With the changing utilization of technology in every aspect of our lives, there comes the realization that some sort of protection needs to be provided for our digital assets. It is common now for people to store financial records in smartphones, computers, or the cloud and conduct most of their financial transactions electronically.
A digital asset protection trust is a type of trust that permits the trust creator to protect their existing digital assets. The beneficiaries are allowed to have access to this trust and utilize it within its bounds. Although some of the digital assets themselves may not have monetary value, protecting them through a trust is recommended by legal professionals. Formulating a plan for digital accounts, even if they do not have financial value, can make it easier for your loved ones to retrieve and secure these assets after you pass away.
Below is a list of digital assets that one person can own and use for their business or personal use:
- Bitcoin, Ethereum, and other cryptocurrencies;
- Non-fungible tokens (NFTs);
- Domain names for websites;
- Digital photos and videos;
- Digital rights to literary, musical composition, motion picture, or theatrical works;
- Digital accounts in an online betting account;
- Blog content;
- Airline miles, hotel points, or any other transferable rewards programs;
- Online video channels and an advertising revenue stream for its owner and;
- Online gaming avatars that provide online goods or services that may be worth real-world money.
What Are the Disadvantages of Digital Assets?
Digital assets are diverse in terms of form, storage, and functionality. There is also digitally encoded financial information that can be complicated to retrieve for anyone other than the original owner. Once a person passes away, there are some obstacles that a family member may encounter when trying to access the deceased’s digital assets and vital personal information.
Passwords are considered one of the most common ways to secure online information. However, generally, no one has access to your passwords besides you. If your family members do not know your passwords, keys, or other requisite access credentials, they may be unable to access information or property stored in your smartphone, computer, online accounts, or the cloud. There are ways to bypass the passwords stored on your laptop or phone, but they are not always guaranteed. For instance, an NFT can be stored in a crypto wallet, and losing the password can mean losing access to it because there is no central customer service team.
Another challenge is data encryption. Digitally stored data may be encrypted, adding another layer of protection. Encryption can scramble data placed in different locations, and it is complicated to understand without the correct passcode. For example, any data stored on your smartphone in the cloud can be hard to access and locate, especially if encrypted.
Furthermore, sometimes, the laws fail to keep up with the evolving world of technology. Be aware of this situation because it will be challenging to bring suit for an issue in an area that the law has not developed thoroughly yet.
Laws on both state and federal levels prohibit unauthorized access to computer systems and private personal data. These laws are meant to shield consumers from fraud and identity theft. Therefore, keeping your estate plan protected and providing your fiduciaries the authorization they need to access any necessary digital data is crucial.
Lastly, there are data privacy laws that create another protection barrier. Federal data privacy laws prohibit online account service providers from turning over the contents of your electronic communications to anyone other than the owner without the owner’s lawful consent. However, this may not always be the case because accounts can be hacked, and information can be leaked.
This means social media sites or other companies may lock up your content unless you provide express permission for others to access it. Therefore, this may lead to your heirs not having access to photos, email messages, or other information stored in the cloud. If you want to obtain access to this information about a deceased loved one, you may need to battle it out in court to have it.
How to Design Your Estate for Digital Property?
It is recommended to create an estate plan that is digitally accessible to prevent any issues stated above. There are ways to ensure you can form a digital savvy plan for the estate. Consider taking the following steps to execute the planning successfully.
First, list your digital assets and notify your loved ones where they can access them. Important information such as passwords, online accounts (including email and social media accounts), and digital property (including domain names, virtual currency, and money transfer apps) can be attached. You can maintain this list securely and ensure your family can access it.
Remember, it can be hacked if it is digitally stored without the proper security mechanisms. For example, there is insurance when someone hacks into your bank or brokerage accounts. But this may not apply to your crypto wallet, and there may be no way of getting your money back. Be cautious and vigilant when you store your crypto passwords.
Furthermore, you must know of any licensing agreements and what you agree to do. Carefully read and check the terms of the agreement before signing any licensing agreements. You also need to have protection for data backed up for storage in the cloud.
Through this, you can digitally back electronically scanned essential documents such as bank and investment account statements, birth certificates, insurance policies, passwords, tax records, and wills. Before storing them, ensure you provide access to them for your trusted friend.
However, it is advised by tech gurus not to just rely on the cloud for backup data. You should also back them up on a computer or a personal storage device for easy access in the future. You can consult an estate lawyer to update your wills, powers of attorney and any revocable living trusts. As the owner of these digital assets, you do not need to provide access to them to all your fiduciaries. This means having a strategy for your estate plan and planning accordingly.
Since digital assets laws are still developing and fairly new, there are chances that you will need to determine another plan of legal intervention. Checking in with your lawyer to devise a plan that applies the local tech laws and regulations to help your case in court is suggested.
Moreover, if you hold a significant amount of digital assets, consider selecting a special executor who has the business and legal experience to deal with your digital assets in addition to the executor of your general estate.
When Do I Need to Contact a Lawyer?
With the rapid technological change, protecting all your digital assets is necessary. Not everyone knows the control the company or organization may have on your business or personal digital assets. If you get into a dispute regarding obtaining these digital assets for a loved one, you may need to face court battles to resolve the situation.
You can reach out to a local estate planning lawyer to understand how to protect your digital assets in a trust today.