This article was first published in STEP Journal, Issue 6, 2024
As our lives become more digital, cloud-based services store a growing array of valuable digital assets, from family photos to cryptocurrencies. These assets present challenges in estate planning, including questions around ownership, transferability, and access. Understanding who owns these assets and how to handle them after death is crucial.
Cloud-based services such as Google Drive, iCloud, and Dropbox store data online. Digital assets include personal files such as photos or document, social media accounts, financial assets, like crypto, and intellectual property, such as blogs and domain names.
These assets often have significant financial or sentimental value and should be part of estate planning.
From an estate planning perspective, one of the most complex issues concerning digital assets is ownership. Unlike physical property, many digital assets are governed by license agreements, which provide users the right to use but not own the asset. Upon death, licenses often expire, meaning heirs may not inherit the asset.
For assets like cryptocurrency, ownership depends on keys. Without those keys, heirs may permanently lose access.
The terms digital assets are governed by are set by the provider. These agreements determine what happens to accounts upon death. Some platforms, like Google and Facebook, offer options to appoint a “legacy contact” or manage what happens to an account after death. However, many services do not allow account transfers, complicating estate planning.
Additionally, privacy laws in each jurisdiction prevent unauthorized access to accounts, even by family members. Accessing accounts without permission may be illegal, even if heirs know the passwords. Sharing passwords as a means to continue access to online platforms is typically in violation of the platform’s terms of service. Proper authorization may be authorization by the Will, or by court order. This gray area has led to numerous court cases in recent years as family members try to gain access to a loved one’s digital legacy.
Unlike traditional assets, not all digital assets are easily transferable upon death. As noted earlier, licensing agreements, such as those for iTunes purchases, generally do not transfer to heirs. This was recently popular on discovery that Steam game libraries are also not transferrable on death. Cryptocurrency, on the other hand, is fully transferable—but only if the estate executor or beneficiary has access to the encryption keys required to manage the wallet. Similarly, intellectual property such as domain names or digital business interests can be transferred but may require specific documentation to ensure a smooth transition.
Proper planning for digital assets involves several steps, the first being creating a digital asset inventory. Individuals should create a detailed inventory of all digital assets, including usernames, encryption keys, and access instructions. This inventory should also consider any relevant licensing agreements or terms of service that may affect the transfer of these assets. The list should be stored in a secure location, where the executor or trusted person has access to it. Do not put the details of this in the Will or any other public document.
Some jurisdictions allow the appointment of a digital executor – a person responsible for managing digital assets after death. This executor would manage tasks such as closing accounts or transferring digital files.
For high-value digital assets like cryptocurrency or intellectual property, placing them in a trust can ensure they are managed or transferred according to your wishes.
The laws surrounding digital assets are still evolving. Terms of service agreements often prevent family members from accessing or inheriting accounts, leading to potential loss of sentimental or valuable assets. Even if heirs know passwords, accessing accounts can violate privacy laws.
To avoid complications, it’s essential to account for digital assets, and how they are owned, in estate plans and designate proper authorization for access. Without these steps, heirs may face legal barriers or permanent loss of assets.
Digital assets are an essential part of modern estate planning. From photo apps, game libraries, document storage to cryptocurrencies, these assets need specific attention to ensure they are accessible and properly transferred after death. By creating a digital asset inventory, updating Wills, and designating a digital executor, individuals can protect their digital legacy and ensure assets are managed according to their wishes.
