In the past, New York State residents who wanted to create a comprehensive estate plan made sure it included tangible assets like real estate, collectibles, items of sentimental value, money, retirement assets and bank accounts. These were relatively easy to find, appraise, assess and distribute. Nowadays, however, people have a litany of assets that are simply kept online. Digital assets can be exceedingly valuable, but many might forget to account for them when crafting their estate plan. With the rise of cryptocurrency, this is a major problem that people should think about when writing or updating their estate plan. Failure to do so can sabotage all the time, care and hard work that was required to accrue the assets.
Basic considerations when dealing with digital assets in an estate plan
There are many areas in which digital planning will be necessary. That includes conventional bank accounts; cryptocurrency wallets; non-fungible tokens (NFTs); payment accounts for utilities and mortgages; health accounts; email accounts; social media; file sharing; and more. One recent example of the problems that can come up with a failure to adequately plan involved a woman whose husband died unexpectedly at the relatively young age of 52.
Ironically, they were involved in the financial industry and should have been cognizant of the problems people might be confronted with if their digital accounts are scattered and not part of the estate plan. It was difficult for the man’s widow to find all the properties that he owned and accounts he had – including retirement accounts and Bitcoin. Eventually, forensic experts discovered what was there, but the Bitcoin is still unavailable to her even three years after he died.
Because digital assets can be accessed at the click of a button once a password is known, protection is becoming increasingly difficult to crack. Not only is it likely to be encrypted, but passwords are growing increasingly complex and the number of hoops a person must jump through to get to the account are harder and harder to navigate. This can be addressed as part of an estate plan so the process is easier after a person’s death.
New investments and accounts should mean updating estate plans
More and more people are relating stories about having trouble sifting through a deceased loved one’s assets and coming to an accurate conclusion as to what was there because there was a failure to include digital assets in an estate plan. This is a challenge that is likely to get worse before it gets better because often, people who are suddenly far wealthier than they imagined are unsure of how to protect their digital assets. In addition, these people are frequently younger and do not take the matter of creating a will, a trust or other estate planning strategy with the urgency they should. Regardless of the financial situation, how many digital assets a person believes he or she has and what their goals are, estate planning is crucial. This extends to having a specifically tailored document that ensures loved ones are taken care of and the person’s digital assets do not simply disappear for lack of preparation.