If you feel like you are constantly being asked to do more with less in your estate planning practice, chances are, you are not alone. The estate planning profession has become increasingly demanding and complex in recent years, and my conversations with estate planners from large and boutique firms alike suggest as much.

One reason: just a couple of decades ago, estate planning asset inventory encompassed a relatively small group of asset classes — bank accounts, investment accounts, retirement funds, and real estate.

But now, more of your clients’ lives are taking place online. What was once a fairly straightforward gathering of assets has evolved into a complex, messy, digital scavenger hunt. Consequently, in many cases, more clients’ assets now constitute “digital assets” than not. “In fact, according to NordPass, the average person now has 168 personal online accounts, creating a complex web of digital assets that extends far beyond traditional financial holdings.”[1] These digital assets — email accounts, social media profiles, cryptocurrency assets, NFTs, cloud storage, photo folders, gaming accounts, and airline rewards, to name a few — comprise an individual’s “digital estate.” They now all demand proper estate planning.

Why does any of this matter? Unlike traditional assets, digital holdings require a unique set of strategies and tools to ensure they are securely accounted for, accessed, and transferred upon death. And between unclaimed digital assets, privacy concerns with online accounts, security breaches, and other potential liabilities, there’s simply too much at stake to ignore digital estates or take lightly this growing challenge.

Understanding the Challenges of Digital Assets

The emergence of digital assets has significantly complicated the estate planning process in several ways:

1. The Risks of Overlooked Assets

The sheer volume and variety of digital assets can make it difficult to identify and manage all relevant holdings. An incomplete inventory can also pose challenges during estate administration, complicating the identification and access of digital assets and potentially delaying the settlement process.

To solve this, estate professionals must take a three-pronged approach: (1) encourage their clients to inventory their online accounts and update this regularly; (2) use password managers, as well as the myriad online tools that provide secure methods to transfer access to beneficiaries; and (3) thoroughly map, document and review the processes of common digital asset providers, or retain digital asset experts for advice.

2. RUFADAA Considerations

The evolving legal landscape surrounding digital assets can also create headaches for estate planners in ensuring that their clients’ wishes are carried out effectively. The Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA) protects executors, administrators, and trustees, by providing guidance on how to access and manage digital assets, legally and ethically. By understanding RUFADAA and its implications, estate planners can better protect their clients’ digital legacies. Here are just a few critical considerations regarding RUFADAA:

• Existing estate plans may need to be reviewed and updated to reflect the provisions of RUFADAA and address the management of digital assets.
• Estate planners should communicate with their clients about the importance of digital asset planning and the implications of RUFADAA.
• Not all states have adopted RUFADAA, so estate planners need to be familiar with local regulations (if applicable) on digital assets.
• Using a RUFADAA-compliant estate planning solution can help estate planners ensure that they are correctly and securely handling digital assets.

3. Master Password and Backup Storage

A lack of proper authentication credentials, such as master passwords or backup Multi-Factor Authentication (MFA) codes, can significantly hinder the ability of designated executors or heirs to access and manage digital accounts. This can lead to delays in probate proceedings, increased legal costs, and potential disputes among beneficiaries.

Moreover, improper storage, or untimely transfer of master passwords and MFA codes exposes digital assets to the risk of unauthorized access. This can compromise the security of sensitive personal information, financial assets, and digital identities associated with the deceased (or living) individual.

This is why it is imperative for estate plans to provide for a secure process for such credentials to be stored and transferred to fiduciaries. Encrypted and secure storage solutions designed specifically for digital estate planning can help safeguard access to important accounts and assets, ensuring they are available only to designated individuals when needed. By prioritizing the security of authentication credentials, estate planners can help protect their clients’ digital legacies and minimize potential complications during the probate process.

4. Asset Schedule Updates

Digital assets evolve rapidly, and it is critical that estate plans mirror this frenetic pace. For instance, dozens of new digital assets may be acquired over a short timeframe — cryptocurrency wallets, shares of a startup, new online accounts, or digital media libraries — that are not included in the estate plan. This oversight can lead to these assets being overlooked or unaccounted for during estate distribution.

Infrequent updates can also leave digital assets vulnerable to security breaches or unauthorized access. Passwords and security settings should be regularly reviewed and updated to ensure they meet current best practices and mitigate potential risks.

Estate planners should remind their clients to regularly review and update their digital estate plans to reflect changes in their digital asset portfolio, ensure security measures are up to date, and maintain clear instructions for asset management and distribution after death. Digital estate planning services often include features to facilitate these updates and ensure comprehensive coverage of all digital assets.

5. Changes to Terms of Service Agreement and Privacy Policies

It is not uncommon for online platforms and services to regularly update their terms of service agreements (TOSAs) and privacy policies. These changes can lead to unexpected restrictions or requirements for accessing and managing digital assets after death. This might include changes in how accounts can be transferred or closed, which could affect the ability of heirs to access vital information or digital property.

Ignoring policy updates may also result in unintentional non-compliance with legal requirements or contractual obligations related to digital assets. This could lead to disputes with service providers or even legal consequences for heirs attempting to manage or access accounts on behalf of the deceased.

Again, that is why it is critical for estate planners to remind their clients to regularly review and update their plans to incorporate any changes in platform policies or legal requirements. Digital asset experts can also help ensure that all aspects of digital assets are aligned with current policies and best practices.

6. Take Advantage of Online Tools

Many of your clients may not know it, but some of the online services they have signed up for allow them to specify what should happen to each of their accounts and data after their death. These are called Online Tools (and sometimes, Advance Digital Directives).

For instance, Facebook offers a Legacy Contact feature, where users can choose someone to manage their memorialized account. This person must have a Facebook account, can take minimal actions, even download an archive of the deceased’s Facebook data. In the absence of using these Online Tools, family members or heirs may face legal challenges in accessing or managing digital assets. This can lead to delays, disputes, or even legal proceedings to gain access to important accounts or information.

Finding a secure technology solution that automates reminders and facilitates the setup of Advance Digital Directives for your clients can help minimize these risks and provide peace of mind for them and their families.

Develop Your Plan for Digital Assets

Digital assets have demanded — and will continue to demand — new strategies and approaches in estate planning. Your clients are now looking to you as their trusted advisor on all things digital assets. As the terrain for digital assets continues to shift beneath us, embracing technological solutions and taking a proactive approach to digital estate planning will help meet the growing demands of clients, ensuring that their ever-expanding digital legacies are protected.

[1] https://nordpass.com/blog/how-many-passwords-does-average-person-have/