Planning for a Digital Legacy

Leave a comment

Increasingly, the digital property of financial planners and their clients is up in the clouds, somewhere or another.

It turns out that the intersection between our mortality and the immortality of our digital property has become an important part of the estate planning process. That’s right—not only do you need to make plans for your tangible assets, but you also need to make plans for your email, social media, banking and financial accounts (investments, of course, but also things like bitcoin and PayPal), online memorabilia and documents; not to mention all those pictures, which at the time seemed artistic, but now just make up an ever-lengthening feed of status updates.

It’s important to know that a person’s digital property and electronic communications are referred to as “digital assets” and the companies that store those assets on their servers are referred to as “custodians.” The reason this matters is that these digital assets are usually governed by a terms of service agreement rather than by property law, and in many cases these agreements are silent when it comes to digital assets after Internet users pass or become incapacitated.

The other problem is the sheer number of online accounts we have today. Some estimates show that each American has, on average, 130 online accounts and that this number could grow to 207 by 2020.

What Now?

Fortunately, many states have enacted a measure to help simplify this issue. The Revised Uniform Fiduciary Access to Digital Assets Act (UFADAA) allows a fiduciary the legal authority to manage another’s property and specifically allows Internet users the power to plan for the management and disposition of their digital assets. At this point, all but 8 states have enacted this or a similar law, but it’s likely that every state will pass a law regarding fiduciary access to digital assets in the near future.

The action steps are to include the idea of digital assets in your normal estate planning and wealth transfer conversations with families. Along with that, you should include an amendment to a client’s existing will, trust or power of attorney which gives the designated agent the authority to direct or dispose of these assets. This amendment may take the form of a Virtual Asset Instruction Letter (VAIL) which allows one to list accounts, instructions for those accounts and the person(s) designated to access those accounts.

While many may doubt the urgency of this legislation, even the most Internet-resistant person can’t help but admit that our lives are becoming more and more digital. The assets that are housed in the cloud have value. Airline miles or hotel points have obvious monetary value, and others like pictures, emails or creative works have mostly sentimental value. The important thing to remember is that a person’s legacy is made up of both sides of that coin.

So even though that Luddite client may scoff at this idea, it has become an important part of the estate planning process. I’m sure that after having this conversation, that client will provide a status update to all their Facebook friends letting them know how happy they are to have had it.

Editor’s note: A version of this post appeared on the Janus Henderson blog. You can find it here.

Ben Rizzuto

Ben Rizzuto, CFS, is a retirement director for the Defined Contribution and Wealth Advisor Services Group. In his position Rizzuto works with financial advisers, platform partners, Janus Henderson colleagues and clients to find solutions for today’s increasingly difficult retirement issues, whether they be within retirement plans or for those clients that are trying to figure out how to retire on their own terms. He also contributes to the dialogue surrounding these issues as the host of the “Plan Talk” podcast and through periodic posts to the Janus Henderson Blog.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s