Digital assets include a broad range of electronic files, images, accounts, and information; think Facebook accounts, Apple accounts, Email accounts, and other online accounts. Other digital assets can include cryptocurrencies or NFTs (Non-Fungible Tokens) which could potentially have significant monetary value. Despite most individuals having a significant online presence and possessing a variety of different Digital Assets, many people do not include planning for Digital Assets in their Estate Plan, which can result in some headaches for Personal Representatives attempting to recover or gain access to a Decedent's Digital Assets.
Different Categories of Digital Assets
Byproducts of Leisure Activities:
Personal websites, social media accounts, a personal YouTube Channel, email accounts, etc. Most of these types of assets result from one's leisure activities. These kinds of Digital Assets may not have much monetary value, but may contain a great deal of sentimental files and information that a Decedent may wish to preserve and transfer to their loved ones. In the alternative, a Decedent may wish for access to Digital Assets to be restricted to protect the items from disclosure or future usage.
Issues can arise following the death of an individual with Digital Assets. For example, if passwords and/or other security keys are not left behind by a Decedent, just gaining access to the Digital Assets can be very difficult. Have you ever forgotten a password to an online account and tried to access it? Consider how difficult this would be for your Personal Representative to access the Digital Assets that you leave behind without logins, passwords, and answers to security questions.
There may also be issues of transferability based on licensing terms associated with a Digital Asset once the original accountholder dies.
Some major online platforms provide a means to exercise control over one's Digital Assets, such as email and social media accounts. Google, for example, allows a person to assign others to deal with their Google accounts that become “inactive” for a specified period of time, or your account can be deleted.
Digital Assets with Potential Commercial Value:
A business website, blog, or revenue-generating YouTube channel can each be valuable Digital Assets. Such Digital Assets that can result in revenue generating after a person dies warrant careful attention when planning an estate.
Digital Assets associated with blockchain technology:
These are Digital Assets that are intentionally created as a means of storing value. These Digital Assets can include cryptocurrencies (Bitcoin; Ethereum; etc.), Non-Fungible Tokens (NFTs), and/or digital equity interests.
Common Issues with Digital Assets
If you have an Estate Plan that is several years old, it is very possible that your estate planning documentation, such as a Last Will & Testament, Living Trust, or Power of Attorney, does not take Digital Assets into consideration. If instructions are not included to direct what you want done with a Digital Asset after you pass away, or a means to access your Digital Assets, this can lead to a lot of difficulties for your Personal Representative.
If a Decedent does not properly plan for their Digital Assets and provide information about such assets, consider how your Personal Representative will be able to identify and inventory your Digital Assets. For example, if an individual has significant money invested in Bitcoin, or some other cryptocurrency, and they do not provide adequate instructions as to where the Bitcoin is stored (e.g., an online cryptocurrency exchange, or a separate physical cryptocurrency “wallet”) and how to access the Bitcoin, their entire investment that they may want to pass on to their loved ones can be totally inaccessible!
Valuation of Digital Assets can present further difficulties, as cryptocurrencies and their value are very volatile as far as market-based valuations are concerned. There are also tax consequences to take into consideration, as many valuable Digital Assets, such as NFTs and cryptocurrencies, are likely going to be considered as capital assets, subject to capital gains.
Take steps to give yourself, and your family, Peace of Mind today by ensuring that your Estate Plan is up-to-date and will address your Digital Assets. Contact Clinch Law Firm, LLC to schedule a free consultation at our York, Nebraska office, or feel free to schedule a complimentary 30-minute telephone consultation or a 60-minute in-person consultation for a time that works for you here: Appointment Scheduler. Virtual appointments are also available, upon request.