Published February 6, 2019 by Jason Smolen and Dan Ruttenberg
Updated March 14, 2022
Nearly everyone owns some digital assets, like online bank and brokerage accounts, bill-paying services, cloud-based document storage, digital music collections, social media accounts, and domain names.
What happens to these assets when you die or if you become incapacitated?
Will someone even know the accounts exist?
Jason Smolen and Dan Ruttenberg say the answer depends on several factors, including the terms of your service agreements with the custodians of digital assets, applicable laws and the terms of your estate plan.
To reduce uncertainty, you should include digital assets in your estate planning.
Reasons why you should create a digital estate plan
Traditionally, when a loved one dies, family members go through his or her home to look for personal and business documents, including tax returns, bank and brokerage account statements, stock certificates, contracts, insurance policies, loan agreements, and so on. They may also collect photo albums, safe deposit box keys, correspondence and other valuable items.
Today, however, many of these items may not exist in “hard copy” form. Unless your estate plan addresses these digital assets, how will your family know where to find them or how to gain access?
Suppose, for example, that you opened a brokerage account online and elected to receive all of your statements electronically. Typically, the institution sends you an email — which you may or may not save — alerting you that the current statement is available. You log on to the institution’s website and view the statement, which you may or may not download to your computer.
If something were to happen to you, would your family or executor know that this account exists? Perhaps you save all of your statements and correspondence related to the account on your computer. But would your representatives know where to look? And if your computer is password protected, do they know the password?
Create an inventory of your digital assets
The first step in accounting for digital assets is to conduct an inventory of any computers, servers, handheld devices, websites or other places where these assets are stored.
Although you might want to provide in your will for the disposition of certain digital assets, a will isn’t the place to list passwords or other confidential information. For one thing, a will is a public document.
One solution is writing an informal letter to your executor or personal representative that lists important accounts, website addresses, usernames and passwords. The letter can be stored with a trusted advisor or in some other secure place.
Another solution is to establish a master password that gives the representative access to a list of passwords for all your important accounts, either on your computer or through a Web-based “password vault.”
Make sure to pass on your passwords
The next and simplest step to providing your family or estate executor with access to your digital assets is to leave a list of accounts and login credentials in a safe deposit box or other secure location, advises Smolen.
The disadvantage of this approach is that you’ll need to revise the list every time you change your password or add a new account. For this reason, consider storing this information using password management software and providing the master password to your representatives.
Or, you can use an online service designed for digital estate planning, says Ruttenberg. These services store up-to-date information about your digital assets and establish procedures for releasing it to your designated beneficiary after your death or if you become incapacitated.
Know the law
Although sharing login credentials with your representatives is important, it’s no substitute for covering digital assets in your estate plan. For one thing, a third party who accesses your account without formal authorization may violate federal or state privacy laws.
In addition, many states have laws, such as the Uniform Fiduciary Access to Digital Assets Act (UFADAA), that establish default rules regarding access to digital assets by executors, trustees and other fiduciaries. If those rules are inconsistent with your wishes, you’ll want to modify them in your plan. The UFADAA allows people to provide for the disposition of digital assets using online settings offered by the account provider. For example, Facebook enables users to specify whether their accounts will be deleted or memorialized when they die and to designate a “legacy contact” to maintain their memorial pages.
The Act also allows people to establish rules in their wills, trusts or powers of attorney. If users don’t have specific instructions regarding digital assets, the Act allows the account provider’s service agreement to override default rules.
Take Inventory
To ensure that your wishes are carried out, take inventory of your digital assets now. Then, contact Jason Smolen at jdsmolen@smolenplevy.com or Dan Ruttenberg at dhruttenberg@smolenplevy.com about possibly including these important assets in a formal plan.
About the Authors
Jason Smolen
Jason Smolen is a founding principal of SmolenPlevy. Smolen’s knowledge of complex estate and business issues has drawn the attention of ABC News, USA Today, E! Online, Realty Times and the Bank of America Small Business Online Community. Mr. Smolen is a graduate of the City College of the City University of New York and the George Mason University School of Law. Smolen also serves as a board member of a local citizens association and recently co-authored an article titled Why You Should Think About Spousal Limited Access Trusts (SLATS).
Daniel H. Ruttenberg
Daniel H. Ruttenberg, JD, CPA, LLM is a principal with the firm. Mr. Ruttenberg received his Bachelor of Science degree with a double major in Accounting and Finance from the University of Maryland. He earned his Juris Doctor with Honors from George Mason University School of Law and his Master of Laws in Taxation with Distinction from Georgetown University Law Center. Mr. Ruttenberg also served as the Director of the Fairfax Bar Association (FBA) for seven years. During this period, he was also elected president – the youngest in FBA history and served as a member of the Board of Directors for the Fairfax Law Foundation.
