What Happens to Your Digital Assets When You Die?

A dad and his little girl look at his phone under a blanket.

(Image credit: Getty Images)

Not very long ago, owning a personal computer was a novelty. Today we all interact personally and professionally using desktop or laptop computers and access the internet by way of cellphones. The constant presence of digital information in our lives has led to social and economic changes that would have been hard to anticipate only a few generations ago.

For those of us born before the Reagan administration, using a cellphone and relying solely on a computer to communicate and do daily financial transactions seemed as futuristic as The Jetsons. Now, our children and grandchildren likely can’t imagine a world without a high-speed digital connection.

5 Reasons Everyone Should Plan for Their Digital Assets

Not everyone is motivated to care about what happens to their digital assets after they’re gone. But here are a few reasons why you should:

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Certain social media platforms will automatically mark a deceased user’s profile as “memorialized,” notifying other users of her death and alerting unscrupulous identity thieves to begin scanning for online accounts or information. Unless you exercise any option available to you for selecting a person to close your account under that provider's user agreement, or your will provides your executor the express authority to manage, access or delete your profile, your social media account may be closed only at the discretion of the platform.
Cryptocurrencies, blogs, web domain names, videos and pictures stored in the cloud or an online medium may have both intrinsic and extrinsic value and may be forever lost unless you properly plan for transferring this type of property.
Do not assume that you own everything stored digitally. Account credits, frequent flier points and cryptocurrency are typically transferable to your heirs. Movie and music libraries, phone apps and email accounts are typically not transferable, since you may not own the content and are only a permitted user. You and your estate planning attorney should review any user agreements to protect your rights concerning these accounts.
A non-fungible token (NFT) is a way of owning the original version of a digital file, such as a piece of art, a GIF, a video or an audio recording. You can think of the NFT as a secure digital lockbox holding a unique digital file. NFTs are logged using a digital ledger called blockchain, which provides a secure way of verifying authenticity and ownership. However, like cybercurrency, NFTs require a password or a distinct key to gain access, and both the NFT and the underlying digital file can be lost if an owner’s trustee or executor doesn’t have that information.
In our economy, many people operate businesses solely online, and your successors’ access to customers and funds in PayPal or similar providers may be delayed or denied without proper planning.

What Happens When You Die with a Will (or Without One)

As many of us try to adapt to the reality of our new digital existence, estate and financial planning have evolved as well. For most of the 20th century, it was not complicated to transfer property or assets to your heirs following your death or permit management of your financial affairs in the event of your incapacity. Preparing a will or living trust and a durable power of attorney is still an important part of proper planning. A will or a living trust gives your executor or trustee instructions concerning payment of your debts and taxes and allows you to direct the distribution of your property to your heirs or legatees.

Don’t Let These Too Common Estate Planning Excuses Stand in Your Way

If you die with a will, the probate court in your state will approve your selection of an executor. If you die without a will, the court will appoint an administrator to pay your debts and final expenses and distribute your remaining assets to your heirs or legatees. A trustee’s responsibilities are essentially the same, with little or no court involvement.

Your executor’s first task is to create an inventory of your assets. Historically, this was done by checking your mail for any account statements sent by banks, savings institutions and investment advisers. Creditors were identified in the same way.

How Old Estate Planning Rules Fall Short Today

But the ways of old no longer work in our modern digital world. Account statements and notices arrive in an inbox — not a mailbox — and sometimes property takes the form of cyber-currency and non-fungible tokens coded in blockchain.

Until only a few years ago, a deceased person’s executor, trustee and even family would be prohibited by computer privacy laws from accessing the person’s email, digital account statements and any property that was held on computer servers in another state or in a foreign country. In a well-publicized case from a few years ago, the parents of a soldier who died in combat were denied his last email messages home because he did not designate a person to direct his email after he died.

Online service providers, such as Facebook, Google and Yahoo, have worked with state lawmakers to create uniform laws governing access to people’s digital information following their death or potential incapacity. According to the National Conference of State Legislatures, at least 48 states and the U.S. Virgin Islands have enacted laws addressing access to email, social media accounts, microblogging sites, website accounts and other electronically stored assets upon a person’s incapacity or death.

The Bottom Line on Your Digital Assets

Essentially, if your will or your durable power of attorney does not directly address control of your digital assets, your family, executor or trustee may be limited by what an online service provider permits under the terms of use or similar user agreement that you accepted when you opened your account.

Digital technology will continue to develop rapidly to transform our present ideas about property rights and how we conduct our personal, business and financial lives. State law will likely not compensate for these changes as quickly.

It’s important for all of us to begin to see the often-overlooked presence of digital assets in our lives and estates and to start a conversation about how these new forms of property, their use and ownership should not be neglected.

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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James Ferraro is a vice president and trust counsel in the Shreveport, La., and Kansas City, Mo., offices of Argent Trust Company. Ferraro is a 2003 graduate of the University of Missouri at Kansas City School of Law, past president of the family and the law section of the Kansas City Metropolitan Bar Association, is a member of the Tax and Estate Planning Council of Shreveport and a Regional Ambassador for the Kansas City Estate Planning Symposium.