Estate Planning for Digital Assets

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Until recent years, those planning their estates did not have to be concerned with anything other than their physical property and liquid assets. Now, technology and digital assets have become part of everyday life and must be thought about when planning ahead. However, digital assets present unique considerations — because they are not tangible, there is more of a need to ensure beneficiaries are aware that they exist and the executor knows how to find them when you pass.

What are Digital Assets?

There are many different kinds of digital assets — including electronic records and files that are stored in personal computers, online, in a Cloud, or on mobile devices. In fact, nearly anything that is a digital record can be considered a digital asset for the purpose of creating your estate plan. Common examples of digital assets include any of the following:

  • Email accounts
  • Social media accounts
  • iTunes and digital music files
  • Online photos and video storage
  • Electronic books
  • Online subscription-based accounts
  • Loyalty program benefits
  • Cell phone apps and gaming accounts
  • Non-fungible tokens (NFTs)

However, it’s important to understand that certain assets don’t qualify as digital assets, even though the underlying asset might be considered a digital asset. For instance, while an electronic bank account might be in digital format, the actual liquid funds in the bank account would not be considered a digital asset. Another example of this would be cryptocurrency — the platform would be characterized as a digital asset, but the actual asset (i.e. Bitcoin) would be part of the decedent’s estate and not subject to the digital asset laws.

What is North Carolina’s Digital Asset Law?

Attorneys have previously included provisions in wills and powers of attorney regarding who should have access to a decedent’s digital assets. However, the Revised Uniform Fiduciary Access to Digital Assets Act (UFADAA) was enacted in 2016 in North Carolina to specifically address these issues. The Act allows an individual to designate a person who can gain access to their digital assets after their passing or in the event of incapacity. Access can be designated to a named executor in a will, an attorney-in-fact under a power of attorney, a trustee of a trust, or to a court appointed guardian.

The need for this law arose since digital assets are typically controlled by the terms of the contract to which an individual agrees when they sign up for a new online account. Although these types of contracts provide for the privacy of the individual, they generally do not address the issue of custodianship in the event of death or incapacity.

The UFADAA permits individuals to use online tools to direct the custodian they have selected to manage their digital assets. But it is vital to ensure your estate planning documents are consistent with any other instructions provided. Under the UFADAA, the executor of an estate no longer has automatic authority over the contents of electronic communications unless the decedent consented to disclosure. In addition, while they may gain access to other types of digital assets, the executor would be required to petition the court and explain why the asset was necessary to settle the estate.

Steps to Take in Creating a Digital Asset Estate Plan

There are several steps to take to begin estate planning for digital assets. First, you should make a list of any devices that contain digital assets — these can include a computer, iPad, iPhone, iPod, Kindle, and various other digital storage devices. Next, compile the usernames, passwords, and security questions for the devices and any associated accounts. It is important to keep track of this information in a place and format that can be updated as you make changes, is secure, and can also be located and accessed by your Personal Representative.

You should also specify each digital asset, where it can be found, and your wishes for its disposition. For instance, you may want certain assets that have monetary or emotional value to be distributed to your children. If there are any assets related to business, you might wish for them to be distributed to a business partner. There may also be accounts that you want to have shut down entirely upon your passing.

Once you have identified each digital asset and determined how they will be distributed, you will need to appoint someone to handle each of your online accounts and ensure your directives are carried out. Since they will have access to all your online accounts and information, it’s important to choose a person who is trustworthy and reliable.

Lastly, your digital asset estate plan must be executed in accordance with the formalities required by North Carolina law to become a legally binding document. Whether you have addressed the digital assets in a last will and testament, a power of attorney, or a trust instrument, a knowledgeable trusts and estates attorney can help ensure the document drafted meets all legal requirements and your objectives will be carried out in the future.

Contact an Experienced North Carolina Estate Planning Attorney

Proper estate planning is critical to ensure your property is distributed in accordance with your wishes. A skillful estate planning attorney can assist you with crafting a comprehensive estate plan that meets your needs and satisfies your goals. Carolina Tax, Trusts & Estates is committed to working with clients for a wide variety of estate planning matters, including digital asset estate planning. We welcome you to contact us for a complimentary consultation to learn how we can help you create a North Carolina estate plan that provides you with peace of mind.