Digital Assets are rapidly evolving and becoming an increasingly common part of modern estates. As their prevalence grows, American attorneys must be prepared to navigate the legal and practical challenges these assets present during estate administration. This article highlights the key types of digital assets and offers essential considerations for managing them effectively during probate. Importantly, best practice is to identify and document these assets in advance of a client’s death, ensuring they are not overlooked and can be administered in line with the client’s wishes.
1. Social Media Accounts
Social media accounts can hold significant monetary or sentimental value. Influencer accounts on Instagram, TikTok, or YouTube channels, for instance, may generate recurring income and can be considered revenue-producing digital assets.
Key Considerations:
- Non-transferability: Many platforms include terms of service that make accounts non-transferable upon death. For example, Facebook allows users to designate a legacy contact to manage their account after death, but the account itself cannot be transferred.
- Legacy settings: Some platforms allow account holders to assign a legacy contact or designate how their account should be handled posthumously.
- Proof of authority: Executors may need to provide court documents, such as Letters Testamentary or a death certificate, to gain access or close accounts.
2. Domain Names: Digital Real Estate
Domain names, particularly those tied to businesses or containing premium keywords, can hold immense value. For example, insurance.com was sold for $35.6 million in 2010.
Tips for Attorneys:
- Identify ownership: Determine if the domain is registered in the decedent's name or through a business entity.
- Assess value: Use domain appraisal tools or consult with valuation experts.
- Transfer protocols: Registrars like GoDaddy or Namecheap typically require probate documentation such as a death certificate and proof of executor authority to initiate domain transfers.
3. Cryptocurrencies: Securing Access Is Critical
Cryptocurrencies are among the most challenging digital assets due to their decentralized nature and stringent access requirements. Without central oversight, asset recovery depends entirely on the possession of specific credentials.
What You Need to Know:
- Storage methods: Crypto can be stored in hot wallets (online), cold wallets (offline, e.g., USB devices), or on exchange platforms like Coinbase or Kraken.
- Access requirements: Without private keys or seed phrases, even a court-appointed executor cannot access funds.
- Best practice: Advise clients to record wallet addresses, private keys, seed phrases, and recovery instructions in estate documents, stored securely (e.g., encrypted digital vaults or secure attorney-client files).
- Example: A client who owns Ethereum (ETH) stored on a Ledger Nano device risks losing the asset permanently if their seed phrase is not documented.
4. Stocks and Shares: Online Brokerages
More clients are using digital brokerage platforms like Robinhood, Fidelity, and E*TRADE, adding complexity to probate processes.
Key Considerations:
- Valuation: Attorneys should coordinate with financial institutions for date-of-death valuations, essential for IRS Form 706 and other estate filings.
- Ownership confirmation: There is no national share registry in the U.S., so statements or trading account access will be required.
- Distribution: Shares can be transferred to heirs or liquidated based on the estate plan. Each platform may have unique procedures and forms required by their legal departments.
Practical Guidance for Attorneys
- Start with a Digital Asset Inventory: Help clients compile a detailed list of digital assets and associated access credentials.
- Review Terms of Service: Platforms may have legal terms that limit executor rights or require specific procedures.
- Collaborate with Experts: Work with cybersecurity professionals, financial advisors, and appraisers for complex digital assets.
- Address Access and Security: Encourage clients to use password managers with emergency access protocols or secure legal storage.
- Prepare Executors: Equip executors with clear instructions and awareness of potential digital asset complications.
Final Thoughts
Digital assets are transforming the landscape of estate planning and administration. From valuable domain names to inaccessible crypto wallets, these assets require foresight, technical understanding, and coordinated action. American attorneys who engage their clients in proactive digital estate planning can help ensure these modern assets are properly secured, valued, and passed on in accordance with their clients' final wishes.
Disclaimer: Please note that the information provided in this article is for general informational purposes only and should not be construed as legal advice. It is always recommended to consult with a qualified legal professional for advice tailored to your specific situation. No liability whatsoever is accepted by EstateMin from any action taken in reliance of the information contained on this website.