Traditionally, estate planning has revolved around how physical assets are handled after death. Homes, properties, bank accounts, investments, and personal belongings, are all fairly straightforward items to track and designate in a will or trust.
As the world continues to embrace new technologies like social media and cryptocurrencies, a significant portion of a person’s life now exists online. But what happens to your digital life when you’re no longer there?
While more attention is being paid to digital assets and estate planning, laws surrounding digital assets are still evolving, and in some cases, don’t offer the clarity that you’d expect for significant assets like crypto.
Today, The Law Office of Vidhya Babu will break down the interplay between digital assets and estate planning. We’ll tackle everything that we know about the current state of estate planning and digital assets in California, so you can begin thinking about how you’ll manage digital assets after passing.
What Are Digital Assets in Estate Planning?
Digital assets is the broad term used to describe the various online accounts or electronic records controlled by an individual. Unlike tangible assets like real estate and bank accounts, these assets exist exclusively in the digital world.
Digital assets fall into three basic categories:
1. Personal Digital Assets
The most basic category of digital assets in estate planning are personal digital assets. These assets typically have no real practical or financial value, but often have great sentimental value to family members.
They include:
- Email accounts
- Social media profiles
- Cloud storage accounts
- Digital photos and videos
- Digital subscriptions
For family members that survive you, preserving these accounts is a meaningful way to preserve memories, which presents a value that you can’t easily put a price tag on.
2. Financial Digital Assets
The second category of digital assets in estate planning includes assets that have objective financial value. Without advanced planning, locating, accessing, and managing digital assets like these can prove difficult, if not impossible, following death.
They include:
- Cryptocurrency accounts and digital wallets
- Online payment and banking accounts
- Investment and trading accounts
- NFTs and digital tokens
3. Business Assets and Intellectual Property
The final category of digital asset planning involves assets related to business or intellectual property. Business owners, freelancers, and creators may have extended digital assets like:
- Domain names and websites
- Monetized social media accounts
- E-commerce stores and accounts
- Professional photo or video collections
- Other monetized digital assets
Without comprehensive estate planning for digital assets in California, these accounts can easily become lost or inaccessible.
In the case of important digital financial and business assets like cryptocurrencies, they can become completely inaccessible to your family, potentially resulting in significant financial loss without advance planning.
How California Law Treats Digital Assets
Under the state of California’s Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA), certain digital assets may be treated as part of an individual’s estate. RUFADAA creates a framework for a fiduciary, such as your executor or trustee, to access your digital assets after passing or incapacity, however they must treat digital assets with the same duty of care, loyalty, and confidentiality as physical assets.
However, the law doesn’t exactly guarantee that they will actually be able to access your digital assets. Because most digital assets are controlled by the platform or company where they were created, managing digital assets after death may be denied, even when an estate plan authorizes it.
RUFADAA establishes a priority system for how digital assets are handled upon death:
- Platform Provided Online Tools Take Precedence: Many popular online platforms now offer a way to designate a “Legacy Contact” who has authority to access the account of the deceased on these platforms using the provider’s own online tools. These instructions take the highest priority.
- Estate Planning Documents Come Next: If no platform-based tools are used to manage legacy access, a will, trust, or power of attorney may authorize a fiduciary to access digital assets.
- Access Defers to Terms of Service Last: If no platform-based tools were used to manage access, and there was no digital asset planning, then access falls to the provider’s terms of service. This is usually very restrictive, and may not permit any access to family members.
The law allows fiduciaries to request access, but some platforms may only provide limited access to certain data, require a court order, or refuse access altogether. Your best option for your digital asset estate plan is to leave clear instructions, so that your executor or trustee may still be able to distribute your digital assets, close accounts, and make transfers according to your wishes.
How to Include Digital Assets in an Estate Plan
Right now, no digital asset estate plan can fully guarantee your family will be able to access your digital assets after you’ve passed, but there are a few steps you can take to increase the likelihood of successful access.
1. Take Inventory of Your Digital Assets
The first step is taking inventory of your digital assets. Start by identifying:
- Your most important online accounts
- Include financial platforms like bank accounts, investments, and digital wallets in estate planning
- Devices where digital assets are stored, especially cold storage crypto keys
When this inventory changes, it is vital that you update your estate plan.
2. Create a Digital Assets Statement
Under RUFADAA, designated fiduciaries including executors, trustees, and powers of attorney may be authorized to manage digital assets to the extent that the law and the platforms allow. However you can also add a digital assets planning statement, which can create a clear outline of which digital assets you wish to pass along. This statement may be included with your other estate planning documents.
3. Keep Instructions Private
If you leave a will, its contents become public during the probate process. Any sensitive digital information, such as usernames and passwords, could unintentionally be exposed if included in your will. Instead, some opt to use a password manager to keep track of passwords, rather than physically including them in their will or trust documents.
Using Legacy Contacts and Platform Tools
We mentioned earlier that many platforms now include built-in tools for families to designate a Legacy Contact to preserve their digital assets, though the verbiage may change between providers.
Here is a quick rundown of how to do this on some of the most popular platforms:
- Google: Legacy Contacts can access selected Google Account data (e.g., Gmail, Photos, Drive) after a set period of inactivity.
- Apple: Legacy Contacts can access iCloud data (e.g., photos, notes, and messages) after providing an Access Key and death certificate.
- Facebook: A Legacy Contact can memorialize your profile, make a final post, or manage friend requests but cannot read private messages.
- Other Platforms: Many services, such as Microsoft, Twitter, and LinkedIn, may have similar policies for managing a deceased user’s account, though they may not explicitly call it a “Legacy Contact.”
Establishing a family member as a Legacy Contact often provides a more direct way to preserve your personal digital assets, than relying solely on estate planning documents. Under RUFADAA, instructions provided through a platform’s own tools, such as Legacy Contacts, generally take highest priority when establishing access after your death.
Cryptocurrency and Digital Wallets in Estate Planning
Lastly, if you plan to include crypto in your will or trust, you must understand the unique challenges cryptocurrency and digital wallets present in managing digital assets after death.
Due to the nature of these accounts, they are not controlled by an institution who can reset a password or restore access. Most crypto wallets require a private key or recovery phrase that is known only to the holder.
If the private key to your crypto wallet is lost, those funds will be unrecoverable and forever lost. An estate document alone does not have the power to unlock a crypto wallet, nor transfer funds out of an account.
Therefore, it is extremely important that you leave explicit instructions for accessing your crypto wallets, as well as for how the held assets are to be distributed or liquidated. These instructions and credentials should be stored securely, offline. Only a trusted individual should know where to locate and how to access this information.
The Law Office of Vidhya Babu: Digital Assets Estate Planning for California Families
Managing digital assets after death presents challenges that are unique to the modern age. With laws still evolving in this area, careful thought and preparation are required to ensure access to your digital assets, especially valuable crypto wallets, intellectual properties, and business assets, is preserved.
The Law Office of Vidhya Babu is ready to help you with comprehensive estate planning for digital assets in California. We will help you accurately inventory your most important digital assets, and coordinate access for your fiduciaries and family that is aligned with the law and platform policies.
Contact The Law Office of Vidhya Babu for an initial consultation and let us help you preserve your most important digital assets.
**DISCLAIMER**
This blog post is for informational purposes only and does not constitute legal advice. Please consult with an attorney to discuss your specific circumstances.