Does Your Estate Plan Include Your Digital Assets?

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If you use a computer, mobile device like a cell phone, or any other electronic device, you probably have digital assets. Like any other property you own, those assets need to be addressed in your estate plan. If they are not, significant problems can arise for your personal representative, other fiduciaries, and your intended beneficiaries. The estate planning lawyers at Sloan Law Firm help clients integrate digital assets into an existing estate plan, as well as create a new estate plan that includes digital assets.

What Are Digital Assets?

Your digital assets include all types of intangible electronic records that you own or have a right to use. Some digital assets have primarily personal or sentimental value, such as photos, videos, and non-business email accounts. Other digital assets have monetary value, such as financial accounts and business accounts (like a commercial website). Cryptocurrencies and NFTs are examples of specialized digital assets that can have significant value.

The electronic nature of digital assets creates specific issues that must be addressed in your estate plan. Your personal representative, agent under a durable power of attorney, trustee, or other fiduciary, must know of the existence of the digital assets, have legal authority to access them, and have the necessary information (such as passwords and Personal Identification Numbers or PINs) to access them. Digital assets (including valuable cryptocurrencies and NFTs) can be lost forever if you do not provide the essential information in your estate plan.

Kansas Law Relating to Digital Assets

Kansas law includes a specific statute that addresses digital assets, named the Revised Uniform Fiduciary Access to Digital Assets Act. As the name implies, many states have adopted this law or some version of it.

The Act defines a digital asset as “an electronic record in which an individual has a right or interest.” The provision goes on to say that the term digital asset “does not include an underlying asset or liability unless the asset or liability is itself an electronic record.” The law generally applies to Kansas fiduciaries such as the personal representative of an estate, a trustee, an agent acting under a power of attorney, and a guardian or conservator.

The statute provides a procedure for a custodian to disclose digital assets to a fiduciary. However, under those provisions, a fiduciary may not gain full access to an incapacitated or deceased person’s digital assets. In addition, using the statutory process to obtain the assets can result in time delays, unnecessary financial costs, and court proceedings. For those reasons, it is unwise to rely on the law to provide fiduciary access to digital assets. Including the assets in your estate plan is the only way to ensure that your digital assets are protected and that they ultimately reach your intended beneficiaries if you become incapacitated or pass away.

The provisions of the Act also recognize the right of a digital asset owner to use a tool to direct disclosure of digital assets through the custodian of the electronic record, if the custodian provides that ability. A custodian is a person or company that maintains or stores digital assets, such as a website or other internet platform.

If a digital asset owner utilizes a custodian’s online tool, the directions regarding disclosure in the online tool will override any conflicting direction by the user in a will, trust, power of attorney, or other document. Using this piecemeal approach to authorizing disclosure is not an effective way to address your digital assets and can create significant practical and legal issues. The only effective way to protect your digital assets is to get help from your attorney to ensure that all your electronic property is included in your estate plan.

How to Protect Your Digital Assets

The first step toward protecting your digital assets involves creating a detailed inventory of those assets. Since the nature of the inventory depends to some extent on the character of your digital assets, your estate planning attorney helps you establish the best approach for creating and storing the inventory.

The inventory should identify the asset and its location, as well as provide necessary information to access the asset, such as passwords and PINs. You should update the inventory regularly when there is any change or addition to your digital assets. The information in the inventory provides your fiduciaries with the necessary information to locate and access the assets. The inventory should be stored on a separate hard drive from your device, and a copy of the inventory should be stored with your estate plan.

It is important to note that digital assets such as cryptocurrencies and NFTs can be stored on an online exchange, like Coinbase, where they are tradeable like a stock. But cryptocurrencies are sometimes stored in digital wallets which are very difficult to access by third parties through traditional means. Digital wallets can be hardware based (also known as “cold storage”), usually on a thumb drive that you keep in a safe place; or based online, which is usually a web-based service protected by two-step encryption. Unlike a normal wallet that holds cash, digital wallets technically do not store your crypto. Instead, digital wallets store the private key to any cryptocurrency you own, while the actual cryptocurrency lives on the blockchain. A private key is a complex series of numbers and letters that is designed to be almost impossible to guess. This private key is what proves ownership of your cryptocurrencies. Anyone with your private key can claim ownership of your cryptocurrency. That’s why it is important for your estate plan to include very detailed information about any cryptocurrencies you own, including directions on how these digital assets can be accessed by your heirs.

Your estate plan must also provide legal authority for your fiduciaries to access your digital assets, as well as protect and manage or distribute the assets. Without this authority, your fiduciaries may not be legally able to access the assets for the purpose of administering your estate or trust. Your estate planning lawyer assists with including the necessary authority in the proper legal manner as part of your estate plan.

Finally, you also need to identify beneficiaries for your digital assets in your estate plan. Whether the assets have sentimental or monetary value, you should designate who should ultimately receive or have access to the assets. Otherwise, the loved ones you want to have those assets may never receive them.

Talk with a Kansas Estate Planning Lawyer about Your Digital Assets

Our experienced estate planning attorneys at Sloan Law Firm help clients create a new estate plan or revise an existing estate plan to include your digital assets. We handle the full range of matters relating to estate planning, including preparation of wills, trusts, durable powers of attorney, and other important estate plan documents. We assist clients throughout Kansas and invite you to contact us by calling (785) 357-6311 or using our online contact form.

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