Estate Planning in the Digital Age
When was the last time you wrote a letter and put it in the mailbox, paid a bill by writing a check, or took your camera’s film to be developed? In this day and age, most people have a digital presence. Step by step, the internet has transparently replaced many of our daily activities and much more in our everyday lives. It has become so ubiquitous that many of us may not recognize the extent of our online presence, or be aware that our online presence may even be an asset with value!
Just what are your digital assets? Where are they located? How can they be accessed? How are they valued? How are they protected and how will they be transferred? These are all questions that need to be discussed with your trusted advisor as we barrel forward into the Digital Age.
What are digital assets?
Digital assets include not only your online accounts, but also your work and personal emails; files and information stored on your computer or in the Cloud; social networking accounts such as those on Facebook or Google; your website; your domain names; your blog; your pictures stored on a hard drive, flash drive, your phone or in the Cloud. Virtually anything that requires a username and password can be considered a digital asset.
Until now, estate planning has focused on traditional assets – both tangible (e.g., your home) and intangible (e.g., bank accounts and stocks and bonds). Increasingly the intangible asset class is expanding to include digital assets, as well. The emergence of digital assets presents myriad issues, including: the ease with which they can be duplicated, the absence of a physical location, the fact that they are usually stored within tangible assets, and that they are usually licensed, not owned.
How are digital assets accessed?
Traditional estate planning – drawing up a will; executing a health care proxy, living will and power of attorney; and arranging for the succession and distribution of your assets – is meaningfully more complex in this Digital Age. Should you become incapacitated or pass away suddenly, accessing your digital assets can become a significant burden for your heirs and loved ones, as well as your employers, service providers or others.
In addition to the obvious, your planning should include a list of all your digital assets and online accounts including passwords. The list should be kept up to date and stored in a secure location — preferably in the safe-keeping of your attorney together with your will. In addition, your plan should specify who has access to which asset(s).
Just think about how difficult it is for you to remember all of the passwords to your digital accounts and the frustration of having to change those passwords periodically, in this age of online everything. Just imagine the aggravation others will face in the event they need to access your accounts. Planning ahead for the transfer of passwords and usernames is crucial to enable access for your designee(s), to provide for smooth transition, and to ensure that no property, including your digital assets, is overlooked or not handled according to your wishes.
How are digital assets valued?
A digital asset should be valued under the same methodology as any other property that is owned, i.e., its price in the market. However, a market for your digital assets may be hard to identify, given changing technology and trends. Additionally, what may have value during your lifetime may have no value once you are no longer actively maintaining the asset – domain names and blogs, for example. Valuation is an important issue that should be planned for and addressed as you are building your assets and planning for their dispersal. Keeping an up-to- date list of your assets is essential.
Estate tax laws are highly complex and specialized.
Marcum’s Trusts & Estates Group offers planning services to help you develop a strategic plan that will preserve your assets for the financial security of your family’s future. The accountants and attorneys in Marcum’s Trusts and Estates Group can help you understand and weigh the options available, so that you can make the best decisions for the future of your family and your business.