Digital Asset Estate Planning

Introduction: The Importance of Digital Asset Estate Planning

When people think about estate planning, they usually refer to physical assets like houses and bank accounts. However, today we own more than just physical things. From cryptocurrency to social media accounts, our digital lives hold real value. Yet, many traditional estate plans completely overlook these assets, which can cause loss of wealth, not accessing accounts, and some unnecessary stress for loved ones.

So, what exactly are digital assets? They include:

• Cryptocurrency – Bitcoin, Ethereum, and others.
• Online Accounts – email, social media, storage, and financial accounts.
• Intellectual property – ebooks, music, designs, trademarks.
• Digital Investments – NFTs, online businesses, domain names.

If you don’t include these assets in your estate plan, they may be lost forever. If you want to keep them, then GPS Wealth Management can make sure your digital legacy is protected and properly passed on to the people you chose.

What Are Digital Assets & Why Do They Need Protection?

Types of Digital Assets

Everything you have online or in digital form are digital assets. These include cryptocurrency, financial accounts, social media profiles, or even personal photos you’ve stored in the cloud. These assets can have real financial or sentimental value but still, many people don’t include them in their estate plans.

If you don’t come up with a plan, your family may not be able to access important accounts and therefore, lose access to valuable assets. Here are the key types of digital assets that have to be protected:

• Cryptocurrencies and NFTs – such as Bitcoin, Ethereum, and digital collectibles that require private keys to access wallets.
• Online Financial Accounts – these include Paypal, Venmo, stock trading apps, and crypto exchanges and without proper access they can be lost.
• Intellectual Property and Digital Content – websites, blogs, monetized social media, and self-published e-books.
• Business Digital Assets – cloud storage, domain names, and software tied to business operations.
• Personal Digital Accounts – email, social media, and online storage for photos, videos, and documents.

Because many of these accounts are locked behind passwords and privacy policies, they can be impossible to access without a plan. Digital assets estate planning is the way to make sure your online life is protected.

Risks of Not Including Digital Assets in an Estate Plan

If you don’t include your digital assets in your estate plan, for many different reasons, your family might have problems when they try to access them:

• Lost or inaccessible assets – your heirs might have no idea how to find or get into your digital accounts, like cryptocurrency wallets or social media, if you don’t leave the proper instructions for them.
• Legal barriers – privacy laws protect online accounts, so without your permission, your family might not be able to access them. 
• Unauthorized access – if you don’t secure your accounts properly, they could be at risk of fraud or hacking.
• Account restrictions – some platforms have restrictions and don’t allow transfers to someone else, which makes it hard for your heirs to manage them.

How to Include Digital Assets in Your Estate Plan

Inventory Your Digital Assets

The first step you want to take is creating a detailed inventory. You have to start with listing all your digital assets, which includes your cryptocurrency accounts, online banking, your social media profiles, and email accounts. Think about anything that has financial or personal value and add them to your list.

After you create that list, then you need to store your access credentials securely. You can use a password manager to keep all your log details safe and organized. Also, you can store the information in encrypted files and protect it from unauthorized access. When you take all these steps, your family will be able to easily access your digital assets when needed.

Assign a Digital Executor

You’ll also need to choose someone you trust and let them manage your digital estate. This person is called your digital executor. They’ll handle your online accounts and digital assets after you pass away.

However, you have to precisely define what responsibilities they’ll have. This means you give them permission to access your accounts and explain what they need to do about them, whether it will be closing accounts or transferring assets. When you assign a digital executor, you are making sure your digital assets can be taken care of the way you intended.

Legal & Estate Planning Strategies

You need to update your will and trust to make sure your digital assets are covered. For this, you’ve to include clear instructions on how your digital assets should be managed and who should handle them. 

You can also create a Digital Asset Protection Trust. This will help you make sure your digital assets are transferred safely to the people you’ve chosen.

You have to consider privacy laws like the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA). This law defines who can access your digital accounts, so you need to follow their rules while planning to avoid any issues.

Secure Your Digital Legacy

One of the effective ways to protect your digital legacy is by using some legacy planning tools. For example, Google’s Inactive Account Manager can help you choose the person who can access your account if it’s inactive for a while. Also, Facebook has a Memorialization feature that makes you able to decide what happens to your account after you’re gone.

The important part is to be clear about how your accounts should be handled. Do you want them to be deleted or transferred to someone else? Your digital executor should know what you wish for, so they know exactly what to do. 

You can also secure your accounts with two-factor authentication (MFA), which is easy and very helpful to set up. This can create an additional protection for you, which makes it harder for anyone to get into your accounts without your permission.

Tax Implications of Digital Assets

You have to consider taxes for cryptocurrencies and digital investments. Cryptocurrencies, NFTs, and digital collectibles are usually taxed like property, which means any profits you make from buying and selling them are seen as investment profits. 

If you want to minimize the taxes for your family, then you have to plan smart. You can use trusts or other strategies that will help you decrease tax liabilities when the time for transfer comes. You can also work with a tax expert, who will help you make sure your digital assets are passed on in a way to not have much tax payment.

Common Mistakes to Avoid in Digital Asset Estate Planning

There are some mistakes people often make when they try to create plans for their digital assets. Such mistakes can cause some problems later on. 

First, not documenting all your digital assets is a big issue. If you don’t have a clear list, your heirs might not be able to find important things like cryptocurrencies or online accounts.

Another mistake is not giving clear access instructions to your digital executor, which is a very relevant step in digital assets estate planning. If you don’t leave these instructions to them, they may not be able to access your accounts because of privacy laws. 

You need to consider the tax impact your digital investments might have. If you ignore this fact, it can cause your family to pay some tax bills. 

Finally, don’t assume digital accounts will automatically transfer to your heirs. Most online accounts like email or social media, won’t automatically go to your family, so you need to plan wisely. 

How GPS Wealth Management Can Help with Digital Asset Estate Planning

At GPS Wealth Management, we can create an estate plan for you that considers your digital assets as well. We’ll work with you to design a plan that fits your digital wealth and make sure everything is protected.

We also offer legal and financial strategies to help secure and transfer your digital assets without any issues. We can also help you create trusts or find ways to minimize your taxes.  

If you have cryptocurrency or online investments and don’t know how to include them in your estate plan, we can help you. We will make sure your digital assets are managed and transferred properly, so you don’t have to worry about your legacy.

Protect Your Digital Assets Today

You can start protecting your digital legacy now. Schedule a free consultation with our estate planning experts and get personalized guidance on how to secure your digital assets.

Are you ready to start planning now? Contact us today and start your digital estate planning now!

FAQs.

1. What happens to my cryptocurrency when I pass away?
   If you should create clear instructions for your family about where your cryptocurrency is stored and how they can access it, otherwise the currency can be lost forever.
2. How can I make sure my family gets access to my online accounts?
   You have to keep the inventory of your login information. Make a list of your usernames, password, PINs, and related accounts, and then make sure to give them to your trusted person to access them.
3. Are digital assets taxable after death?
   Digital assets like cryptocurrency, online investments, and other digital collectibles are taxable after death. The taxes depend on their value and any gains made. That’s why you have to plan for these taxes in your estate plan to avoid any problems for your family.
4. Can I put digital assets in a trust?
   You can include digital assets in a trust. A trust can help make sure your digital assets are safe and passed on accordingly. You just have to provide clear instructions on how to access them and choose someone to manage them for you.
5. How do I start planning my digital estate?
   Start with listing all your digital assets, such as social media accounts, cryptocurrency, and online investments. You have to choose a digital executor to manage them and set up a trust for safer transfer. Make sure your will includes instructions and use a password manager to store account details safely.