Digital Asset Planning

01101000 01100101 01101100 01101100 01101111. That is “hello” in binary code, the language that all digital computers speak. The computer represents all data text, pictures, video, audio, and every other form of information as a string of zeroes or ones. Fortunately, we don’t need to know binary code to use computers in our everyday lives. And, use them we do. In addition to the desktop and laptop devices we traditionally call “computers,” tablets and smartphones are also digital computers because they accept user input, run calculations on the input, and then provide output to the user.

Think about how many things you do using a computer, tablet, or smartphone. We surf the Internet for information using an internet account. We buy merchandise online, and when we do so, we often set up an account with the merchant and use something like PayPal to buy it. We may do our banking or keep track of our investment portfolios online. We buy airline tickets and hotel rooms with still more online accounts that give us loyalty points that are tracked on the website. We keep up with our friends, family, and colleagues on social networks like Facebook, Instagram, and LinkedIn. We tweet on Twitter. We communicate with each other via email using services like Yahoo! or Gmail more than we do the U.S. Post Office. We store photographs on platforms like Flickr and iCloud, music on iTunes, and videos on YouTube.

What do all of these things have in common? They use computers or computer technology to store information, and it is just a bunch of zeroes and ones unless we know the magic words to access the data and translate it from binary code into the form we use. Thus, another common denominator for most of these things is a password to unlock the account. Whether we think of them this way or not, all of these things are assets—digital assets. Collectively, these digital assets may have great sentimental and financial value, but without proper planning, they could get overlooked or be subject to being hacked.

Numerous surveys find that fewer than 50% of Americans have planned their estates by putting a will or trust in place. Even if you have completed traditional estate planning, you probably did not include plans for your digital assets. Given the prevalence of the virtual world in our lives, we need to plan for our digital assets.

Here are some recommendations:

  • Create and keep a list of all of your online accounts, including any relevant information such as the email address, the account number, the password, the answer to any security questions, and your username. We sometimes call this a digital asset instruction letter.
  • Tell your fiduciary what to do with the accounts. For instance, should the fiduciary email your contacts on an email list and tell them of your passing and then delete the account? Should they do the same on a Facebook page or turn it into a memorial page and let it continue? Should they retrieve any images or music you have stored online and copy them to a permanent disc or flash drive?
  • List the types of hardware you have, such as a desktop computer, a laptop, a tablet, or a smartphone, and any passwords that may be needed to unlock those devices. Tell your fiduciary what to do with data stored locally on any device.
  • Update your power of attorney to include provisions authorizing your agent to access your email and other electronic data during your lifetime.
  • Consider appointing a special digital fiduciary to deal with your digital assets through your will or trust after your death. This might be a good idea if you have particularly valuable assets such as domain names or if your first choice for a fiduciary is technophobic.
  • Do not forget any passwords that you maintain for a business. If you are the owner or key person who conducts all of the online banking for the business, make sure someone else will know the passwords so the business suffers no disruption in access to its accounts because of your death.

One challenge will be keeping your digital asset instruction letter updated and stored in a safe place where your fiduciary can access it. Several companies pledge to be a virtual safe deposit box for your digital assets and/or your digital asset instruction letter. If you plan to use such a service, make sure it is reputable and consider whether it will still be in business in 10, 20, or 30 years. A better choice might be to keep it in a safe place at your home and then let a trusted family member or advisor know where the letter is so they can tell the fiduciary at the appropriate time.

The virtual world is changing quickly. In a few years, these digital assets may be so ingrained in our existence that we do not have to think about them separately when we do our estate planning. It will be as natural as planning to dispose of our house. But for now, spend some time doing your digital estate planning. 01000111 01101111 01101111 01100100 00100000 01101100 01110101 01100011 01101011. (Good luck.)