Digital Asset Estate Planning for the Analog Client (article)

Digital Asset Estate Planning for the Analog Client (article)

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As Baby Boomers retire and approach their golden years, they should focus on effective estate planning. This includes planning for all assets, digital and analog. With the proliferation of social media, internet and smartphone access to traditional financial accounts, the landscape is changing quickly and dramatically. The continuing trend is for a greater percentage of your assets to have some digital component (electronic information or media, including rights to use the information or media).

Digital assets come in many different forms and generally include the following:

  • Digital assets that may have little value per se but may be the primary or sole means of accessing financial accounts (e.g., login for an online internet bank account, login for automatic bill pay authorization, donor advised fund account login, etc.);
  • Digital assets that have intrinsic financial value (e.g., bitcoin digital currency account, PayPal account, domain names, frequent flyer loyalty program benefits, commercial blogs, etc.);  and
  • Digital assets that have sentimental or personal value (e.g., digital photos stored on a photo sharing website like Picasa, digital music accessed through an online account like iTunes, digital video files, a YouTube account, personal blogs, social networking profiles like those of Facebook, Twitter or LinkedIn, family tree files or online genealogical accounts like Ancestry.com, email accounts, e-reader accounts like Kindle or Nook, digital medical records, etc.).

You should create a secure, comprehensive inventory of your digital assets, including information about access procedures, user names, passwords and PINs and keep it up to date. Passwords for home computers, tablets and smartphones should also be listed. Make sure to keep the list ("old school" paper list or digital thumb drive) in a controlled access place, such as a bank safe deposit box or other secure location. You should ensure that the appropriate family member or executor will have access. This will make it easier for your family or executor when you die or if you become incapacitated. If you have any digital records that you wish to remain confidential, you should have a separate list and access procedure for these records so that the records can only be accessed by those who you have designated.

You should review the user agreements for all of the online accounts to determine their policies for granting others access to your accounts. We recommend storing the most recent terms and conditions of each account with your secure inventory (make sure to replace with the most recent version each time you are requested to agree to updated terms). Certain agreements may prohibit the user from granting others access to the account. For accounts that have prohibitions on access transfer, consider whether you want the records preserved for posterity (family tree, digital photos, etc.); there may be some that are not critical to transfer (routine email messages, your world class collection of You Tube cat videos, etc.). Back up the records you wish to keep permanently on a portable hard drive at home or other secure location.

Any personal digital information stored on business computers, tablets or smartphones would be subject to the terms and conditions imposed by the employer. This should be described in your employee handbook. You probably were required to sign an IT department policy agreement when you were issued the digital device. Avoid storing personal digital information on business devises where practical. If you cannot avoid it, back up this data on a personal digital device.

For digital assets of significant value, you may want to consider transferring ownership to an LLC or trust if such a transfer is permissible under the terms and conditions of the account. Any such transfer should be discussed as part of your overall estate planning.

The law relating to the transfer of access of digital accounts is undergoing rapid change. Although there is an ongoing process to draft uniform laws on fiduciary access to digital information, it is an evolving area of law, and there can be conflicts between state law and Federal laws (e.g., the Computer Fraud and Abuse and Stored Communications Acts). 

In summary, even if you think:

  • tumblr is a drinking glass;
  • flickr is an old movie with Roddy McDowall;
  • digg is something you do in the garden;
  • twitxr is a candy bar; or
  • Picasa was a cubist painter,

you still need to carefully plan for your digital assets. Contact your local CBIZ MHM tax advisor to discussing accounting for digital assets as part of your overall estate plan.


Copyright © 2015, CBIZ, Inc. All rights reserved. Contents of this publication may not be reproduced without the express written consent of CBIZ. This publication is distributed with the understanding that CBIZ is not rendering legal, accounting or other professional advice. The reader is advised to contact a tax professional prior to taking any action based upon this information. CBIZ assumes no liability whatsoever in connection with the use of this information and assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.

CBIZ MHM is the brand name for CBIZ MHM, LLC, a national professional services company providing tax, financial advisory and consulting services to individuals, tax-exempt organizations and a wide range of publicly-traded and privately-held companies. CBIZ MHM, LLC is a fully owned subsidiary of CBIZ, Inc. (NYSE: CBZ).

Digital Asset Estate Planning for the Analog Client (article)As Baby Boomers retire and approach their golden years, they should focus on effective estate planning. This includes planning for all assets, digital and analog. ...2015-05-04T15:16:00-05:00

As Baby Boomers retire and approach their golden years, they should focus on effective estate planning. This includes planning for all assets, digital and analog.