Visiting the doctor for my annual medical checkup has become second nature to me. And as an accountant, meeting with my medical professional clients and their spouses to conduct their annual financial checkups is something that I too prescribe.
At a recent client and spouse meeting, where we were discussing wills and estate planning, the topic of how to deal with digital assets and digital estate planning came up. This couple were well aware of the value of having proper wills and powers of attorney in place: several years back, they had a rude awakening with the loss of a family member who did not have a proper will or estate plan. But fast forward a few years, and this couple was now also living in a brave new world where they handled most of their banking and financial dealings online, conducted research, had Facebook accounts, shared family photos online and so on. Along with coming up with a plan for their tangible assets, they now had a barrage of questions for me about how to deal with their digital assets as well.
Digital assets are not just for the "kids." Research shows that just over three quarters of baby boomers and over half of those aged 65 and older are spending significantly more time online than before for things like online banking, watching videos, sharing photos and engaging in social media.
Knowing my clients and appreciating their past family experience, I knew I could not leave that evening without covering the topic of digital estate planning in some detail. I left them with an outline of a plan to incorporate digital estate planning into their overall strategy. First, I covered the meaning of digital assets. Second, we addressed the importance of having a digital estate plan. And thirdly, we addressed the various aspects of such a plan.
What are digital assets?
Wikipedia defines digital assets as any item of text that has been formatted into a binary source that includes the right to use it. In simpler terms, it includes all your electronic possessions (financial and social). Typical digital assets include:
- Social network accounts, such as LinkedIn, Twitter and Facebook, etc.;
- Online account information for other websites and programs;
- Videos, such as those posted on YouTube;
- Email and webmail;
- Financial documents, such as those used for banking, investments and utilities;
- Online businesses such as on eBay or Etsy; and
- Personal documents.
With respect to your digital estate, an executor would need to consider the following elements of a digital asset: the digital file, the right to use it and a method to access the digital file. All three elements will be touched upon further in this article.
Importance of a digital estate plan
"The new reality is that our lives are largely digital, and the artifacts of our digital lives have value, from both sentimental and financial standpoints," notes Evan Carroll, co-founder of TheDigitalBeyond.com and co-author of Your Digital Afterlife, a book about digital estate planning.
In order to ensure the orderly distribution of your digital assets, a plan is mandatory. It will minimize the opportunity for post-mortem identity or content theft. A plan will ensure that your digital assets, regardless of their nature, are distributed in line with your personal wishes. Finally, a plan may ensure that someone, such as your executor or possibly, a digital executor, will be able to manage your online presence. (For instance, would you want your Facebook account closed or left open as a lasting memorial to your life?) On this last point, the key word is "may." There are practical issues dealing with the disposition of digital assets upon death, two of which are ownership and access to them. Although this facet is beyond the scope of this article, privacy issues may come into play restricting the access and control of your digital assets to your executor and thus, prohibiting him or her from carrying out your wishes.
A digital estate plan
Here are four steps to create a digital estate plan, which may parallel your estate plan for tangible assets:
- Make a list of your digital assets including usernames/account numbers and passwords. To assist you in this undertaking, ask yourself what items of value would be lost if your computer was stolen? Consideration may be given to storing the list of passwords separately from the account name in case someone steals one of the lists.
- Draft instructions on how you would like your digital assets to be handled when you die. It is important to draft a specific clause in your will providing access to your digital assets, thereby giving your executor the power to access, handle, distribute and dispose of such assets. For financial assets, as long as your executor knows how to access and control your online accounts, that should facilitate the administration of that aspect of your estate. For example, if you are receiving your bills electronically, having access to your accounts will ensure they are paid on a timely basis and make the subsequent closing of the accounts simpler. For non-financial or sentimental assets, a list of your wishes needs to be created. As a case in point, do you wish to have your Facebook account closed or do you want it to remain online as a memorial of your life?
- Name a digital executor. Where circumstances exist, it is conceivable that you could have a number of executors for your will: one for your personal tangible assets, one for your business assets and one for your intangible or digital assets. The need for more than one executor will be contingent on that person`s capability.
- Store the information in a safe place. You will need something equivalent to a digital safety deposit box. There are a number of programs such as PasswordBox® and My Vault® to name a few, that allow you to both store your private data and manage your digital assets. You can also use one of these sites to store copies of your important documents, such as wills, powers of attorney and your birth certificate.
Technology is moving faster than the law in this area. The discussion I had with my clients was solely meant to open their eyes to the potential complexity of dealing with digital assets and only scratched the surface of this topic. That is why my last piece of advice to my clients was to meet with a lawyer specializing in estates to assist them in updating their wills to cover digital assets. Estate planning has entered a new frontier: our growing online presence requires that we consider digital assets. Will you?
Originally published Winter 2014
Connect with the Author
Alan Wainer is a partner in Crowe Soberman's Audit & Advisory Group, and a facilitator of the firm's Succession, Retirement and Estate Planning Group (SuRE Group). In 2003, Alan completed the Canadian Association of Family Enterprises (CAFÉ) Family Council Facilitator program.
This article was originally published in the Comments Winter '14 Issue.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.