This post provides an overview of digital assets by defining what a digital asset is and why digital asset planning is so important during the estate planning process.
Digital asset defined
A digital asset is an electronic record in which an individual has a right or an interest. Presently, the term digital asset, does not include the underlying asset or liability unless that asset or liability is itself an electronic record.
Digital assets are not your computer, smart phone, or iPad. Digital assets are all of the pieces of information stored on these devices, such as, digitally stored content, online accounts, files stored on digital devices, and accounts maintained and managed online. Digital assets can further be classified among the following categories:
- Your data, including any writing, visual, video, or recording created by you, in electronic form and stored on your digital device, portable device, in a cloud, or on another software sharing platform.
- Social media data including texts, photos, recordings, videos stored on Facebook, Twitter, LinkedIn, Snapchat, Shutterfly, and Instagram accounts, among others.
- Financial assets including financial information stored on digital devices or an account maintained and managed solely online such as, cryptocurrencies, like Bitcoin, and PayPal, Amazon accounts, eBay accounts, and Venmo, or any other type of account that’s associated with a monetary value.
- Business accounts, including customer information, databases, trademarks, trade secrets, copyrights, websites, domain names, employee information, online stores, online marketing, emails, calendars, any other item connected to the Internet or some other software database.
- Miscellaneous digital assets can include online gaming accounts, online gambling accounts, iTunes, Spotify, Pandora, Kindle, store loyalty programs, and even airline miles.
Why is it so important to plan for digital assets either personally or for your business?
It’s extremely important to plan for the disposition of digital assets in accordance with your wishes. When you opened your Facebook account, did you want it to live on in perpetuity? As out lives continue to become linked to our online presence, it is important to ensure wishes are followed with the management, transfer, and disposal of digital assets, just like any other physical item in your life.
Digital assets need to be properly identified and inventoried to avoid an unnecessary loss at the time of your death. If digital assets are not identified, it could almost be impossible to find them. Take something like pictures. Many people gift their family photos in a will. If all of your photos are digital and you store some of them on your phone, computer, Dropbox, and Facebook, how would your heirs know that they can access them online if they were not aware you owned a Dropbox account or your computer is not preserved until the photos files can be transferred. These precious memories can be forever lost forever, if the storage sources are unknown and not disclosed to your heirs. If the digital asset with monetary value is a PayPal account, your heirs will suffer an economic loss if you die with a balance. Planning for the disposition of digital assets will avoid all of those less than ideal scenarios.