King & Wood, P.A.

Estate Planning to Serve Today’s More Complicated Life

“Traditional estate planning often assumes a conventional family structure, but modern relationships demand more nuanced approaches.”

The plan of simply leaving everything to a surviving spouse, relying on the unlimited marital deduction to protect against any estate taxes at the first death, works for some families. However, when this is the only strategy, heirs receive an unwelcome tax surprise when the second spouse dies. A recent article in The National Law Review, “Estate Planning Mistakes—2025 Annual Refresher—Part 2,” reviews this and other estate planning matters.

The marital deduction strategy could be vulnerable to different jurisdictional approaches if one of the spouses is not a U.S. citizen or the estate includes overseas property. Foreign property regulations or citizen-based taxation systems could unravel a straightforward marital deduction strategy. A Qualified Domestic Trust (QDOT) might be considered for international estates.

To work properly, the QDOT must meet specific requirements. A U.S. trustee must immediately pay any estate tax if the principal is distributed, and special withholding is required for distributions to the non-citizen spouse. If the estate is valued at over $2 million, a bond or letter of credit for 64% of the initial QDOT value must be furnished by a bond or letter of credit, or a U.S. bank must be the trustee.

For domestic estate planning, using a credit shelter trust, sometimes referred to as a credit equivalent bypass trust, could solve taxes at the second spouse's death. The trust takes assets out of the taxable estate, and while funding is limited to the estate tax credit amount, this type of trust could create significant long-term tax savings.

Asset allocation takes more than a simple division of assets. One heir may have a substance abuse problem, while another enjoys a highly lucrative career. Different maturity levels and financial responsibility must be considered when dividing assets to achieve the testator’s goals of caring for the family. A trust may be needed to provide limited support to the individual who can’t manage money, while another may be in a high tax bracket and prefer assets to be passed on to grandchildren.

Today’s family could be traditional, blended, include non-traditional partnerships or children conceived through assisted reproduction or surrogacy. Without addressing these different definitions of families, partners, and children, some family members could be unintentionally excluded from family trusts or qualify as decedents under prior estate planning documents. Definitions of familial relationships and explicit provisions may need to define “issue” and “descendants” to protect family members, while preventing unintended claims.

Documentation and record management is a cornerstone of estate administration. However, it typically receives little attention during the estate planning process. Having to reconstruct assets based on poorly maintained records causes headaches and additional expenses for heirs. Secure storage solutions need to be considered.

Digital vaults are growing in use. However, they must be carefully vetted to ensure that sensitive information is both protected and, at the same time, accessible to the right person. Your estate planning attorney will have recommendations for safely storing documents, whether in a fire-and-waterproof safe at home or online.

Your life and your family may look very different from your parents’ or your grandparents’ lives. However, your estate plan can reflect modern life and serve to protect all of your loved ones.

Reference: The National Law Review (Dec. 9, 2024) “Estate Planning Mistakes—2025 Annual Refresher—Part 2”

How to Include Digital Life in Your Estate Plan

“The shift to a digital world has made life easier in many ways, allowing people to eschew physical photo albums, file cabinets, taking checks to the bank and waiting for the mail carrier.”

The same conveniences of digital life, from making bank deposits on the phone, posting photos instantly and accessing investment accounts wherever you are in the world, create headaches for executors and heirs if no plans are made for a “digital afterlife.” A recent article from The Minnesota Star Tribune, “When death planning, don’t forget to account for your digital life,” explains how to plan ahead.

In the past, when someone died, their executor and family members would work together to go through paper financial statements, bills and property ownership documents. There would usually be a shoebox or a cabinet somewhere in the house with relevant documents. The search is far more complex today, with information locked inside a computer or cell phone.

The right kind of authorizations are needed for each platform. You can create directives for Google, Yahoo!, Apple and Facebook to request a copy of the account contents. This way, the executor doesn’t have to deal with passwords, encryptions, or data privacy laws.

• Google has an Inactive Account Manager, which notifies someone else if you stop using Google products for a designated period of time. You choose which data you want to share, and the contact receives a link for a download.
• Apple has Legacy Contacts, allowing you to add a contact for your Apple ID who will have access to your Apple account.
• Facebook also has a legacy contact who can manage your main profile if it is memorialized after your death. Friends and family members can leave memories and comments on your page. Another option is to allow the legacy contact to delete your account.

Most states today have laws concerning digital assets. Your estate planning attorney will be able to help you plan for what you want to happen to your digital assets and how to make this task easier for your digital executor.

A federal data privacy law known as the Stored Communication Act protects the disclosure of a person’s digital communications without their consent. You’ll want to have a consent form created by an experienced estate planning attorney to allow online platforms to disclose your digital assets. Think of it as a HIPAA form for digital assets.

Create a complete inventory of all digital property and online accounts and how to access them. Use an electronic list, an encrypted secure list, or a notebook, whatever method works best for you. Make sure to tell your digital executor how your information is stored.

Some platforms will not release data unless family members pursue the matter in court if no legacy contact was named and no consent form has been completed. Don’t count on calling the company out on social media or contacting the press to take up the fight on your behalf as a solution.

If you have data stored only in the cloud, consider backing up your data (content) on a local computer, external hard drive, or a memory stick. Accessing this will be easier than taking Microsoft to court.

While preparing for your digital afterlife, ensure that your will, power of attorney, trust documents and authorizations are current. Have an estate planning attorney create authorization paperwork; if you don’t already have a digital consent form, create one.

Reference: The Minnesota Star Tribune (Nov. 11, 2024) “When death planning, don’t forget to account for your digital life”

Make Life Easier for Heirs: Get Your Estate Organized

“It’s easy to put off doing many of these things. However, get them done, and your heirs will be thankful you did.”

The holiday season is not when most of us think about death and dying. However, we do think about gift-giving. Estate planning is a gift for your family. Wouldn’t you prefer a package wrapped in festive paper and decorated with ribbons than an unwrapped item hastily stuffed into a shopping bag? The article “5 Things to Do Now to Make Your Estate Simpler for Your Heirs” from The Wall Street Journal offers a starting point.

Update all estate planning documents. Failing to update estate planning documents, including finalizing new documents, can wreak havoc on families. One example is a woman who took about two decades to update her will and then died before signing the papers. Her will included giving assets to stepchildren she hadn’t seen in more than twenty years. Her adult children are spending thousands to have the new will enforced by a judge, even though it’s unsigned.

When did you last examine the beneficiary designations for all your financial accounts? Life insurance, retirement accounts, bank and investment accounts, pensions and other financial accounts provide an opportunity to name a person or people to receive the assets directly upon your death. If your old college pal is the person you thought of when you started your 401(k) with your first job, your wife may not appreciate his receiving hundreds of thousands of dollars upon your death.

Named beneficiaries receive assets directly from the financial institution and do not go through probate. No matter what language is in a will or even a living trust, these assets belong to the people you named to receive them. You should have a list of all of these accounts and know who the beneficiaries are.

Digital assets are now part of estate plans. There are very few people today who don’t have digital assets. These include the content in your emails, photos stored on the cloud, websites, content on social media platforms, online businesses and anything you’ve created online. Most people don’t understand the Terms of Service Agreement they make between the service provider and themselves when they click on the link to approve the TOSA. However, this is a legally binding contract delineating what the platform owns and what the user owns. You may not own books, movies, or other digital assets; you might have rented them unknowingly.

Digital assets need to be organized for heirs, since there isn’t a paper trail for them to follow like in previous decades. You can create a spreadsheet, use a password manager or a pad of paper.  However, there should be a means for your digital executor to identify and access your digital assets.

Some digital platforms allow you to name a “legacy” contact who can take care of your digital assets after you’ve passed. You’ll need to go through each of your digital assets to find out which platform has this or related features. If it seems annoying, imagine how your heirs will feel trying to untangle your digital assets.

If your estate includes cryptocurrency, this is especially important. Millions of dollars of crypto have been lost because people have failed to secure their pass keys or digital wallets.

Deal with personal property now. Especially if you have multiple heirs, hoping the kids “work things out” could be a recipe for disaster. Make a list of your personal items and who you want to receive what. In some families, this is relatively straightforward. However, your adult children will be grieving after your passing and vulnerable to disputes. Another tactic: give items while you’re living.

Get your estate planning documents organized. Create a three-ring binder with all essential documents. Contact information for your estate planning attorney, CPA and financial advisor should be provided. Include a list of bills paid online, like utility, mortgage, taxes, health insurance, car insurance, etc. Also included are Power of Attorney, Health Care Power of Attorney, Living Will, Trusts and other estate planning documents. Tell your executor and adult children where the folder is.

An organized estate plan helps avoid family conflict. Having documents prepared, property assigned and accounts recorded all takes time. However, by doing so, you’ve minimized the work for loved ones and minimized reasons for quarrels during what will already be a difficult time.

Reference: The Wall Street Journal (Nov. 14, 2024) “5 Things to Do Now to Make Your Estate Simpler for Your Heirs”

Wealth Protection Through Estate Planning

“Estate planning is crucial and beneficial in many ways since it documents all your assets—from real estate, bank accounts, investments and business interests to personal items, like family heirlooms and even your monthly subscriptions.”

Without a well-prepared estate plan, wealth can be lost to taxes, administrative costs, or disputes among heirs, both in and out of court. With an up-to-date estate plan, changes to tax laws are proactively addressed and wealth can be protected and passed across generations. A recent article appearing in Medical Economics, “Estate planning is your first line of defense against wealth loss—Here’s what you should know,” explains how an estate plan creates a framework to minimize taxes, avoid the costs and complications of probate and ensures that your wishes for your estate are followed.

Documenting assets is one task that is done when creating an estate plan. When records are not clear, transferring assets can become complicated. A comprehensive record-keeping system can store documents like deeds, life insurance policies, asset inventories, family videos and photographs online.

Many financial records are already online through client portals by major financial companies. The key to incorporating these records into an estate plan is remembering where all the information is stored and being willing to share access information with a trusted family member or friend. The person you name as an executor of your will or a trustee for a trust is the most likely candidate to be provided with this information.

There are many steps to having a solid estate plan. However, there are also many missteps. Here are some of the most common pitfalls to avoid:

Failing to update an estate plan. All the documents in your estate plan, including a Will, Power of Attorney, Healthcare Proxy, HIPAA Release Form, Trusts, Advanced Directives and more, must be updated to comply with changing laws and changes in your life.

Making a careless decision about the executor or trustee can be disastrous. The eldest child does not have to be the one to be in charge of your estate. Neither does the person you love if their life is a trainwreck. The person to be named executor and/or trustee needs to be someone you know to be extremely responsible, reliable, good with money management and a solid moral compass.

Digital assets are often ignored when it comes to estate planning. However, this new asset class needs to be included. If you have email, you have a digital asset. You have digital assets if you have email, cryptocurrency, websites, social media content, online subscriptions and photos stored in the cloud. Suppose no plan is made to create an inventory of accounts and name a digital executor. In that case, your estate becomes vulnerable to identity theft, valuable cryptocurrency could be lost forever and there may be nothing your loved ones can do.

Most family fights have to do with unequal asset distribution after the death of a parent. A clear estate plan is one way to preclude confusion about what you want to happen after death. Talking about your estate plan while you’re still able to have these uncomfortable discussions is one way to help establish your wishes. You may want to create a Letter of Intent or make a video to express your reasons for making certain decisions. This may not be legally enforceable. However, it will serve to document your wishes.

Estate planning is not just about distributing assets after death. By establishing an estate plan, the family is better prepared to deal with the loss of a loved one and can focus on healing together instead of battling over their inheritance.

Reference: Medical Economics (Oct. 17, 2024) “Estate planning is your first line of defense against wealth loss—Here’s what you should know”

What Is the Biggest Mistake People Make on Their Wills?

“Have you managed to avoid the eight most common estate planning mistakes? Your family will thank you.”

Making mistakes in your estate planning can torpedo every effort made to protect your family after you die, warns a recent article from Kiplinger, “Common Estate Planning Mistakes.” Everyone benefits from a professionally-made comprehensive estate plan, a process for preparing your legal and financial affairs so assets and possessions are passed on after your death to the people or charities you want.

Not having an estate plan can create a world of trouble for those you love. The biggest estate planning mistake of all is not having an estate plan. After that, there are several others.

Procrastination. Suppose you unexpectedly become incapacitated and don’t have an estate plan. In that case, your family will be left guessing what you would want your medical care to be, in addition to needing to go to court to apply for guardianship so they can pay your bills and keep your household running. Everyone should have documents like Health Care Power of Attorney, Power of Attorney, HIPAA Release Form and Living Will in place.

Trying to make an estate plan on your own. Unless you’re an experienced estate planning attorney, there’s a lot you could leave out if you attempt a DIY estate plan. If there are errors, a court could declare your will invalid and it’s as if you never had a will in the first place. The laws of your state will be used to distribute your assets. It may not be what you had in mind.

Keeping estate planning documents in a safe or safe deposit box. Documents need to be where someone can get them in an emergency or after your passing. Safety deposit boxes are often sealed on the death of the owner. Give copies of your estate plan to your appointed executor or trustee, a trusted family member and your estate planning attorney.

Missing key documents. If your estate plan lacks key documents, your heirs might find themselves battling over the estate. Make sure your estate plan includes these documents:

• Last will and testament—This document outlines all final wishes and instructions for distributing your assets and how you want your affairs managed after you die. It also is used to name a guardian for minor children and an executor to oversee the instructions in the will.
• Beneficiary designations—Any account allowing for beneficiaries, including IRAs, pension plans, investment accounts and insurance policies, will pass directly to named beneficiaries. Be sure that these are up to date.
• Durable power of attorney for medical care—Allows another person to make medical decisions for you if you become incapacitated. Depending on your jurisdiction, it may include an advanced healthcare directive, which gives your instructions on whether or not to use life support.
• Funeral instructions—Do you want a traditional burial? Cremation? Tell your family your wishes for a funeral or memorial service.
• Proof of identity—Your Social Security card, birth certificate, marriage and/or divorce certificate and any prenuptial agreements will be needed for administering the estate.
• Deeds or loan documents for large assets—Collect paperwork for homes, boats and other big assets.

Digital assets. These include websites, cloud storage, social media accounts and cryptocurrency, to name a few. By assigning a digital fiduciary and sharing key information, you help heirs avoid identity theft and lost assets.

Failing to update your plan. Your estate plan needs to reflect the changes in your life. If your estate plan is outdated, you may unintentionally disinherit beneficiaries.

Appointing the wrong person as executor or trustee. If your eldest child is a disaster with money management, don’t name them your executor. Consider a trusted person who is unbiased and able to manage money and family dynamics and talk with them about taking on this role before appointing them to this critical role.

Reference: Kiplinger (Dec. 30, 2023) “Common Estate Planning Mistakes”

Are You Neglecting Your Estate Planning?

“Estate planning is a vital part of financial management that often gets overlooked.”

Estate planning is about more than ensuring that assets are distributed according to your own wishes after you die. It’s also about what you’d like to have happen to your assets and who you want to be in charge of your health care decisions if you become incapacitated. A recent article from Go Banking Rates, “8 Key Signs You’re Neglecting Essential Estate Planning,” outlines the top signs showing that you need to take care of this critical task.

You don’t have a will? This is the biggest red flag of estate planning mistakes. A will, or last will and testament, is a critical legal document specifying how you want your assets to be distributed after you die. If you don’t have a will, the laws of your state will determine how everything in your estate will be given to heirs. If you have estranged family members, they may end up owning everything. There won’t be anything your beloved family members can do about it. All state’s laws are different, so speak with a local estate planning attorney to address this critical document.

How outdated are your beneficiary designations? Many people open accounts as young adults and forget to update them as the decades pass. If you’ve been married, divorced, had children, experienced loss, or if your beneficiaries are no longer part of your life, you will want to update your beneficiary designations. Your assets could very easily go to people like an ex-spouse or a former friend. Beneficiary information should be updated every few years to be sure that your current wishes are followed.

Do you have a Power of Attorney? Everyone of legal age should have a Power of Attorney. A Power of Attorney is a legal document giving a person of your choice the legal power to make decisions on your behalf if you cannot do so because of illness or an injury. Without a POA, your family will need to go to court to apply for guardianship to take care of various duties, like paying bills, managing investments, or maintaining your home.

Do you have an inventory of digital assets? If you pay bills online, are active on social media accounts, or own any digital assets like cryptocurrency, you need a plan for digital assets. Start by making a complete inventory of your accounts—you’ll be surprised at how much of your life is lived online. Some platforms have an option for naming a “legacy” contact—someone who can access your data and manage it after you pass. Your digital executor will also need usernames and passwords. Otherwise, they won’t be able to access your accounts.

Have you planned for taxes? Estate planning includes understanding the tax implications of assets. There may be estate taxes or state estate taxes due from your estate, and failing to plan could leave heirs with a smaller or no inheritance.

Do you need a trust? Trusts are valuable tools for addressing specific needs, from caring for a disabled family member to managing minor children's assets. Without trusts, these individuals could face unexpected complications that could otherwise be avoided.

If you own a business, do you have a succession plan? Business owners need a succession plan to protect their work and family. Planning for a smooth transition includes naming key employees, creating partnership or shareholder agreements and determining if the business can continue to operate and provide income to family members, including the retiring owner.

What about end-of-life care plans? Estate planning includes end-of-life care, including a living will or healthcare directives. Your family will be less stressed if you have documented your wishes for what kind of health care you want or don’t want if you become incapacitated.

Reference: Go Banking Rates (Nov. 25, 2023) “8 Key Signs You’re Neglecting Essential Estate Planning”

Why You Need to Include Digital Assets in Your Estate Plan

“From Bitcoin to Gmail accounts, the rules governing ownership, storage and transferability of digital assets differ significantly from traditional forms of wealth.”

A new form of wealth, with different ownership, storage, and transferability terms, has created a new challenge for estate planning from traditional forms of wealth. These are digital assets, electronic records in which an individual has a right or interest, as explained in a recent article, “Planning for Digital Assets 101,” from Wealth Management.

Digital assets can be divided into two groups: sentimental digital assets and investment digital assets.

Sentimental digital assets are those with an emotional tie, like photos, videos, social media accounts, etc. For these assets, the goal is to provide access to loved ones after a person’s death. Some platforms allow settings to name a legacy contact. A list of accounts, usernames and passwords will be helpful for family members.

The IRS defines investment digital assets as “any digital representation of value which is recorded on a cryptographically secured distributed ledger, like a blockchain, or any similar technology as specified by the Secretary.” This type of asset includes cryptocurrency, stablecoins and non-fungible tokens.

The challenge of digital investment assets in estate planning centers on how they are owned and stored.

Digital assets are stored in digital wallets, web-based or hardware-based. “Hot wallets” are web-based and run on smartphones or computers. Many investors use them for small amounts of cryptocurrency and frequent trading. “Cold wallets” are hardware-based wallets stored on devices not connected to the internet, reducing the risk of unauthorized access. A cold wallet can only communicate with an internet-connected device when plugged in. An investor will have a seed phrase or backup code to access the cold wallet, which the owner must store in a secure place.

Understanding the storage system is essential for estate planning for two main reasons:

Beneficiary Access. The recipient of a gift or bequest of the digital asset must have access to the relevant storage device to access the actual investment. Sharing this information comes with an element of risk, as access is inherently tied to value.

Fiduciary Access. If only the owner has access, heirs will have no way to gain access to the digital assets when the owner dies. Digital exchanges don’t allow users to name a contact to access the investment information upon death. Most exchanges don’t have centralized entities to record information. If access is denied to the heir, the investment could be lost.

Transferring digital assets requires providing access to beneficiaries and/or fiduciaries. There are several ways to structure such a transfer while minimizing the risk of theft or loss.

Digital assets can be transferred to a Limited Liability Company, and subject to certain limitations, retain control of the digital assets' management by serving as LLC manager. Transferred LLC interests can also provide a mechanism to discount the value of the transferred interest. In addition, LLCs can provide asset protection since, in most states, LLCs protect a member’s personal assets from an LLC’s liabilities.

A directed trust is another way to transfer digital assets, while maintaining control and decision-making with the owner. In some states, a directed trust can have an “investment trustee” or “investment trust director” to exclusively handle investment responsibilities, including managing and storing digital assets.

Even using these two methods, someone other than the original owner must be granted access to the digital assets. One way to do this is by naming a “digital fiduciary”—someone tasked with managing the digital assets.

Estate plans involving digital assets must clearly outline heirs for the digital investment and its tangible storage devices. The assets can pass with the residuary, and complexities can arise if the residuary beneficiaries differ from tangible property beneficiaries who will receive the storage device. Speak with an experienced estate planning attorney to be sure that your digital assets are included in your estate plan.

Reference: Wealth Management (Sep. 19, 2023) “Planning for Digital Assets 101”

Estate Plan can Ease Anxiety and Confirm Legacy

“Preparing for the future supports the causes you believe in and provides peace of mind for you and your heirs.”

Creating an estate plan can take stock of today’s priorities while creating a legacy by clarifying intentions. This could mean providing for your family, supporting charitable organizations, or providing a means for future generations to know about your passions. Estate planning also addresses tax issues and can be used to reduce court involvement with your estate, according to a recent article from Worth, “Take Charge of Your Legacy With an Estate Plan.”

For most people, considering death is uncomfortable, but your estate plan is essential to those loved ones taking care of your estate. Nearly all wealthy Americans expect to leave money or other assets to their children. People who don’t consider themselves wealthy also intend to leave property to their loved ones.

Consider what happens when no estate planning is done. It took six years to settle the $156 million estate of singer Prince, who died without a will in 2016. A jury only recently finished determining the inheritance of Aretha Franklin, who left conflicting wills after she died in 2018. While the estate was being decided, it dwindled from an estimated $80 million to $6 million.

Having an estate plan can also alleviate anxiety, with a survey showing individuals with investible assets of $1 million—$10 million feeling more in control of their finances once they have an estate plan in place.

Creating an estate plan may be easier if you address parts individually. You may even have some parts in place already, such as details about ownership of bank or investment accounts and beneficiary designations.

All assets need to be recorded, including digital assets. The estate plan should include information on life insurance proceeds because there may be adverse tax implications for the estate if they’re not appropriately structured. For instance, life insurance proceeds are generally exempt from federal income taxes; they are included in the estate and could potentially bump the estate's value above the federal estate tax exemption. This can be avoided by transferring ownership of the policy to another person or establishing an Irrevocable Life Insurance Trust. Any transfer of life insurance policies made within three years of death is subject to federal tax, so this step needs to be considered carefully with the help of an estate planning attorney.

Don’t overlook the emotions of loved ones. Items with sentimental value often cause family strife, so create a distribution plan for possessions. Your last will and testament should include jewelry, artwork, and family heirlooms.

Part of your estate plan addresses what would happen if you become incapacitated. This includes Do-Not-Resuscitate instructions and other wishes for medical care. Everyone over 18 should have a Power of Attorney in place so someone can manage their legal and financial affairs in case of incapacity. There are different types of POAs; your estate planning attorney will know which best suits your needs.

Estate planning is a time to speak with family members about the role they can play in carrying out your legacy. A family meeting to discuss values, vision, and purpose can be helpful at any level of wealth, from endowing a new building at an alma mater to volunteer opportunities in the community.

Your estate plan is not a “set-it-and-forget-it” document. It should be reviewed annually and fine-tuned, especially when significant life changes occur, like marriage, divorce, death, the sale of a business, a change in the law, or a change in real estate ownership.

Reference: Worth (Sep. 22, 2023) “Take Charge of Your Legacy With an Estate Plan”

How do You Pass Cryptocurrency as Inheritance?

“How should you include digital assets in your estate plans? What do your heirs need to know about inheriting these assets?”

A recent survey found that almost 90% of all crypto owners are concerned about what will happen to their crypto assets when they die. Awareness is a good thing. However, this doesn’t always mean that they have taken steps to include digital assets in their estate plans. A recent article from Forbes, “Your Financial Legacy When You Own Cryptocurrency” provides some answers about estate planning for cryptocurrency.

The IRS treats cryptocurrency like artwork: it’s personal property, and like artwork, there are certain implications requiring proper planning to ensure that assets are passed on to heirs.

Appraisals are required for any taxable transfer of crypto, including NFTs, which do not regularly trade in the market or are illiquid. Obtain one or more appraisals from certified experts and keep records—digital and hard copy—of the appraisals.

Special tax and estate laws applicable to digital assets differ from those governing distribution of other asset classes. Don’t ignore these rules! You could leave your children with unusually high capital gains taxes, income or estate tax penalties, or depreciation of the digital asset’s market value.

Distribution of digital assets can get complicated. Estate plans generally articulate a clear plan for dividing and distributing financial assets. The distribution of complex assets, like real estate or business ownership, has been developed over many decades. Therefore, there are well-established planning methods for these assets. Regarding estate planning, digital assets are still a relatively new asset class.

Create an estate plan with both a will and a trust. These are legal documents outlining how assets are to be distributed after death. Explicitly include digital assets in your will or trust, so they are distributed according to your wishes. Refrain from including information like account numbers, passcodes, usernames, etc., in your will, as this becomes a public document during the probate process. Your estate planning attorney will help you create a plan for passing down your digital assets in a private and secure way.

Use a trust for digital assets. It may be best to name the trust as your beneficiary for cryptocurrency assets, so they do not go through probate and pass directly to beneficiaries named in the trust.

Name a digital executor or trustee responsible for managing your digital assets after your death. Select someone who understands all aspects of digital assets to ensure that they are properly managed and distributed.

Create an inventory asset list for digital assets. This will be needed if your family or digital executor needs to locate and manage assets after your death. There are many instances of people losing access to digital assets of significant value because they lost this information. An inventory will be helpful while living and after you have passed.

Administering cryptocurrency and digital assets in an estate can present unique challenges. Digital assets are stored in digital wallets accessed with private keys—a code known only to the owner. If the key is lost or stolen, the asset may be irretrievable.

Cryptocurrency can have major implications for your estate plan because of the differences between how digital assets and traditional assets are handled. Speak with an experienced estate planning attorney to be sure to address both kinds of assets in your estate plan.

Reference: Forbes (July 5, 2023) “Your Financial Legacy When You Own Cryptocurrency”

Estate Planning for Digital Assets

“Your digital life includes dozens of usernames and passwords. Providing a digital estate plan can help your family deal with your accounts with minimal fuss.”

What happens to digital assets when you die? There are state laws offering the executor of an estate or an estate planning attorney to obtain access to a person’s online accounts after incapacitation or death. These laws—including RUFADAA (Revised Uniform Fiduciary Access to Digital Assets Act)—will help to protect digital assets, but only if you have a digital estate plan, reports the article “How to Tackle Digital Estate Planning in Four Easy Steps” from Kiplinger.

RUFADAA has a three-tier process for accessing digital assets:

Tier One: Some digital service platforms offer a way to designate what happens to digital assets after death. Yahoo has an inactive account manager to designate a friend, which guides what happens to digital assets.

Tier Two: If there is no such tool, the owner’s estate planning documents must dictate what should happen with the asset.

Tier Three: If neither of these tiers is in place, refer to the platform’s Terms of Service Agreement (TOSA) to see how the executor may access these accounts.

What makes up your digital estate? It includes all electronic and virtual accounts and assets, including:

• Social media
• Email
• E-Commerce accounts
• Photos saved in cloud-based storage
• Cryptocurrency keys, wallet, and any related accounts
• Cellphone and cellphone apps
• Domain accounts
• Text, graphic and audio files and any other intellectual property
• Blogs and domains
• Loyalty benefit programs, like credit card perks and frequent flier rewards programs
• Utility accounts, including electricity and cable tv
• Online banking
• Gaming
• Online shopping accounts

Electronic bank accounts are considered digital assets. However, the money in the bank account is not a digital asset. Likewise, cryptocurrency account access platforms, such as Coinbase, are digital assets, but the actual cryptocurrency, such as Ethereum or Bitcoin, is not a digital asset.

Here are the four steps to creating a digital estate plan:

Create a complete digital asset inventory. This should include all account names, usernames, passwords and the URL or address of the digital asset.

Decide how you want digital assets handled. List intentions for every account, so your executor knows what you want to happen. This is known as a “directive” and will likely be required by the platform to indicate your wishes. Some companies have conditions in the TOSA, so make sure your wishes can be followed. For example, Twitter and Google have “legacy” policies. Facebook lets family members memorialize your account.

Name a digital executor. This person doesn’t need to be the same as your executor. You’ll want to select someone familiar with the online world.

Store your digital estate plan in a secure place. Make sure that your digital executor knows where the information can be accessed. There are online platforms to help organize digital estate plans in the event of an emergency. Note that they are not the same as password managers, which store passwords. These platforms should include directives indicating what you want to happen with your digital assets.

The digital estate plan is considered informal, if your state has not passed RUFADAA. Ask your estate planning attorney if you can formalize it by making it a codicil to your will.

Reference: Kiplinger (May 16, 2023) “How to Tackle Digital Estate Planning in Four Easy Steps”