Estate Planning Goes Digital: Protecting Your Virtual Assets
Your grandmother's jewelry sits safely in a lockbox, but what about the $500 sitting in your Venmo account? As our lives become increasingly digital and online assets become more valuable, estate planning is evolving to protect assets that exist only in the cloud.
Most people are unaware that without proper planning, your loved ones may find themselves locked out of digital accounts containing both financial and sentimental value if something happens to you.
The Growing Importance of Digital Assets
Digital assets encompass far more than most people realize. They include:
Financial Digital Assets
Venmo, Cash App, and similar payment platforms
Online-only bank accounts like Ally Bank
Investment apps like Robinhood or E-trade
Cryptocurrency wallets
PayPal and business payment accounts
Personal Digital Assets
Social media accounts (such as Facebook, Instagram, X)
Cloud storage (Google Drive, iCloud, Dropbox)
Email accounts containing years of correspondence
Digital photo libraries
Numerous people use these platforms as their primary method of storing money or conducting business. Online sellers, freelancers, and content creators may have substantial balances in digital payment apps. Others rely on cloud storage as their only backup for irreplaceable family photos or creative content. Even casual Venmo or Cash App users often maintain balances for convenience, unaware these funds could become inaccessible to their families.
The Access Problem
Companies have historically prioritized user privacy above all else, creating significant challenges for estate administration. Apple, for instance, requires specific court orders detailing exactly what an executor can access. This process requires knowing specific account details and going through lengthy court proceedings.
Venmo and similar payment platforms present an even trickier situation. When someone passes away and their connected bank account becomes frozen, money trapped in payment apps has nowhere to go. Recovery requires identifying the account's existence, determining its value, and often obtaining court orders for access.
The problem even extends beyond money. Families risk losing access to years of photos stored in cloud accounts, important documents saved in Google Drive, and the digital record their loved one built via social media accounts.
Innovative Strategies for Managing Digital Assets
Forward-thinking estate planners are developing solutions to address these challenges. The key lies in proactive planning and precise documentation.
Beneficiary Designations
For many accounts, naming beneficiaries provides the smoothest transfer process; however this is not always an option for all accounts. Several online banks, investment platforms, and some payment services do offer this option.
Social Media Solutions
Facebook has pioneered the solution for addressing digital legacy concerns. The platform allows users to designate a "legacy contact" who can manage the account after death. Users can choose whether they want their account memorialized, converted to a remembrance page, or deleted entirely. It is likely that other social media platforms will do the same to help address these concerns.
Legal Documentation Updates
Modern estate planning documents must specifically address digital assets. This includes updating wills to include language acknowledging current data privacy laws while explicitly authorizing executors to access digital accounts and assets.
Powers of attorney require similar updates. Without specific language authorizing access to digital assets, agents may find themselves unable to manage someone's financial affairs during incapacity. This authorization should cover everything from Venmo accounts to Google Drive access.
Essential Documentation for Digital Assets
One of the most important steps involves creating a comprehensive record of your digital presence. This doesn't necessarily mean writing down every password (though that helps), but at a minimum, documenting what accounts exist and where.
Account Inventory
Begin by compiling a list of all platforms where you maintain an account or store assets.
Include:
All banks, including online-only institutions
Payment apps like Venmo, Cash App, PayPal
Investment platforms and cryptocurrency exchanges
Cloud storage services
Social media accounts
Email accounts
Subscription services with stored payment methods
Access Information
While security concerns make some people hesitant to document passwords (which are often subject to change), at a minimum, include account numbers or other account identification information. This gives your appointed representatives a starting point for asset recovery.
Another critical layer is ensuring someone can access your phone. Your smartphone often serves as the gateway to accounts through saved passwords and two-factor authentication.
Building a Digital Legacy Plan
Estate planning is adapting to protect both traditional and digital assets. It’s crucial to work with attorneys who understand current technology challenges and can craft documents addressing modern realities. Thoughtful planning can ensure your digital life remains as protected as your physical assets!