There is no denying that we live in a digital world today. A world that is constantly and exponentially advancing, bringing more aspects of our daily lives into its ambit with each passing day.
There have been many examples where families have initiated legal action against each other over ownership of digital assets belonging to a recently deceased family member. Some have had the foresight to include such assets in their estate planning, but this has its challenges.
Today we’ll be discussing what these challenges are, in addition to covering what digital assets are and what you can do with digital assets in terms of estate planning.
What Are Digital Assets?
Considering the limitless possibilities of what kind of content can be generated by digital means, it's difficult to give an exact definition of digital assets. It could include simple items such as photographs, music compositions, videos, personal financial accounts, tax information, emails, and documents.
More complicated things like source codes, algorithms, online finance portfolios, and personal information entered into different websites and subscription services can also be considered digital assets. In essence, if the material in question was made using digital means or has been converted into and stored in digital form, then the same can be considered digital assets.
The Types of Digital Assets
While there is no official categorization of digital assets, there is a widely accepted one in the form of types of digital accounts that give access to the different types of digital assets. The 3 main types of digital accounts are Virtual Currency Accounts, Virtual Property Accounts, and Social Media Accounts.
Virtual Currency Accounts, as the name suggests, would deal with virtual currency such as Paypal, Bitcoin, and credit card accounts with cashback features and loyalty programs. Such accounts can hold or be worth a lot of money. Bitcoin alone has a market cap of $500 billion and people can end up with thousands of dollars in savings and cashback from credit cards.
Virtual Property Accounts would contain any virtual property like documents, images, videos, and music. Online drives such as Google Drive, Dropbox, and OneDrive are examples of virtual property accounts.
The property need not be owned by the account holder; it may also be available to them by way of a license. iTunes is one example where you can purchase copies of songs, but you wouldn’t have ownership of the song itself.
Finally, there are Social Media Accounts on different platforms like Instagram, Facebook, and Twitter, which could hold valuable personal and commercial information.
What Are Some Common Ways to Manage Digital Assets in Estate Planning?
When it comes to estate planning, the law says almost nothing about digital assets. Without a legal or official roadmap, the only thing one can exercise is prudence.
First and foremost, carry out an inventory of all your digital assets to ensure that you have everything covered. Be sure to mention all of these assets in your estate planning documents.
Do not assume that any custodian or executor will assume your digital assets to be part of your estate. Without expressly mentioning your digital assets, it would be difficult for any representative to prove their authority over said digital assets.
So, it is very important that you clearly specify your digital assets and accounts and lay out a plan on how the assets are to be disbursed upon your death.
Also, by not having a proper record of your digital assets and how they are to be disbursed, you leave behind the potential for assets to remain undiscovered or for disputes to arise among family members and other beneficiaries.
You may also want to consider other steps to be taken by your representative regarding your digital assets. Account details with usernames and passwords, how accounts are to be treated after disbursement of assets, and what devices are to be used for transferring assets and data and how they are to be treated.
Also, ensure that your estate planning documents have all the necessary authorizations and power-of-attorneys required so no one can challenge your representative at a later date.
What Are Some Common Problems with Digital Assets in Estate Planning?
The biggest problem faced by people involving digital assets in estate planning is the terms and conditions under user agreements associated with digital accounts, which severely limit the right of survivorship and also prescribe what is to be done with any digital assets upon the death of a user.
Account platforms usually have no right of survivorship, meaning the heirs or representative of any deceased person is not guaranteed access to an account. In these cases, it might be necessary to have prolonged negotiations with platforms or even have a court order that would force the platform to grant access.
Similarly, there might be a set mechanism on how assets are to be treated upon the death of a user. For example, Amazon simply closes down an account or you have PayPal which requires a death certificate from an authorized representative of the deceased before funds are released.
Then there are platforms like Bitcoin which have no terms at all and, if the password is lost because no one other than the deceased knew it, then you can’t recover any of the money.
Have More Questions Regarding Estate Planning? Call Eastport Financial Group To Get The Advice You Need!
Without any set laws or regulations, it’s very difficult to say exactly what might work and whether a layperson is equipped to deal with the obstacles one would face in estate planning with digital assets. While prudence can go a long way, having a trained and experienced person handling these matters offers a lot more surety.
In such cases, it might be best to get help from an expert financial advisor who is well-versed in estate planning and all it entails. By consulting with the experts you’ll be able to efficiently manage your existing digital assets and ensure these assets are properly distributed after your death.
At Eastport Financial Group, our specialist financial advisors are the best people to call for estate planning in Halifax. For more information, give us a call at 902-474-5433 or email us at info@eastportfinancial.com
