Don’t ignore this component
We draft wills and name executors to carry out our wishes for our assets when we die. Digital assets are becoming ever more present in our lives but are often overlooked in estate planning.
Take a moment to contemplate your digital assets. Consider your digital devices — your desktop, laptop, tablet and smartphone — and all of the files saved on them and all of the accounts you access with them. The list starts to grow quickly when you account for your e-mails and e-mail accounts, digital photographs, videos and music, social media accounts, electronic banking and investing accounts, digital currency, tax preparation service accounts, file sharing accounts, online shopping, auction and gaming accounts, loyalty reward programs and any blogs, websites and domain names you may have.
If you have even just a few of the items on this list, you should be considering what will happen to it all after you are gone and make sure that you provide instructions to your executor, the trusted person that will be responsible for your estate.
Why should you care about estate planning for your digital assets?
1. To make it easy on your executor and family members. The top reason why you should care about estate planning for your digital assets is because planning today makes it easier for your executor and family members in the future. If you do not plan ahead, you risk leaving your executor with a logistical and administrative nightmare as they struggle to take an inventory of your digital assets, attempt to access those assets and accounts and to guess how you would have wanted them handled.
2. To monetize online assets that have financial value. Your digital assets may have significant financial value. Blogs and websites may be generating income, digital currencies could be cashed out for hard currency, online shopping accounts and gaming accounts may have a positive balance, and loyalty rewards points may have accumulated significant value. Your executor will be responsible for collecting, accessing and liquidating these digital assets when you are gone.
3. To salvage your digital assets that have sentimental value. Treasured photographs are now more likely to be stored on your smartphone, tablet, hard drive, cloud storage server or online photo sharing website rather than printed and placed in a photo album. While hardcopies can be easily passed on, it may be difficult for your loved ones to find and access digital assets that have high sentimental value. Consider leaving a plan in place to make it easy for your executor to access and collect your digital assets with high emotional value.
4. To help your executor avoid an administrative headache. Important documents such as your annual income tax returns and your monthly account statements will be very helpful to your executor when they administer your estate. Electronic bills need to be discovered and paid by your executor to prevent late fees and cancellations. As important records increasingly become paperless and online banking and investing becomes ever more prevalent, it is imperative that your executor has access your electronic records after you are die in order to prevent a major administrative headache and potential losses to your estate.
5. To protect your privacy. Your e-mails, the files on your computer and the contents of your social network accounts may reveal relationships or interests that you have that are not widely or otherwise known. Consider any digital assets that you would rather keep private and that your executor should delete rather than distribute after you die. When it comes to social media accounts, consider whether you want to leave a digital footprint by having your accounts memorialized or if you would prefer that all of your social media accounts be shut down and deleted. Online accounts that are left stagnant could be susceptible to hacking and identity theft.
How do you “do” digital estate planning?
Digital estate planning is about taking steps to organize your digital assets by providing instructions and authorizations to your executor. Digital estate planning can be done in three steps:
First, make a list of your digital assets. Create an inventory of account login usernames and passwords, indicate where the account can be located and include answers to your security questions. Update this list regularly and include it as part of your digital assets memorandum (see step three).
Second, grant your executor authority over your digital assets. Your will can include a clause that gives your executor power over your digital assets, including the power to access, obtain, use, control and transfer or delete your digital devices and assets. Remember that a good estate plan does not only consists of a will document but also includes powers of attorney to be used in the event that you become incapable of managing your own affairs. Your power of attorney for property can also contain similar clauses.
When providing your executor authorization, be aware of the terms of service agreements that govern the accounts. Each service provider has its own terms of service agreement that you likely accepted when registering. Some terms and conditions prohibit or limit how your account can be accessed and controlled. It may be a breach of the provider’s terms to share your password with others. Some sites may allow your executor unlimited access to your account, others only when certain requirements are met and others may allow only limited or no access at all. A complicating factor is that most social media sites are not governed by Canadian law. Ensure that your plan is consistent with the providers’ terms of service to avoid difficulties for your executor when they try to implement your plan.
Third, instruct your executor what to do with your digital assets. Consider preparing a digital assets memorandum that provides instructions on how to deal with your digital assets. For each digital asset, provide corresponding instructions and specific wishes, for example, to delete, sell, or pass on the asset. Your will can reference that such a memo exists. The benefit of having a separate memo is that you can update it periodically without having to formally update your will. Keep the memo in a safe place and ideally together with your will.
When preparing the memo, think about what digital assets you actually own. You may have accounts that contain virtual property such as an online music library, podcasts or ebook collection. Do not assume that you have the same rights to this digital content as you do the physical version of the asset. You may have a licence to use these digital assets and may not actually own the asset itself, in which case your executor may not be able to pass on these collections if you do not actually own them.
Acknowledge your digital assets as an important part of your estate plan. Taking simple steps now will assist your executor tremendously down the road.
Sabrina Gismondi is a trust and estate lawyer at Lawrences Lawyers, Brampton, Ont.