The role of digital assets in your estate plan: What high-net-worth investors need to know

In today’s increasingly digital world, many high-net-worth individuals have amassed valuable assets that exist entirely in the digital realm—social media accounts, cryptocurrencies, digital media collections, and perhaps even intellectual property and domain names. Unfortunately, these assets are often overlooked in traditional estate plans, leading to potential confusion and complications when it’s time to pass on wealth to heirs.

As digital assets grow in value and importance, it’s essential to incorporate them into your estate planning strategy to ensure they’re properly managed, protected, and transferred to your loved ones.

1. Inventory and Value Your Digital Assets

The first step in managing your digital assets within your estate plan is to create a comprehensive inventory of what you own. Digital assets can take many forms, and it’s easy for even the most well-organized individuals to forget a valuable online asset. The process of inventorying your digital assets should include:

• Social media and online accounts: Include personal or business-related accounts on platforms such as Facebook, Instagram, LinkedIn, and X. Each of these may contain valuable intellectual property (posts, followers, business accounts) or important personal records (photos, conversations).
• Cryptocurrency holdings: Make a list of all digital currencies you own (Bitcoin, Ethereum, etc.), including the specific wallets where they are stored and any private keys or access credentials required for access.
• Domain names and websites: If you own domain names or websites, catalog these along with account access information and renewal dates.
• Intellectual property: Include any patents, trademarks, copyrights, or other digital intellectual property. This could also include creative works like e-books, music, or digital art.

Once you’ve compiled the inventory, you should also estimate the value of these assets. Valuing digital assets can be tricky since there are few standard guidelines or market comparisons for many digital holdings (especially in the case of cryptocurrencies or intellectual property). If you’re unsure of the value, working with a professional appraiser who specializes in digital assets is highly recommended.

2. Update Digital Accounts and Passwords in Estate Documents

Many traditional estate plans neglect to include digital accounts—which can complicate matters after death. Your will or trust should include clear, written instructions for accessing your digital accounts, as well as passwords and login credentials.

However, you should exercise caution when doing so:

• Use a secure password manager: Rather than writing down passwords on paper or storing them in digital files that could be hacked, store your passwords in a secure password manager that can be shared with your executor or trustee upon your death. Many password managers allow you to designate a beneficiary who can access your account in case of emergency.
• Specify digital account instructions: In your will or trust, you should specify how to manage or liquidate certain digital assets (e.g., if you want your heirs to inherit your cryptocurrency or close your social media accounts after you pass). Include the names of key digital accounts, instructions for their management, and specific desires regarding which assets should be transferred or terminated.

3. Strategies for Passing on Digital Assets

Digital assets like cryptocurrency present unique challenges when it comes to estate planning, largely due to their decentralized nature and reliance on private keys for access. If not planned for properly, the loss of a private key can render cryptocurrency holdings completely inaccessible, which may result in the loss of substantial value.

Here’s how to plan for these types of assets:

• Create a secure plan for private key access: Ensure your heirs can access your cryptocurrency by leaving a detailed, secure private key management plan. The private keys (or backup seed phrases) that allow access to your wallets should be stored securely and be accessible to a trusted individual upon your death. Some high-net-worth individuals opt for cold storage solutions—secure offline devices that hold private keys—making them harder to steal but requiring careful management.
• Designate a digital executor: In the case of cryptocurrency and other digital assets, you may want to specifically designate a ‘digital executor’ who understands the intricacies of these assets and is capable of managing them on your behalf. This person should be familiar with the technology and have the necessary information to access, manage, or transfer your digital holdings in accordance with your wishes.

4. Legal Considerations for Intellectual Property and Online Business Assets

Many high-net-worth individuals have intellectual property in digital form—whether that be trademarks, patents, or even the value of an online business. These assets require careful legal consideration in your estate plan to ensure they’re transferred in a way that aligns with your intentions:

• Transfer of ownership: If you own intellectual property or digital business assets, it’s important to ensure that the transfer of ownership is legally documented. This might include formalizing copyright assignments or licensing agreements that clearly outline how your intellectual property should be handled upon your death.
• Business continuity: If you own an online business (e-commerce, digital services, etc.), ensure that your estate plan includes clear instructions on how the business should be managed after your passing. This may involve appointing a successor, transferring ownership to heirs, or liquidating the business.

5. Ensuring Smooth Access to Accounts for Loved Ones

Another essential component of your estate plan is ensuring that your loved ones can easily access your personal and business-related online accounts. Without proper planning, they may be locked out of important accounts, leading to frustration and potential delays in handling your estate.

• Designate a trusted contact for social media and email accounts: Ensure that your executor or a trusted family member is listed as the contact for key accounts like email, social media, and cloud storage services. These accounts may hold valuable personal information or serve as gateways to other assets. Consider setting up legacy contact options available on many platforms, such as Facebook, where you can designate someone to manage your account in the event of your death.
• Establish a comprehensive “digital estate” plan: Beyond just listing your passwords, work with an estate planner who understands the digital landscape and can help you create a digital estate plan that ensures a smooth handover of your online assets and data.

Protecting and Passing on Your Digital Legacy

Incorporating digital assets into your estate plan is essential for high-net-worth individuals whose portfolios include valuable online and digital holdings. By taking proactive steps to plan for your digital legacy, you’ll ensure that your assets are protected, valued, and passed on to your loved ones in a way that honors your intentions and preserves your wealth. Just be sure to work with a qualified estate planning attorney who can help you include these critical elements into your will or trust.

And if you’re needing expert guidance and assistance with your overall estate plan, just reach out. Our in-house specialists can create a personalized strategy that’s fully integrated with your financial plan, so your entire legacy is protected for generations to come.