In today’s digital world, much of our personal and financial lives exist online. From banking and social media to photo storage and email, our digital assets hold both practical and sentimental value. Yet, without proper planning, these assets can become inaccessible during times of incapacity or after death, highlighting the critical need for a digital estate plan.
Don’t Let Two-Factor Authentication Destroy Your Estate Plan
The digitization of assets and personal information is creating a significant yet often unaddressed need in estate planning: a comprehensive digital estate plan. Imagine you become incapacitated, would your Power of Attorney (Agent) have the ability to successfully manage your finances? Although they may have the legal authority, without a digital estate plan, they may not have the ability to do so in an efficient and timely manner. A digital estate plan provides instructions and the ability to manage your digital assets, as well as your digital legacy.
Digital Assets
Digital assets are broadly defined as any digital file or record in which an individual has a right or interest, which may include:
- Online accounts (Bank accounts, email accounts, social media accounts)
- Digital Media (Photos, videos, cloud-based storage, operating systems)
- Cryptocurrencies and digital wallets
- Digital intellectual property (Websites, blogs, digital artwork)
The first step in creating a digital estate plan is making a list of your digital assets. Key pieces of information that should be included:
- The name of the Website or application
- Your username
- The email address linked to the account
- Your Password
This information should be stored in a secure location such as a safe, a safety deposit box, or a secure online storage vault. Clients of Pacific Wealth Management can utilize their personal online vault, a feature offered through the Compass Center. Below is a checklist that may be helpful to get started on your list of accounts:
Legal Access to Digital Assets
After compiling your digital asset inventory, the next step is to formalize consent for their management within your legal documents. This can be done by updating your estate planning documents to specifically address the accounts you have listed. A traditional Power of Attorney grants your appointed agent the legal authority to manage your financial affairs, but its authority may not automatically extend to your digital assets. Many online service providers' terms of service and privacy policies can create significant hurdles for agents attempting to access digital accounts, even with legal documentation. This is where specific legal frameworks, such as the Revised Fiduciary Access to Digital Assets Act (FADAA 2.0), come into play. This legislation, adopted in various states (including California), aims to provide fiduciaries with the legal right to access and manage digital assets, but it often requires specific consent and clear direction within your estate planning documents.
Another strategy is to directly establish instructions or agreements with the online platforms themselves. You can accomplish this by assigning a Legacy Contact to your account. I believe this is particularly crucial for the account linked to your smartphone. Given that most of our clients use iPhones or Android devices, and both operating systems provide a Legacy Contact or equivalent option, leveraging this feature is a fundamental step in creating a basic digital estate plan
Apple’s Legacy Contact and Google’s Inactive Account Manager allow you to designate individuals who can access your account data, including photos, notes, email, and other sensitive information stored within the cloud. By proactively setting up a Legacy Contact or inactive account manager, you provide a direct and authorized pathway for your chosen individual to manage your digital assets on your phone's ecosystem and avoid potential obstacles related to recovering your accounts.
Digital Legacy
Our digital legacy, the collection of accounts and content we accumulate online, is another significant area requiring consideration. Your estate plan should provide instructions on whether these accounts should be preserved as digital memorials or deleted, and who should be responsible for these actions.
Having a plan for your online profiles and communicating your wishes to your legacy contacts can provide significant clarity during a difficult time. Consider your Facebook or Instagram profile—would you want your photos and old posts to remain accessible to your friends and family after you're gone? Or would a memorialized account or deletion be more appropriate?
Even after passing, personal privacy matters. Clearly defining your preferences for those managing your digital estate ensures your wishes are honored.
In Conclusion
Our expanding digital footprint underscores the growing importance of a digital estate plan. Failing to address this area of estate planning can place an unnecessary burden on our loved ones in the aftermath of our passing. We encourage you to plan accordingly and empower your designated representative to manage your digital assets and digital legacy. Please reach out to us here at Pacific Wealth Management if you have any questions.