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The Rising Importance of Digital Estate Planning

The rise of the internet spawned a whole new world of estate planning questions. What happens to your digital assets at death? Who can access your online data when you are incapacitated? 

Digital estate planning answers most of such questions. It allows you to protect your online accounts, digital currencies, photos, and other properties stored digitally.

The law makes it possible for you to design and control your digital estate plan, including giving consent to an executor to access your digital assets. To take advantage of the opportunity, you have to start by building your understanding of what’s involved.

Traditional Estate Administration Is Changing

When conducting estate administration, the first task must be to marshal the deceased’s assets. To “marshal the assets” means to:

  • Identify all of the decedent’s assets
  • Protect them 
  • Retitle them in the name of the estate

For years, I counseled family members about the estate of a loved one. I advised them to collect all of the mail for one or two months.

We used account statements and correspondence to confirm we knew all of the deceased person’s assets and accounts. Back then, we looked also at income tax returns to find the sources of their income.

That’s all changed.

Most of our financial information is now kept on the cloud, a hard drive, or a smartphone – not in a filing cabinet. When a person dies, much of marshaling their assets takes place in the digital world.

Our digital assets extend well beyond the financial. The content of our social lives is online, too. A decedent’s family will want access to their electronically stored photos and videos. And when was the last time you posted a letter? 

Gaining Access to Digital Assets Has Historically Been a Challenge

Digital assets include data, user accounts, domain names, and virtual currencies such as cryptocurrency. User accounts span areas from email to social media, document storage, services, gaming, and beyond. 

Accessing data and user accounts is famously difficult and time-consuming. One well-known case is Ajemian v. Yahoo!. After John Ajemian’s death in 2006, the administrators of his estate worked to access his email account. At the time of death, Yahoo!’s terms of service denied third-party access to an account and any right of survivorship.

The case dragged on until the Massachusetts Supreme Judicial Court ruled that, under the Stored Communications Act (SCA), personal representatives of the estate could consent to disclosure of the emails through “lawful consent” and “agency” exceptions. The ruling did not happen until 2017, 11 years after Ajemian’s death. 

Terms of service contracts—like those in the Ajemian case—can still pose problems. Those may be compounded by federal and state laws aiming to protect data privacy. All fifty states have passed laws making unauthorized access to a computing device illegal. The Department of Justice takes the position that access to a user account in violation of the terms of service can be a criminal act. This includes using someone else’s password to access an account. 

So where does this leave the deceased loved ones?

Legal Changes Enable Digital Estate Planning for Online Accounts

To further clarify the rights of executors and agents in digital estate planning, many states have enacted a version of the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA). They provide a mechanism for fiduciaries to gain access to a deceased or incapacitated person’s digital property. They also say that a person’s estate plan can provide the needed “lawful consent.”

An important component of RUFADAA laws allows an individual to use online tools to direct whether their account information should be disclosed. The practical applications of this may best be understood by looking at a Facebook example. 

Just before writing this post, I logged into Facebook to name a “legacy contact” – or a friend allowed to access my account should the need arise. The Facebook friend may keep the account “memorialized” but does not have the right to change existing content or friends. The user may also give the legacy contact the right to download a copy of the account. Facebook also lets you direct the deletion of your account upon death if you prefer.

Google provides a similar tool called “inactive account manager.” If Google determines a person hasn’t logged in within a specified time, Google will notify the user and others designated by the user. Like Facebook, Google allows you to direct the deletion of your account or data sharing with your designated individuals.

Taking Care with Cryptocurrency

The value of the global crytocurrency market has grown astronomically in recent years, topping $4.57 billion in 2022. With more than 22% of Americans holding cryptocurrency in their investment portfolios, it’s an increasingly common digital asset that families will need to grapple with when a loved one passes away.

That becomes more difficult without digital estate planning. As Vox explains:

Cryptocurrency is usually stored on the blockchain, a digital ledger that’s formed by a network of computers throughout the world that record transactions, including the exchange of cryptocurrency. People usually make these transactions by using public and private keys. Public keys work like bank account numbers, and serve as an address that you can use to send other people crypto. Private keys work like passwords, and are made of unique, extremely long strings of characters that unlock your crypto. Unlike other types of passwords, however, private crypto keys can’t be recovered once they’re lost or forgotten. That means that without those keys, people who are entitled to inherit their loved one’s crypto won’t be able to get it.

This underscores the importance of digital estate planning. The documents involved ensure your loved ones can take ownership of your holdings upon your passing.

Clarifying Control with Separate Authorizations

Many practitioners have updated their digital estate planning documents (like a will or power of attorney) to address these changes. The documents can give fiduciaries broad management powers over digital assets.

RUFADAA also allows you to sign a separate authorization that gives your fiduciaries access to your digital property. This is a short document—the digital estate planning version of a medical privacy waiver. It’s an easy fix for people with an old estate plan or no estate plan.

If you use a digital tool to name your successor users, that tool overrides your estate plan. For example, say I have named my sister as my Facebook legacy contact, but my last will and testament names my husband as my executor. My sister receives control over the account.

Step One: Prepare to Plan

You may have your tax returns, financial records, personal records, photos, videos, and correspondence all stored electronically. As these may not be governed by account accessibility, there will likely be little or no paper that instructs the people taking care of you or your estate how to handle it all.

Tedious though it may be, it is critical to make a list of all of your online accounts and other digital properties. Don’t forget to include: 

  • Online medical records
  • Online IRA accounts
  • Answers to security questions and details for second-step authorizations
  • Automatic payments to creditors
  • Website domains 

It doesn’t have to be exceedingly complicated. Many choose to use an encrypted online service to record account and password information. Additional services are available that will provide information to the people you designate in your digital estate plan, too.

Managing access to your digital assets is complicated and requires attention to detail. Those details are the only way to ensure your trusted friends or family members can protect you and your property when you cannot.

If you’re hoping to learn more about digital assets to support your estate planning journey, we recommend checking out our Digital Assets webinar for additional information. You might also enjoy:

For more information about our on-demand webinar series, click here.

This is an updated version of an article originally published in July 2017. ©2023. DailyDACTM, LLC d/b/a/ Financial PoiseTM. This article is subject to the disclaimers found here.

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About Michelle Huhnke

Michelle M. Huhnke is a partner at Sugar Felsenthal Grais & Helsinger LLP. She focuses her practice on estate planning, charitable planning, and wealth preservation. She works with clients and their families to develop estate plans that address varied family circumstances in a caring, detailed way and include efficient estate, gift and generation-skipping tax planning.…

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Article Comments

  • Sree says:

    Excellent article

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