfers to family members who may not have access to or awareness of your digital assets.
- Identity theft after death which may jeopardise digital assets or lead to loss for estate beneficiaries.
- Issues with social media, including pages being defaced and awkward invitations to a deceased person because of a continuing online presence.
Planning for incapacity
The most commonly suggested plan is to create a digital inventory of all your assets with the usernames, passwords and secret questions, to allow easy access to your information by a nominated person.
Although there are numerous internet sites already offering online inventories or registers, it could however be simply and easily created as a digital document stored on a USB or as a hardcopy.
The inventory should list all your digital assets with their respective access details. It should be stored in a secure place. Secure places include a bank deposit box, your lawyer’s safe custody room or with a commercial service provider such as security safe or legacy locker, who store data and allow access to nominated persons. The inventory should be kept secret so that only the nominated person can have access to it. Therefore, it should be kept in a sealed envelope.
However, creating an inventory does have one limitation; the inventory may need to be updated regularly, as some accounts require passwords to be changed periodically. For these accounts it would be prudent to back up any information on to hard storage if possible in the event the inventory is not updated.
The most important part of planning for incapacity is to sign an enduring power of attorney. This will allow you to appoint someone that you trust who is ‘tech savvy’ to deal with your digital assets effectively and properly. The power of attorney document can also include specific provisions that allow your attorney (as far as possible) to manage and deal with your digital assets.
Planning for death
Part of your estate planning should be to deal with the transfer of the access details to your digital assets. Your Will may include a clause that will give power to your executor to handle and manage your digital assets in accordance with the terms of your Will.
Your executor should also have an inventory of your digital assets so the executor knows what assets exist. The inventory should remain separate from the Will in a sealed envelope because of the sensitive nature of the information. The inventory should be updated and re-sealed as required.
Some providers offer after life options. For example, Facebook has a memorial feature allowing friends and families to request that a deceased account become effectively frozen. Google has launched “Inactive Account Manager” allowing users to provide Google with specific instructions about what to do with their data when they die. The majority of social media and financial providers do not offer after life options with their online accounts.
Also, online digital assets (except website domains) are not the same as the assets that form part of your estate. These assets are not a form of personal property that a court can order to be transferred like physical property, because there is no current law in NSW that governs them. Therefore, in order to minimise the associated risks it is prudent that you consider digital estate planning.
The law is still developing and changing in this area. Modern forms of wealth and asset ownership will continue to change and evolve. It is only prudent estate planning to consider and attempt to deal with all your assets in any shape or form in the event of your incapacity or death.
This publication is intended as a source of information only. No reader should act on any matter without first obtaining professional advice.
Authors: Chris Hahn and Gerard Basha