A Guide to Digital Assets in Your Estate Plan

In today’s modern age of technology, estate planning and digital assets go hand in hand. Nearly everyone owns some type of digital asset, whether it is a photo album on a phone, a social media profile, or cryptocurrency. Critically, these intangible items may have financial or sentimental value and it’s essential not to overlook them when you’re considering your wishes for the future. Like physical items, digital assets must be addressed in an estate plan to ensure they go to the intended beneficiary. Failing to plan for digital assets can result in their loss, inaccessibility, or even legal complications for your heirs.

What are Digital Assets?

It has become commonplace to store financial information and various other data on phones, computers, and other electronic devices. These digital items and electronic communications are collectively known as “digital assets.” They can include financial and business information, personal data, and social media accounts. Importantly, digital assets may also include intellectual property rights, such as copyrights to digital works, and loyalty or reward program points.

The following are some common types of digital assets that people use on a daily basis: 

• Digital photos and videos
• Digital wallets
• E-books
• Social media profiles
• Non-fungible Tokens (NFTs)
• Cryptocurrency and other digital currency
• Digital documents
• Digital collectibles
• Website content and domain names
• Blogs
• YouTube accounts
• PayPal and Venmo accounts
• Online music libraries
• Digital artwork
• Email accounts
• Online subscription services (such as streaming platforms or cloud storage)
• Loyalty and reward program points

Be sure to back up any digital data you own to avoid it being lost or destroyed — you should not rely solely on the electronic device in which it is stored. You can use external hard drives, online backup services, and cloud storage. When it comes to estate planning and digital assets, you may consider creating several copies of the data and keeping them in different locations. This can ensure your intended beneficiary will be able to access the data in the event a storage method fails. Additionally, consider using a password manager to securely store and share access credentials with your fiduciary or trusted individual.

Can Your Loved Ones Access Your Digital Assets When You Pass Away?

Gaining access to the digital assets of a person who has passed away is very different from accessing their physical property. In contrast with physical items — which may be accessed with a key and are safeguarded under property law — digital assets are usually protected with a password and by terms of service agreements. This means that when the user of the services passes away, their loved ones would not be able to access the assets without being provided with the proper credentials and the authorization to do so. 

Access to a decedent’s digital assets in Michigan is governed under the Fiduciary Access to Digital Assets Act (FADAA). This law allows a person to plan for the disposition of their digital assets in the same manner they would make plans for the bequeathment of tangible property. It also grants a fiduciary the ability to access them. The Act specifies that an individual may provide direction in an online tool (separate from the terms of service), will, trust, power of attorney, or other written record. If no instructions are provided regarding the disposition of the digital asset, the terms of service for each particular account would determine whether the fiduciary can gain access. It is important to note that some service providers offer their own online tools (such as Google’s Inactive Account Manager or Facebook’s Legacy Contact) that allow users to specify what should happen to their accounts upon death or incapacity. These online tools generally take precedence over instructions in a will or trust.

Digital Assets and Estate Planning Tools

It’s crucial to address digital assets in your estate plan to ensure they are distributed in accordance with your wishes, like any other property you own. Some online account providers may allow you to activate a setting that allows them to release your digital data to a personal representative upon your passing, but you should still outline the instructions for the distribution of your digital assets in your will. Alternatively, you can specify if your preference is for an account or digital asset to be destroyed. You can also name a digital executor in your will (apart from the primary executor) who will specifically manage these assets. Be sure to check whether your state law recognizes the appointment of a digital executor, and ensure that your estate planning documents clearly define their powers and responsibilities.

A trust is another estate planning instrument that can be used to distribute your digital assets. A trust can allow you to transfer the assets outside of probate or make periodic distributions. With a trust, you can also specify that a distribution should be made upon your chosen beneficiary reaching a certain milestone. For added privacy, you might want to consider creating a separate digital asset trust. This can be particularly useful for assets that require ongoing management or that you wish to keep confidential. 

In addition to planning for what will happen to your digital assets when you pass away, a power of attorney can be drafted to appoint someone who will manage them in the event you become incapacitated. This document would allow an individual of your choice to access the digital property you specify, and manage it in accordance with your instructions. Be sure to use clear, specific language in your power of attorney to authorize access to digital assets, as some providers may require explicit consent.

Addressing Digital Assets in Your Estate Plan

It’s important to be organized with digital assets and estate planning. To include your digital assets in your estate plan, you should first make a list of each digital asset you own, as well as the usernames and passwords associated with them. Because digitally stored data is typically encrypted, your loved ones may not be able to access it without the correct passcode. 

You should also note where the asset is stored and indicate any special instructions for accessing the account. For instance, the asset may be stored on your phone, a computer, a tablet, or in a cloud. Keep the list in a safe location — but be sure to let your loved ones know where it is stored. Consider updating this inventory regularly and reviewing your estate plan to reflect any changes in your digital holdings or access information.

Finally, be mindful of privacy and security concerns. Avoid including sensitive passwords directly in your will, as it may become a public document during probate. Instead, reference a secure location or use a password manager with instructions for your fiduciary.

Contact an Experienced Michigan Estate Planning Attorney

It’s vital to have a plan in place for the disposition of both your physical and digital property to ensure your future wishes are met. To learn more about digital assets and estate planning, contact us today. Our team of attorneys is committed to guiding families through the estate planning process and offering the support they need every step of the way.