Estate planning for a digital world

Text size: aA aA aA
The assets you've stored online require different treatment from those you've kept in physical form. These tips can help you ensure that your heirs and executor have access to all the information they need — while protecting your privacy.
Practically every aspect of our lives today is inextricably tied to our devices and networks, and the digital assets we've accumulated. They've become just as critical as anything we possess. We need to account for these assets in our estate plans as much as any others, taking all eventualities into account.
But what are "digital assets"? The term refers to any electronic record to which an individual has a right or interest. These can be financial assets, including bill pay sites, insurance or virtual currencies; business assets, which might include a domain name, client data or intellectual property that is stored in the cloud; personal assets, like photos or email accounts; and social assets, like Facebook or Instagram accounts.
It's more than just a matter of making sure your passwords are secure and your account information is safely stored. It's important to have a plan for how and when the people you trust can gain access to these details.
Many people don't fully appreciate that digital assets are different animals from traditional assets such as bank accounts.
— Colin Korzec,
head of Trust and Estate Settlement Services,
Bank of America Private Bank
As you're developing that plan, consider these 5 tips:
  1. Create a legal framework

    At first glance, the solution seems simple: Why not just give your heir or executor the passwords they need for access to your laptop, smartphone and other devices? Unfortunately, this strategy can weaken your personal security. And there are other potential pitfalls you may not be aware of. "Many people don't fully appreciate that digital assets are different animals from traditional assets such as bank accounts," says Colin Korzec, head of Trust and Estate Settlement Services at Bank of America Private Bank. "They're often subject to terms of service agreements as well as state and federal laws, so you need to work with your estate attorney to be sure these assets are identified and granted authorized access by specific parties." In other words, others will likely need your explicit permission to go into these accounts.

    As you consider the matter of granting them access, be aware of potential trade-offs. Your personal email account, for example, might contain a trove of documents, attachments and information that could help your executor settle your estate. At the same time, there may be personal messages you may want to keep private. Balancing those two needs requires a thoughtful approach. You can choose to grant access to some digital accounts while excluding others, or choose different people to receive access to different accounts.
  2. Make an inventory of your digital assets

    Creating a road map of the assets that you own and the debts you may have could be the most important thing you can do right now.
    — Colin Korzec,
    head of Trust and Estate Settlement Services,
    Bank of America Private Bank
    "Creating a road map of the assets that you own and the debts you may have could be the most important thing you can do right now," says Korzec. "Taking stock and keeping track of the items on your list will help ensure that your heirs or executor won't miss anything."

    You can get started by looking at "Checklist: The most critical digital assets" (below), then creating your own digital asset inventory. The worksheet goes through everything from security questions and electronic devices to loyalty programs and online shopping sites. Everything you do online should be on the inventory — even things like gaming avatars. "I used to laugh when people listed these as assets, but the joke is on me because they can be worth hundreds of thousands of dollars," Korzec admits.
  3. Keep passwords separate

    While you may be inclined to include usernames and passwords on the inventory document you create, Korzec cautions against including passwords. "For one thing, those passwords may well have expired by the time the inventory is accessed," he says. "But it's also important to note that the person with your inventory may not be authorized under the law or terms of service to access those accounts," he explains. "I would rather simply know where the accounts are, period."

    Checklist: The most critical digital assets

    A true digital assets inventory is exhaustive, but to get a rough feel for the size of your digital estate, just jot down the key accounts and assets you own and use, organized by type.

    • Financial

      Access to banking and investing accounts will not only make your heirs' or executor's life easier, but also alert them to assets they may be unaware of.

      Includes banks, brokerages, online payment tools, credit cards, digital wallets, NFTs (non-fungible tokens)
    • Business

      If you own a business, your personal and work lives might be deeply intertwined — so securing your personal digital assets might also mean securing those of your business.

      Includes tax software and documents, bookkeeping, IP, proprietary business software, client data, domain names you might personally have registered, backups and patents
    • Personal

      You might want to make some personal data available to your heirs and executor — but some you might prefer to keep private.

      Includes email accounts, texts, contacts, medical records, photos, digital music, loyalty programs, document scanner apps, streaming service accounts, online shopping accounts

    One way of keeping your account information safe is to save your passwords on a separate, password-protected document. Tools such as a password vault can serve as a secured central storage location, not only for passwords but also for key account information and documents your heirs and executors may need to ensure a smooth transition. Alternately, you can write down the passwords and store them in a locked safe, a safe deposit box or with your attorney, Korzec says.

    You might also want to look into designating a contact or other authorized user to recover passwords in the event of an emergency, for contacting insurance, canceling services or other tasks. However, as Korzec notes, your provider may not allow for this type of designation.

    Whatever way you choose, it's best to keep your passwords separate from the inventory. When a fiduciary is named, that person should be granted access to both documents. Bear in mind that even failed attempts to log into some password-protected accounts or documents can lock them — which is why experts recommend that whoever is going through the physical devices should first make copies of the hard drives.

  4. Engage experts when you need to

    In some cases, it may be worthwhile to engage a digital expert. "We actually have a third party we engage who, depending on the facts and circumstances, can assist us by examining a device to understand if there is a reference to a digital wallet or a non-fungible token (NFT) somewhere," says Korzec. "We had one client who had a relatively valuable painting on consignment that no heirs knew about — until a forensic computing expert found a reference to it stored electronically," he adds. "It turns out it was worth a significant amount."
  5. Revisit your plan from time to time.

    Just as you update your estate planning documents every couple of years or if something major changes, like a marriage or the birth of a grandchild, you'll want to periodically take another look at your digital asset inventory.

    Keeping track of those assets isn't really optional anymore," Korzec believes. "But dealing with it now will ensure that your loved ones and heirs aren't spending an already difficult time scrambling for passwords and account access for those assets — which is probably not the legacy you intended to leave."
Next steps