The best things in life are intangible—experiences, memories, time with loved ones. Increasingly, our assets are intangible too, save for a few 1s and 0s. Cryptocurrencies, frequent-flyer miles, social media accounts, cloud storage—these all exist outside the physical world. This lack of tangibility can make estate planning tricky and create headaches for loved ones. Careful planning now, however, can help you get your digital ducks in a row. As Pablo Picasso said: “Only put off until tomorrow what you are willing to die having left undone.”
In this blog post, I assess what counts as a digital asset, why they are often overlooked in estate planning, the legal framework, practical steps individuals can take, and some security and privacy considerations.
- What counts as a digital asset? Digital assets generally include the following:
• Personal accounts: Email, social media, cloud storage, online banking.
• Financial/crypto assets: Cryptocurrency wallets, digital wallets like PayPal or Venmo, investment accounts.
• Business-related assets: Domain names, e-commerce store logins, intellectual property.
• Loyalty points: Airline miles, credit card points, store loyalty points.
Even non-monetary accounts can have important legal, sentimental, and sometimes monetary value. Email accounts may contain bills, contractual obligations, subscription services, and legal dispute-related information, as well as personal correspondence. Cloud storage accounts may contain photos and other digital memorabilia. Domain names and intellectual property—patents, trademarks, copyrights—can have substantial market value. Customer databases, digital storefronts, and business email accounts can be the lifeblood of small businesses.
- Why do digital assets often get overlooked? Digital assets get overlooked for a few key reasons:
• Intangibility: They aren’t part of the standard physical inventory like houses, cars, and personal items.
• Not Knowing Where to Look: Digital assets don’t show up in a safety deposit box or file cabinet; unlike bank or trust accounts, beneficiaries may be unaware of the digital assets’ existence or whether they can be inherited.
• Privacy Laws and Terms of Service: Beneficiaries are often blocked from accessing without express authorization.
• Lack of Access: Passwords change frequently; two-factor authentication adds another layer. - What is the legal framework? Texas, like 47 other states and D.C., has implemented the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA). A few things to note about Texas’s version of the RUFADAA, found in the Texas Estates Code Title 4 – Digital Assets Chapter 2001:
• Definition: “Digital asset” as “an electronic record in which an individual has a right or interest.” (See § 2001.002). This definition is intentionally broad and can include cryptocurrencies, frequent-flyer miles, social media accounts and other types of digital assets.
• What’s Not Covered: This definition of “digital asset” does not override any terms of service (See § 2001.052). If an airline’s terms of service stipulate that frequent-flyer miles are not personal property—as many do—they may not be inheritable. While airlines are known to grant exceptions, you should always review terms of service before assuming that something is inheritable.
• Custodian’s Role: Chapter 2001 spells out the role of the custodian. The custodian is the company or person who holds or stores a digital asset, such as Google for email or Facebook for social media. Google’s Inactive Account Manager is an example of how the custodian role works in practice. The custodian’s primary obligation is to follow the law’s hierarchy, first honoring any online tools a user created, then their will or power of attorney, and finally their terms-of-service agreement. By providing a clear process for fiduciaries to request access, custodians help in the recovery of digital assets.
• Appointing a Fiduciary: You can give fiduciaries access to their digital assets. The most common way to do this is through a will, trust or power of attorney document, much like one would appoint an executor, trustee, or POA designee. The key is to have explicit language governing digital assets, which will enable the fiduciary to seek access from the custodian.
• Unique Factors Relating to Cryptocurrencies: Cryptocurrencies are considered digital assets under §2001. While the law gives a custodian the legal right to access your cryptocurrency, it doesn’t solve the technical problem. Even a court order may be useless without access. Crypto is secured by a private key or a seed phrase, not a centralized company or custodian. To grant access, you must securely document your private keys and give them to the person you trust. This is the only way to ensure that the fiduciary has access and is able to distribute them according to your wishes. - What practical steps can you take to protect your digital assets?
• Inventory your digital assets: Make a full list of digital assets, including social media accounts, cloud accounts, email addresses, digital financial assets, intellectual property, and other intangibles. This list will likely need to be updated periodically.
• Decide who gets what and who can access what: Once decided, this should be reflected in the estate documents (wills, trusts, POA files).
• Document access information securely: Use password managers, encrypted files.
• Update your estate documents to include digital assets: Don’t rely on boilerplate or catch-all terms (e.g., a residue clause). This fails to apprise readers of your digital assets, where they’re located, and how you want them distributed. Use explicit language referencing digital assets and attach an inventory of those assets. A good practice is to name accounts in a separate memorandum referenced in the will or trust. This memorandum can be updated without making changes to the main document.
• Review regularly: Technology and accounts change quickly. Make a point of periodically updating the inventory of digital assets. - How can you keep your digital assets secure?
• Never include passwords in a will itself. A will is a public record and its contents can be disseminated widely. This point is particularly important for liquid assets like cryptocurrencies, which have been prone to theft. Only include general descriptions.
• Use password-sharing tools: Vaults and dead-man switch services work well here. Just make sure that trusted individuals, such as your estate’s executor or a trustee, have access with the current login credentials.
Conclusion
Getting a handle on your assets can bring peace of mind for family members. It can also ensure that your hard-earned digital assets are distributed according to your wishes and don’t lapse into the digital ether. The adoption of the RUFADAA has smoothed the path toward digital inheritance. You can plow ahead gracefully by updating your estate documents with an inventory of your digital assets. You wouldn’t want to die leaving it undone.
Disclaimer: This blog is for informational purposes only and does not constitute legal advice. Reading or interacting with this content does not create an attorney–client relationship. You should consult a qualified attorney for advice regarding your specific situation. Mehaffy, PLLC disclaims all liability for actions taken or not taken based on this blog.