Are Digital Assets Included in Estate Planning?

When Texas’ probate laws were originally written, no one could’ve envisioned how important digital assets would become. As more and more people invest in cryptocurrency and other digital assets, these are becoming increasingly more important in estate planning, and laws are adapting quickly. If you have digital assets or are planning to add them to your portfolio, speak with a Houston estate planning attorney today to find out the best way to include them in your estate and protect these and all your assets for your heirs.

Are Digital Assets Included in Estate Planning?

Absolutely yes. Your digital assets have great value and most certainly be included in your estate planning. And here’s the first tip:

You NEED a Houston Estate Planning Attorney

The laws surrounding digital assets change constantly. It’s critical that you develop your estate plan with the help of an experienced estate planning lawyer. Not only do you need a lawyer who already has experience, but you need a lawyer who is committed to this area of law and who keeps up with all the changes in the laws and will let you know whenever your estate planning may need to be adjusted to accommodate a change.

Without professional help, it’s highly likely that you’ll make an error that could compromise the value of your estate and cause your beneficiaries to lose out unnecessarily. At best, you could accidentally create a situation where they are mired in probate proceedings for much longer than they need to be.

Make Sure You Include Everything

When you think of digital assets that have value, you might first think of Bitcoin and other cryptocurrencies. And while these are important, you also need to consider other things that belong to you and have value that are digital. For example, any domain names for websites that you own can be sold if your family will no longer use the website after your death. The same is true of blog content, particularly if your content brings in income. That content belongs to you and should be something you can pass on to your beneficiaries.

Don’t forget digital photos and videos, the rights to any literary, theatrical, or musical compositions, and even your airline miles and hotel points. Then there are nonfungible tokens and any online video channels you might own where the content is being monetized. Finally, don’t forget any digital accounts you might have with an online betting service. Talk with your lawyer to make sure that all your digital assets are being properly included in your estate.

Make Sure Your Family Can Access Everything

One of the greatest challenges with digital assets is the huge variety of forms they take. They can be stored all over the place, from your own computer to the cloud and even in other countries. They are all digitally encoded in different ways, and each has a different form. It can be extremely challenging for anyone other than the original owner of the assets to get access to these, so you need to help your family in this regard.

Once you have spoken to your lawyer about what digital assets you have and have made sure all of them are included, you’ll then want to make sure that access passes smoothly to your family by carefully planning in the following areas:

Around Data Privacy Laws

With most of these assets, it’s illegal for the entity that manages or provides the account to give access to anyone other than the original owner without express legally valid permission from the owner. Once you pass away, many sites will automatically lock up all your content, and your heirs are going to need specific permission to get at it.

If they don’t have this, they’re likely going to have to go to court to fight over it. This can cost them an enormous amount of money, and in the end they may lose. Even something as simple as all the photos and videos that you have taken could be lost to them forever.

Getting Your Passwords Out

If your family doesn’t know your passwords or doesn’t have the proper digital keys to access your assets, they won’t be able to get at them. Some passwords are fairly easy to bypass with professional help, but some are almost impossible, particularly with cryptocurrency and NFTs.

If you have a digital wallet that’s not managed custodially, your family may never be able to gain access unless you ensure they have the password and the private key passed on to them after your death. Remember that some of your accounts may require two-step verification. If that’s the case, then your family likely won’t be able to get in with the password alone.

Dealing With Criminal Laws

The laws on this change constantly, which is frustrating and can create problems for your family. Depending on the asset you’re talking about, it may be illegal for your family to even attempt to access it unless everything is carefully set up in your estate planning documents to give them legal authority to do so.

And what’s required to give them that authority can change with time. Make sure that your estate planning attorney has experience dealing with digital assets so they will be able to keep your estate up-to-date in this area.

What to Do

1. List Out Everything With Your Lawyer

Sit down with your lawyer and inventory all your digital assets. You must then make sure your family knows what you have and where they can find it. This doesn’t mean you have to tell your family the worth of all the assets; just let them know that there are such assets and what steps they need to take to access them.

If for some reason you think it’s unwise to allow your family to even know that you have certain assets at this time, that’s fine. Just make sure that you specify to your estate planning attorney how to get them what they’ll need after your death.

2. Double-Check All Licenses and Terms of Agreement

Some digital assets are owned outright, but some are essentially just “leased” and can’t actually pass to your beneficiaries. It’s important that you carefully go over all licenses that you have for any digital asset or any terms of agreement that you have signed so you understand what exactly you own, what can pass on, and whether you might need to adjust your holdings in some way.

3. Back Up Everything

Even if you have things stored in the cloud, don’t assume that’s enough. It’s a good idea to back everything up, and in more than one place. Talk to your lawyer about the best ways to back everything up and how to safely ensure that none of your assets are lost.

4. Plan for Proper Distribution

Finally, you and your lawyer will figure out how you want your assets to be distributed after your death and make sure that everything is set up to allow this to happen smoothly. This might include setting up powers of attorney or putting certain family members on as co-owners of an asset. The right strategy for you will depend on your situation.

For help with your digital assets and estate planning, talk to us at Hensley & Krueger, PLLC in Houston today.