Digital assets are a popular topic and an ever-important aspect of estate planning with today’s digital age. Even simple accounts such as Facebook and Twitter have tremendous transferable value to beneficiaries. However, beneficiaries and clients alike believe that merely sharing a password or access gives the beneficiaries the rights to the account. Ironically, this may constitute a violation of the law if this is how a digital asset is handled in an estate. It is important to understand the transferability, the value and how to provide instructions for transfer.
When planning for digital assets in an estate plan, it is important to help your clients identify their digital assets. Certainly, the best place to start is with an inventory. Try asking them if they have some of the popular digital assets and explaining the intrinsic value to the beneficiaries. Once they have a comprehension of the value, they are more likely to identify digital assets they own. While they may not initially see value in digital asset planning, photos, videos and stories go a long way in legacy planning. Helping clients realize the value of legacy planning can assist with digital asset planning.
After taking inventory, you will have to familiarize yourself with some of the policies of a particular digital asset. Digital assets can be transferred in similar ways to normal assets. Some will allow the account holder to appoint a legacy person and some need specific language in wills or trusts to transfer the digital asset. The only caveat is that some assets (unlike liquid and tangible assets) are not considered property and simply cannot be transferred. Most of this occurs in loyalty reward programs.
One of the most popular digital assets is Facebook. The reason for its popularity is because of the memories it holds. A user can appoint a legacy sponsor to handle the account once someone has passed. The user can also choose to delete the account. The challenge here is similar to that of a beneficiary designated account, someone must be chosen prior to death. Once someone dies and Facebook finds out they memorialize the account. This basically freezes the account and provides no access. Just like setting beneficiary designations (and revisiting them), digital assets that have legacy access should have those designations set and revisited periodically.
Loyalty reward programs are equally as popular. While most are not that friendly within an estate, some have clauses that can be accounted for in legal documents. Let’s take American Airlines. American Airlines has some language in its AAdvantage program terms and conditions which does not specifically allow transfer after death, but the airline gives itself a “loophole” to transfer the miles after approved legal documents have been submitted. Accounting for specific language in estate documents can be vital in transferring a specific digital asset with significant value. This is an excellent example accounting for digital assets within a will or trust document.
Digital assets can be tricky when accounting for them in an estate plan. The key is to take proper inventory, gather some familiarity or help and account for transfer. The great news is, this is an excellent conversation starter, a differentiator in practice and a way to provide great value to your clients. In the digital age we are in, digital assets are becoming more important in estate planning. Take the time to learn how to account for them in estate plans, it will be well worth it.
Scott Huff is the CEO of Yourefolio.