People often associate the entire realm of digital assets with Bitcoin or cryptocurrencies, but digital assets are much more than that. In fact, digital assets comprise all electronically stored pieces of information used and owned, ranging from emails, text messages, social media posts, self-recorded videos, photos, blogs, websites, downloaded videos, and songs, to art, NFTs, biometric data, financial and medical records, and all of the accounts that hold this information.
According to a new Bryn Mawr Trust 2024 Digital Asset Survey, the average American has hundreds of accounts and values their digital assets at $191,516. However, despite this high reported value of digital assets, only 29% of respondents stated they are very or somewhat knowledgeable about digital assets.
As Bitcoin prices surge and the number of online accounts for each American continues to grow, digital asset planning is becoming increasingly important. However, as the Bryn Mawr Trust survey illuminated, many Americans with a significant digital footprint are generally unaware of the complex nature of digital asset planning. Roughly two-thirds of the survey respondents said they had never heard of the term “digital estate planning,” which is concerning as the rules around ownership, control, and the ability to leave digital assets to one’s heirs or loved ones are more complicated than traditional assets.
Diving into the estate planning topic further, only 32% of the respondents stated they have an estate plan or will in place. However, for high-net-worth respondents, that number jumped to 64%. Of those with an estate plan in place, only 67% said they had a will, 30% said they had a trust, and only 43% said they had a power of attorney in place. Furthermore, roughly 44% of high-net-worth respondents with an estate plan said their estate plan covers their digital assets. Ultimately, this means that less than 15% of respondents had an estate plan covering digital assets, meaning most estate plans are not up-to-date, according to the data.
About 78% of the respondents indicated that they believed it was essential to protect their digital assets. This percentage was higher than those respondents who stated it was important to have an up-to-date estate plan, which was 61%, or those who felt it was important to have the appropriate amount of life insurance.
4 Steps To Take For Digital Asset Planning
If you find yourself in the same boat as many other Americans regarding digital assets, here are some steps to help you start putting a plan in place.
1. Start with awareness and understanding of your digital assets.
As mentioned earlier, digital assets encompass a broad category. Some digital assets, like social media posts, might not be valuable to you. However, others might represent significant value, such as family photos stored online, financial statements, digital currencies, company websites, or emails.
Ask yourself: If you were to lose access to these assets or could not pass them along to your heirs, would it cause financial hardship or emotional distress? Start by making a list of all the digital accounts and assets you own. Prioritize them based on value and risk. Which ones are most important? This exercise will help you gain clarity about their relative importance.
2. Determine what should happen to these accounts in certain scenarios.
For example, if you become incapacitated, do you want your spouse or someone with power of attorney to manage these accounts? If so, you need to update your power of attorney documents to explicitly include access to digital accounts. In most states, a general “catch-all” provision granting your fiduciary or power of attorney access to all accounts will not be sufficient. Instead, the term “digital assets” must be specifically included, under the Revised Uniform Access to Digital Assets Act (RUFADAA), which most states have adopted.
The same principle applies when transferring assets upon death. Your will and trust documents must specify access to digital assets so that your trustee or executor can manage or distribute these accounts.
3. Understand the rights you have to these accounts.
Many are surprised that most digital accounts are not transferrable to heirs or loved ones. These accounts are often governed by Terms of Service Agreements (TOSAs) that you accept when setting up the account. Typically, TOSAs state that accounts cannot be transferred to others—even upon death—and that sharing passwords is prohibited.
Generally, online accounts provide you with a lifetime lease to use the account, but no rights to transfer ownership. Once you pass away, your rights to the account end. However, you can have rights to underlying assets stored within the account. Therefore, it is critical to ensure your loved ones or fiduciaries have the legal authority to access these accounts to retrieve assets or close them out.
4. Put a plan in place.
Consider speaking to an attorney who specializes in digital asset planning and a financial advisor who can address any tax or financial implications related to these assets. Digital asset planning and estate planning are still relatively new and evolving concepts. However, the key is to start with a clear understanding of what you own and to put a plan in place that aligns with your goals. Make sure you use the appropriate language and legal documents to protect these assets for your loved ones.
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