Five Steps to Plan for Digital Assets, such as Online Passwords

Q. My father, Daniel, is a techie and an environmentalist. In other words, any type of banking, including bill payments, he does online (no paper statements for him!) He also invests online and is an avid user of Facebook, where he records just about everything he and my mother, his children, and grandchildren do. According to dad, “(i)t never happened if I didn’t put it on Facebook!” He also has many automatic deliveries set up, everything from dog food to laundry detergent.

As dad is getting older, he has become more and more forgetful. His diagnosis is currently mild cognitive impairment, but it could very likely become dementia as it progresses. I keep telling my mom that if they don’t plan for his digital assets, she will be broke and have a lifetime supply of dog food and laundry detergent delivered to her door. How do you suggest she get started?

A. Digital assets are comprised of the valuable information typically stored on your PC and phone. This often includes your e-mail accounts, bank statements, websites, software programs, cryptocurrency, credit card payments, reward points, blog posts, Facebook and Twitter and other social media accounts, online photos, and more. Currently, according to the internet security company, McAfee, the average person worldwide has over $35,000 of digital assets and Americans have a value of over $55,000. To protect these valuable assets and to avoid identity theft or fraud, you want to make sure they are planned for accordingly.

As you can imagine, there’s risk involved in letting your digital assets linger once you’re gone. For instance, if someone could access a username and password for your email account they can use the information to hack into other accounts, such as a bank account or credit card. In doing so, they can rack up charges on a credit card that the surviving spouse doesn’t even know about.

Challenges in Planning for Digital Assets

When it comes to planning for digital assets, it can create a few unique challenges traditional physical assets do not have. For example, digital assets can be difficult to find online, as there is an endless amount of information available. Accessing them can also be challenging because most assets stored online are protected by a username and password.

Lastly, ownership rights are less clearly defined than traditional assets. Most ownership rights in digital assets are set with each online service provider when the individual scrolls all the way to the bottom of the page and hits “I Agree,” technically known as the Terms of Service Agreement (TOSA). Unfortunately, no one typically reads these agreements.

TOSAs and privacy policies govern access to social media and email accounts, and most expire when a user dies and are not transferable. Surviving family members may not be able to access these accounts, and then what? This is why planning for them is a MUST!

How to Plan for Digital Assets

Here are five steps you can take to plan for digital assets:

1. Create an inventory of online accounts and passwords: If you were to suddenly pass away, would your spouse know how to access accounts set up solely in your name? Would they even know what accounts you have? Chances are, they probably wouldn’t, unless you keep track of this information somewhere. This is why you should create an inventory of important online accounts and usernames and passwords to ensure their digital content is accessible should the original owner no longer be able to manage the content. An easy way is to store all of your digital user names and passwords in a secure password safe, such as keepass, lastpass, or Dashlane. Most password managers will store all your usernames and passwords for multiple accounts while letting you set up a “master password” that lets you log into every digital asset you own. Some password managers, such as Dashlane, will also alert you when one of your accounts may be susceptible to theft, such as after a major data breach.

2. Set up an external hard drive or store your information on a thumb drive: If you don’t like the idea of storing your usernames and passwords with a third-party company, you can consider storing that kind of information in an external hard drive or a thumb drive that is safely stored. Of course the risk with this tactic is that a small town Drive is very easy to lose, and it can become corrupted.

3. Keep master password safe: Give your executor/trustee the password and location of the password safe or the means to locate your master password, such as by writing down the master password and putting it in an envelope in your safe deposit box.

4. Document your digital legacy wishes and coordinate with an experienced estate planning attorney, such as the attorneys at the Farr Law Firm, to ensure that your wishes are noted in your estate planning documents and the passwords to access them are accessible. Also, in addition to documenting your wishes, you can supplement the information with a letter of instruction that explains how your heirs can access all your digital accounts. This letter alone won’t grant them legal access, but it can help them get started with some basic information on the accounts you actually own and how to log in to them.

5. Transfer control of digital assets: In your estate planning documents, you should specifically give control over these digital assets to an executor or trustee, who could then take over upon your death. If you don’t plan in advance for your digital assets, state law decides what happens, which may or may not be what you want.

State Laws Governing Digital Assets

Currently, at least 46 states have enacted laws addressing access to email, social media accounts, blogging, or other website accounts, and certain electronically stored information, upon a person’s incapacity or death.

Please note: Even with these laws in place, your best bet is to plan properly for your digital assets, to ensure that the right person has access to them, and is equipped with all the information that they need to access them.

These are the laws regarding access to digital assets in Virginia, Maryland, and DC:

Virginia:
For documents created or for fiduciaries appointed on or after July 1, 2017, Virginia has updated its legal position on digital assets. While a power of attorney will often grant similar access, Virginia Code sections §§ 64.2-116 through 64.2-132 outline when a fiduciary will be granted access and control to a principal’s digital assets.

Maryland:
The Maryland Fiduciary Access to Digital Assets Act took effect on October 1, 2016. With the passage of the MFADAA, an individual can grant or prohibit a fiduciary, such as an attorney-in-fact, trustee, personal representative, or guardian the ability to access his or her digital assets.

DC:
In DC, Bill B22-0199 introduced procedures for digital assets of a deceased user. It would require that the “legal duties imposed on a fiduciary charged with managing tangible property apply to the management of digital assets.” This Bill has not yet become a law.

Protect your Digital and Traditional Assets

To reiterate, in order to protect digital assets, we recommend specifying them in your estate planning documents and specifically giving control over these digital assets to your executor or trustee, who could then take over upon your death. We have been incorporating this important language in all of our estate planning and incapacity planning documents for many years.

If you haven’t already, it’s important to take the time to start planning for your digital assets AND your traditional assets ASAP. Call us any time to make an appointment for an initial no-cost consultation:

Estate Planning Fairfax: 703-691-1888
Estate Planning Fredericksburg: 540-479-1435
Estate Planning Rockville: 301- 519-804
Estate Planning DC: 202-587-2797

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