Digital Assets

Digital world for estate settlement

In the modern era, certain classes of assets have no physical presence and exist only in the digital world. These so-called "digital assets" include everything from bank accounts to cryptocurrency, and from frequent flier miles to social media accounts. Although these assets exist only in the digital world, many have real-world value, and must be included in an estate's inventory, while others, such as social media accounts, have no recognized intrinsic value and are not addressed by standard estate settlement practices (although the executor may wish to address them regardless).

General Background

Traditionally, assets were physical things such as land, vehicles, jewelry, and so forth. Often, ownership of particularly valuable assets were recorded via paper deeds or ownership certificates of some sort. With the rise of the information age, however, paper became less important, and many such records took digital form. In fact, some asset classes may be considered to have transitioned entirely to digital form, and have no real physical manifestation. For example, a bank account is nowadays really just a digital concept which can interact with the world, paying your bills electronically, or even providing bits of cash via ATMs when needed.

While assets such as bank accounts, life insurance policies, and brokerage accounts might therefore be considered "digital assets" by purists (and even the law), they have been around long enough that people know how to work with them, and we can lump them in with the other estate assets.

However, the 21st century has seen the rise of something entirely new, something without historical precedent. These are digital assets that have no corresponding manifestation in the real world, and that exist entirely online: for example, social media accounts, email accounts, online photo storage, and the like. These truly "digital assets" have no recognized intrinsic value, and the law does not require executors to include them in an estate's inventory, and in fact, does not require executors to do anything about them at all.

There are other natively digital assets that do have clear real-world value, and which have been primarily designed to serve as value stores (most notably, cryptocurrencies and NFTs). Because these assets have real-world value and can be bought or sold, sometimes for very large values, an executor does have a fiduciary duty to include these in the estate's inventory, to safely manage them, and to eventually sell or distribute them to the rightful heirs.

Institutional Financial Assets

Strictly speaking, institutional financial assets such as bank accounts, life insurance, pensions, and brokerage accounts are legally considered "digital assets", as they are not actually physical objects in the real world. For the most part, however, that classification is irrelevant, and you can treat these as you would treat other assets.

Cryptocurrencies

Cryptocurrencies such as Bitcoin, Ethereum, and Tether were invented as alternatives to traditional fiat currencies, such as the US dollar. Cryptocurrency must be treated like any other valuable estate asset ... if you can find and access it. Cryptocurrency exists purely in the digital realm, but ultimately must be stored somewhere, either in a centralized digital exchange such as Coinbase, in a purpose-built software or hardware wallet, or on any digital media storage such as a hard drive or a USB stick ... making it very difficult to find if the estate owner has not left clear instructions. Moreover, you typically must have the correct password to access the cryptocurrency, and too many incorrect guesses can permanently render the asset unusable.

If you do successfully take possession of cryptocurrency assets, you should treat them as you would treat other valuable assets (i.e., sell or distribute) ... but be careful, because fraud and theft are common in this area.

NFTs

Non-Fungible Tokens (NFTs) digitally convey ownership of something, often digital artwork, and are considered digital assets in their own right. You can think of an NFT as the "deed" to whatever property it claims, and since these NFTs can be bought and sold, they should be treated as other assets. NFTs are similar to cryptocurrencies in that they must be digitally stored somewhere, so they can be difficult or even impossible to find and access unless the estate owner has left clear instructions. Nevertheless, if an NFT, or a collection of NFTs, has value, it must be treated as an estate asset, and either ultimately sold or distributed to heirs.

Loyalty Points

Many frequent flier and other loyalty programs will allow an executor to transfer points upon proof of executor authority (e.g., your Letters), while at the same time, declaring that the account holder does not "own" these points, that these points have little to no independent value, and that any such transfer is at the discretion of the company.

This situation makes these accounts a little murky from an estate executor position. The decedent didn't legally "own" these points, and thus you may not be obligated to list them as estate assets, let alone look for them or deal with them at all, but if the amounts are meaningful, you may indeed have a fiduciary responsibility to at least try to claim them.

Programs to consider include airline miles (e.g., United, American), credit card points (e.g., Visa, Mastercard), hotel chain credits (e.g., Hilton, Marriott), as well as more specialized memberships (but keep in mind it's probably not worth it unless the unclaimed rewards are signficant). For details on some of the more popular programs, see The Points Guy: After Death and Points and Miles after Death.

Online Media Accounts

Social media accounts, email accounts, photo storage accounts, and the like do not normally have an associated monetary value, and thus do not officially need to be included in an estate's inventory. That being said, an executor may still want to shut these down, memorialize them, or otherwise transition their contents.

Almost every state has now enacted legislation to address executor access to these online media accounts. For more information about your legal rights, see the National Conference of State Legislature's Access to Digital Assets of Decedents.

Here are links to policies and instructions for some of the more popular services:

Trying to track down all these accounts and somehow wrapping them up can be A LOT of work, so you'll want to consider whether handling these online media accounts is really something worthwhile: after all, the deceased is gone, and you are still living your life. At a minimum, you may want to pick and choose only the ones you consider most important.

Discount $$:  Licensed EstateExec users are automatically entitled to 25% off GoodTrust's digital executor service, which can help an executor resolve these kinds of accounts. Note that EstateExec does not recommend or receive compensation from third-party companies; we provide these discount offers simply as a service to our customers.

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