Your estate plan likely includes a will, and perhaps a trust. But you may be missing protection for digital assets — your electronic files, records and accounts — if they aren't part of your estate planning picture.
"Digital assets are things like your online photo collection stored in the cloud and your online music and book collections," says Sean Foran, Managing Director, Business Transition Planning at CIBC.
The cloud refers to data or files that are stored on the internet, versus on your computer's hard drive. Google Drive™, OneDrive™ and Dropbox™ are all examples of cloud storage services you can use to hold photos, music, word processing documents and other files. The default setting on these accounts is private — meaning only you can see the stored files unless you decide to share them. If that access isn't shared with a trusted relative or friend, then all of that data, from childhood photos to important letters, may be lost.
By the end of 2020, the average Canadian will have accumulated $10,000 worth of digital assets, according to a Globe and Mail reportOpens a new window in your browser, climbing to $50,000 for some wealthier Canadians. Those figures include money stored in online payment accounts, loyalty program rewards, virtual currencies and online investment or bank accounts.
If you own digital assets, you need a strategy for passing them on to your loved ones. Here's why — and how — to create a digital estate plan.
Know what you own
Taking inventory of your digital assets is just as important as taking inventory of real estate or other assets you own as part of your estate plan.
"Your will need to provide an inventory of digital assets, a special trustee to deal with these assets and detailed instructions of how you want these assets to be distributed to beneficiaries," says Foran.
The most important asset to consider will likely be digital investment and bank accounts, if you routinely manage your financial life online. If a large chunk of your assets are tied up in online bank accounts or brokerage accounts, or cryptocurrency investments, your spouse or heirs may need access to pay bills, cover other expenses or close the accounts.
- The type, whether it's a financial account, social media account, multimedia account, or so on
- Where it lives online
- The user name and password required for access (use a password keeper to record sign-on information if you're concerned about security)
- Each account's estimated financial value, if any
- Whom you grant access to, and their rights or responsibilities
That last part is particularly important for avoiding potential conflicts among family members about who can unlock the accounts. It's a good idea to ask those you plan to list if they're comfortable with the responsibility. And consider who would make a good candidate for managing digital assets. Ideally, they should be internet-savvy, organized, and someone you can trust to follow your instructions.
Facebook, for example, allows you to name a legacy contact. That person can request the removal of your account after you pass away. But that person can't sign on to your account and post on your behalf. On Twitter, authorized individuals can request to have your account closed, although they can't access it directly.
LinkedIn can close and remove a deceased person's account, but only after someone verifies your identity and their relationship to you.
Special rules may also apply to digital media accounts. Amazon Kindle™ users, for instance, can share their accounts with authorized users, but the license for e-book files can't be transferred to someone else if you were the original purchaser. The iTunes terms of service also prohibit transfers. You may be able to give your executor access to close your account, but they wouldn't be able to copy any music files you bought.
If you're in doubt about how to create a digital estate plan or what assets to include, ask a financial advisor or estate planning attorney for advice. They can offer guidance on which digital assets belong in your estate plan, the best way to add them to your will, and what obstacles you may encounter.