At this point, you may have developed an estate plan that includes how your loved ones will eventually inherit your house, the beloved Steinway grand piano, your dad's 88-year-old Swiss watch, or other family heirlooms. We take great care to help ensure every person's assets are distributed as they outline in their will. Still, we can't help but notice many are failing to account for a significant category: digital assets.

What happens to your digital estate when you die? Furthermore, when you think about all the protections that guard your digital assets, how can you ensure that your loved ones can gain legal access to them?

If you fail to include digital assets in your estate plan, your heirs may not be able to gain access to them. For example, your family photos and videos could be inaccessible without providing the necessary details, as would your social media accounts. As owning digital property becomes the norm, estate plans need to employ new strategies.

Obstacles Preventing Access to Your Digital Assets

Legally, your digital assets are like other kinds of property; they can be passed on to beneficiaries in your estate plan. However, the laws and practices of social media sites and search engines around digital property are still evolving, which means that loved ones might face some hurdles when trying to gain access to your digital assets (including any digitally encoded financial information). Plan for these obstacles that your beneficiaries could face when trying to access your digital assets after you're gone

Passwords

The first line of defense, passwords, could be a preventative barrier to your loved ones collecting their inheritance. Without your login information, your heirs may not be able to access information or property stored on your smartphone or computer. The same is true for online accounts or data stored in the cloud.

Data Encryption

Beyond passwords, digitally stored data may be encrypted for an added layer of protection. Encryption can be used to scramble data so thoroughly that it is practically impossible for anyone without the proper passcode to unscramble it.

Fraud & Identity Theft Laws

Both state and federal laws prohibit unauthorized access to computer systems and private personal data. Although these laws are intended to protect consumers against fraud and identity theft, they also create obstacles for heirs trying to gain access to the digital assets and information of a deceased loved one. Luckily, the legal landscape is evolving to keep up with the rapidly changing online world, but there's still a grey area to navigate. That's why it's essential to ensure that your estate plan gives fiduciaries the authorization they need to access any necessary digital data.

Data Privacy Laws

Federal data privacy laws generally prohibit online account service providers from turning over the contents of your electronic communications to anyone other than the owner without the owner's lawful consent. That means social media sites or companies offering online accounts may lock up your content unless you give express permission for others to access it, leaving your heirs unable to gain access to photos, email messages, or other information stored on your digital accounts. Fighting for that access in court could prove to be cost-prohibitive, so it's best to develop a plan to grant your loved ones access after you're gone.

How to Make Your Estate Plan Digital-Savvy

Addressing your digital property in your estate plan can help you avoid these obstacles. By organizing and planning ahead, you can arrange for full access to your digital assets, keep estate administration costs down, and ensure that no valuable or significant digital property is overlooked. Consider taking the following five steps:

1.       Make a List of Digital Assets and Passwords

First, the obvious: Make a list of all your online accounts and assets so that your loved ones know where to find things when the time comes. There are a few ways to accomplish this, from handwriting them to using an online password aggregator. This list should include your usernames and passwords, online accounts and digital property (including domain names, virtual currency, and money transfer apps). Keep your list in a secure location and ensure a trusted contact knows how to access it.

2.     Make Sure You Actually Own the Digital Asset

In some cases, you may have thought you purchased a digital asset, but you actually purchased a nontransferable license to use the asset. Each vendor's terms of agreement will indicate whether they sell the asset itself or simply a license to use it.

3.     Regularly Back Up Data Stored in the Cloud

Cloud-based technology is wonderful in many ways, but if you want to divvy up portions of your digital property, the easiest way to do it may be by using a thumb drive or external hard drive. That's especially critical if you don't want your loved ones to have to jump through hoops to access your digital bequests.

4.     Provide Specific Consent in Legal Documents

Perhaps one of the most important steps is to include specific terms regarding who should be granted access to these areas. For example, will your executor or personal representative have access to everything, or will you selectively choose who can access certain digital assets? Work with an estate planning attorney to update your will, powers of attorney, and any revocable living trusts to include language giving lawful consent for providers to divulge the contents of your electronic communications to the appropriate people. Or, if a blanket authorization is not appropriate, you might also consider exactly which information you want to make available.

5.     Keep Informed of the Changing Digital Landscape

The realm of digital property is continually evolving. It's important to meet with an estate planning attorney on a regular basis (we recommend every couple of years or when a significant life event occurs) to determine if your plan still meets your expectations and legal requirements.

We often counsel our clients to collect paper statements when a loved one passes. While you used to be able to accomplish this by watching their mailbox, the new reality is that many of the most important communications are delivered via email or managed by online portals.

Don't overlook this critical area of your estate. Talk with estate planning professionals about steps you can take now, and review your estate plan regularly to accommodate any changes in the law or in your digital property.

You can also download our free Financial and Personal Account Inventory to start creating a comprehensive master list of all of your accounts and assets.