Digital Assets and 21st Century Estate Planning

11/7/2022 - By Chris Stennett, CFP

This blog has been updated on 10/27/2022 from its original publishing on 10/4/2021.

Today, more than ever, our daily routines are intertwined with a digital world that didn’t exist that long ago. Collectively, we wake up and check our phones. “For missed calls”, you ask? No, for every reason except actual phone calls. Maybe you want to look at last night’s photos, or check your emails, or check out your crypto wallet or just check in on social media. Whatever the reason, your phone has become the gateway to your life. Welcome to the 21st century! But what happens to your digital life when you’re no longer physically alive? The answer has a lot to do with the preparations you’ve made before you pass.

You have more digital assets than you think. A digital asset is any digital file or dataset that has meaningful value or use to you or to others. 20 years ago, that would have been audio or video files, spreadsheets or documents, and an email address. 10 years ago, that included personal photos and videos uploaded to the cloud, websites and social media accounts. Five years ago, that was your frequent flyer miles, online banking and investment accounts. Today, it would include cryptocurrency wallets, digital art collections and non-fungible tokens. The list keeps growing.
What’s the problem? These are items of value, that upon your passing, might not actually be passed on to your heirs. There are two main reasons for this: First, your heirs might not have any knowledge of their existence. Digital assets, by their very nature, don’t leave a paper trail. So, unless you’ve kept meticulous physical records of your digital acquisitions, there’s very little information available for your executor to uncover their existence. Second, even if known, executors generally can’t demand access to your digital accounts unless there is a specific authority granted to them in your will or living trust. Even then, there are Terms of Service with each provider that may ultimately limit what can be done by the executor.
What can you do? First, start by taking an inventory of your digital life and create a physical document that you can store for safekeeping. At Saltmarsh, we’ve created an Asset Inventory Worksheet including digital assets that we share with our clients - but a simple online search can yield similar worksheets. Be sure to include information about where to access the accounts, usernames, passwords and estimated values. Ensure you have a secure place to store this information such as a bank safety deposit box or a home safe, and communicate the location with a spouse, trusted family member and/or executor. Since many accounts require two-factor authentication, make sure your executors’ devices are also listed on your account profile to allow them access in the future. If your executor is not your spouse or if you do not want your executor to have access to these accounts while you’re alive, then make sure you don’t share your username and password with them until your passing. How? We recommend that you draft a letter of instruction detailing the log-in information and your intentions with each account, including what to keep, what to delete, what to transfer to heirs, and store that safely with your other Estate Planning Documents. Finally, update the document regularly, as passwords and balances tend to change over time.

Ultimately, the goal is to ease the burden and stress for our loved ones or executor and enable a smooth transition and preservation of digitally stored wealth and memories for the next generation. So, ask yourself, “If I die tomorrow, what would I want to happen with these assets?” If the answer is anything other than “Nothing”, then start your Asset Inventory Worksheet today and take the appropriate steps to help your heirs preserve your digital legacy.

Questions?

Don't hesitate to reach out to our Investment Management & Financial Planning team from Saltmarsh Financial Advisors, LLC to answer any questions you might have about digital assets and estate planning!

About the Author | Chris Stennett, CFP®

Chris is a financial advisor and Certified Financial Planner® practitioner for Saltmarsh Financial Advisors, LLC, an affiliate of Saltmarsh, Cleaveland & Gund. He serves individuals and organizations as a comprehensive financial planner and coordinator of investment activities. His areas of expertise include investment management, income planning, tax and estate planning, and risk management. Chris has over a decade of experience as a wealth manager working with teachers, federal and state employees, retired Armed Forces, and private-sector employees.