If you own a cellphone, computer, tablet, or another electronic device, you probably own digital assets. Those assets should be part of your estate plan, just like the other property that you own. Providing access to the assets, transferring them to beneficiaries, and protecting your personal information are among the reasons that estate planning for digital assets is essential.
What Are Digital Assets?
The Michigan Fiduciary Access to Digital Access Act defines a digital asset as “an electronic record in which the user has a right or interest.” This definition is consistent with the general understanding of what constitutes a digital asset.
When you hear the term digital assets, you may immediately think of the files on your device like photos and other types of records. But digital assets also include information stored in cloud accounts, electronic financial accounts, your email accounts, social media accounts, online subscription and reward programs, and even your shopping accounts. Generally, any information you store online is a digital asset.
Importance of Including Digital Assets in Your Estate Plan
If you become incapacitated, even temporarily from a medical emergency or accident, or if you pass away, it’s essential to make certain that your fiduciary can access your digital assets. To accomplish that goal, your estate plan should provide your fiduciaries with legal authority to access your digital assets, as well as express your wishes concerning distribution of the assets.
Digital assets pose a special problem with respect to access. Unlike other types of assets, many digital assets require specific proprietary information (a user name, password, and sometimes a Personal Identification Number or PIN) to access. When you address the assets in your estate plan, you ensure that your fiduciaries not only have legal authority to access them, but you also provide information necessary to access them. Otherwise, your fiduciaries may not be able to access the assets or even know that they exist.
Some types of digital assets are highly specialized and so unique that they require special treatment in your estate plan. Cryptocurrency is an example addressed in our separate article, How to Include Cryptocurrency in Your Estate Plan.
Your Digital Assets Inventory
The first step in estate planning for digital assets is to make an inventory of your digital assets. The inventory should list all the information about your online assets and accounts, including the location (full web address) and access information like the username, password, and PIN. It’s also important to note for each account if you use a tool from the host site to provide another person with access to the account.
If you use a password manager, you may be able to print an inventory from the manager. Most browsers also provide an easy way to save and print out a full list of all stored password information. In addition to saving the list of access information, it’s a good idea to keep a copy of your digital files on a separate hard or thumb drive. You can store a copy of the inventory on the same drive, as well as keep a hard copy.
Your inventory needs to be updated regularly to keep it current. Revising it annually may be sufficient. But if you frequently add accounts or change passwords, updating it even more often will be important.
How to Include Digital Assets in Your Estate Plan
After you create your inventory of digital assets, give thought to how you would like to distribute your digital assets and which trusted people close to you should have access to them. Then share your inventory with your estate planning attorney and discuss how you would like to address the assets in your estate plan. An important aspect is making certain that your fiduciaries have legal authority to access the assets and can administer them in accordance with the terms of your estate planning documents.
Your inventory does not become part of your estate plan, nor are the contents listed in any of your estate planning documents. It is a separate document (or drive) that you should store with your estate plan in a safe place. You should make certain the fiduciaries who will need access, such as your personal representative (executor) and agent under your durable financial power of attorney, know where to find the inventory.
Michigan Fiduciary Access to Digital Assets Act
As previously mentioned, Michigan has a specific statute that addresses access by fiduciaries to digital assets, titled the Fiduciary Access to Digital Assets Act. The law provides a mechanism for a fiduciary to access digital assets from a digital custodian, but the provisions in the law are complex and cumbersome. If a fiduciary needs to resort to the Digital Assets Act to access digital assets, the process will usually consume a significant amount of time and incur unnecessary expenses. Moreover, the fiduciary may end up with less than full access to the assets at the end of the process.
If you own important and valuable digital assets, the best way to protect them, provide legal authority for access, and pass them along to your loved ones is to address them in your estate plan. If you have an estate plan, talk to your attorney about including your digital assets. If you don’t have an estate plan, protecting and preserving your digital assets is one of many good reasons to make one.
Talk With Our Michigan Estate Planning Attorneys
Our attorneys at the law firm of Barron, Rosenberg, Mayoras & Mayoras, P.C., provide a full range of services relating to estate planning, including development of a sound strategy to safeguard and transfer digital assets in an estate plan. Whether you wish to create a new estate plan or update an existing plan to address your digital assets, we welcome the opportunity to address your needs.
We’ve been serving clients in Oakland County and beyond for more than 40 years. Our clients count on our commitment, experience, and credentials when they turn to us for their legal needs. Call us today at 248-641-7070 or use our online form to talk with our experienced estate planning attorneys.