Insights

10 min read

Estate Planning in this Digital Age

Published on

Estate Planning in this Digital Age

Unpredictability is a fundamental part of life. Therefore, when it comes to preparing for the unexpected events of life—such as death and various forms of incapacity—we must take the reins and steer our lives in the direction we would choose, should the unthinkable occur.


Estate planning encompasses more than just the distribution of your assets upon your death. It also includes planning for the sorts of events that might render you unable to make decisions for yourself, such as mental deterioration due to conditions like dementia or Alzheimer's, or a coma. In Singapore, we have a unique opportunity to plan ahead for such mental incapacities through something called the Lasting Power of Attorney, or LPA.


In the last few years, the digital age has advanced significantly, and our lives have been pulled along with it. It is now almost two decades since the real explosion of the internet came about, and we have all begun to understand its presence in our everyday lives, from personal to professional. Financial planning is no different, though historically it has been. Estate planning has been rather slow to recognise the rise of the internet, but at this point, you would have to be living under a rock not to understand that its occurrence is very much the same as the occurrence of the rise of virtual assets.


Understanding Digital Assets

A digital asset is any electronic device, account, or password-protected website. It can include your mobile phone, especially the photos and text messages inside it. A wide assortment of items falls under the umbrella of digital assets, including the following:

  • Digital Currency: Financial resources like Bitcoin and Ethereum that exist in only digital form.
  • Payment Wallet: Using a platform for payment, such as GrabPay, PayPal, etc.
  • Personal websites and blogs: Any website or blog that's built using a third-party service and their hosting facilities.
  • Social Media Accounts: Accounts on social media platforms like Facebook, Instagram, and Twitter that might be of significant value as a means of digital expression.
  • Subscriptions: These include recurring payments for digital services (like Netflix, Dropbox, Nintendo Switch Online, PlayStation Plus).
  • Online businesses: Websites, e-commerce platforms, and other ventures that exist in the online world.
  • Email accounts: Personal and professional accounts, the contents of which could be crucial to your heirs in ensuring a smooth transition of your business and personal estate.
  • Valuable digital files: If precious music, videos, or other digital auction-worthy files exist such as Non-Fungible Token, NFT, their online equivalents should be both inventoried and valued.
  • Cloud Files: Anything stored in the cloud, including photos, music, and documents.

Of course, these items can hold great emotional value, which is reason enough to consider them as integral to your estate. But many of the things listed above could also hold serious financial value. Each individual has a unique combination of these assets.


Changes in the Estate Planning Landscape

  1. Recognition of Digital Footprint: Nowadays, individuals have comprehensive virtual traces, usually including a mix of both valuable and invaluable materials.
  2. Legal Frameworks: A growing number of jurisdictions are hard at work creating legal frameworks that give access to a deceased individual's virtual traces. Some of us might even call these "virtual wills." Virtual laws are laws too, and most are being created in a very messy, organic way.
  3. Complexity of Asset Valuation: Determining the value of digital assets can be an intricate task. The worth of cryptocurrencies can change quickly and drastically, while the value of a social media account could vary widely based on the number of its followers and the degree of engagement it has.
  4. Privacy and Security Concerns: Digital assets often require careful handling to maintain privacy and security. Passwords and other access methods need to be recorded in a way that allows heirs to access these assets without in any way compromising the asset's security.
  5. Technological Advancements: As technology continues to advance and evolve, new types of digital assets will emerge, this create the need to update estate plans as well.

Incorporating Digital Assets to your Estate Planning

It is crucial to have a responsible custodian in place to manage your physical assets when you can no longer tend to them, and the same goes for your digital assets—they need a custodian, too. Netizens have assets that exist only in a digital form, like their online bank accounts. If your estate plan doesn't take these digital assets into account, your family members could very well find themselves shut out of these authorless accounts for good, losing priceless memories archived somewhere online, and not to mention photos and videos that exist only in a digital form.


By incorporating digital assets into your estate plan, you facilitate the management of your estate by the people you leave in charge and help ensure that your privacy is respected, even posthumously. It is as important to include your digital assets in any conversation about estate planning as it is to include discussions about any other form of treasure.


How to plan for digital assets in estate planning?

Here are some potential strategies for incorporating digital assets into estate planning:

  • Compile a list

    • Account for all digital assets and liabilities, such as accounts with online service providers, apps for managing home and work life, and even cryptocurrency accounts. Some of these might be hard to access because of stashed security questions and passwords. Others might be time-consuming to locate after your death if you've not already authorised a trusted person to access them while you're still alive. And it's not an easy inventory to make because it's not an easy time to be made in a digital life.
    • Include digital liabilities, such as any automatic billing programs, renewals, or other arrangements where your digital asset proxy (an executor, for instance) might be charged on your account after you've passed.
  • Determine what you want to do with the digital assets and who should be the one doing it

    • If you want any of your email accounts to be controlled by a certain family member or members instead of an executor, you should specify this in your Will. You may wish only such family members to handle social media accounts that might be relevant to your career (such as LinkedIn), and that will go into the Trust as well. Note that the major digital providers do now have policies that allow some sort of access to your accounts for your heirs. Your stated intention will override what's in those policies.
    • Clearly outline your choices within your Last Will and Testament or your Trust document. This is especially important if you have any digital assets that may not readily convert to a more traditional form of inheritance.
    • Maintain a sealed letter with your Will that provides details of your digital assets. Instead of including the information in your Will, it is better to keep a letter that details your digital assets alongside your Will. The reason for this is simple: once you are gone, your Will becomes a public document. But a sealed letter is private. And it is better to keep such a letter with your Will than to hide it in some other place that could be just as public.

Why Consider Digital Assets in Estate Planning?

Your estate plan secures the future of your tangible and financial assets. But what about your digital assets? If you hold digital assets with significant financial value—such as cryptocurrencies, non-fungible tokens (NFTs), or online businesses—they need to be included in your estate plan. Even if you don't have millions of virtual dollars in the bank, consider this: your future heirs will need access to your neglected social media accounts, and the smartphones of your mobile life—all used to keep in touch with the world. Can you really say you have a digital legacy if the future access to these assets isn't part of your estate plan?


Often, digital assets have so much sentimental value that they're almost priceless. Not infrequently, picture-perfect moments and videos of them are stored on digital devices. Make sure your estate plan allows access to what really matters in life while giving you the peace of knowing that your loved ones can always reach those meaningful memories. After all, what could be more harmful to the legacy of the relationship you shared than having your digital memories erased by your passing? You're not just planning for pictures; you're putting a plan in place that shows you're thinking about the memories and the very essence of you that those pictures and videos embody.


Preventing disputes among heirs is a primary reason for mapping out your digital assets and specifying your intentions for them. Without proper documentation, misunderstandings can arise over ownership and access. These misunderstandings can lead to conflicts that strain family relationships during a time when everyone is under enough stress as it is. Side note: this is not in any way a reason to be underhanded or mean to your family; mapping out your digital afterlife is truly an act of love.


Appreciating the worth of your digital assets makes it possible to manage and possibly monetize them before bequeathing them to your heirs. This can lead to even greater financial stability than you might expect, during your lifetime and posthumously. By valuing your digital assets, you can manage them better, clear up any IT fog concerning their worth for your kids and grandkids when they're trying to manage their own lives, and make it easier for the next generation to keep them safe and secure.


As technology develops, so do the types of assets we possess. Keeping your estate plan current and up to date ensures that it is still relevant and effective. When it comes to estate planning that includes digital assets, the major concern is that the plan will go out of date with new developments in the law, technology, or with changes in our possession of digital assets. If we're adaptable in our thinking, if we're flexible, and if we update our digital estate plan regularly, then we can rest assured that our digital legacy will be honoured and well preserved.


Conclusion

The ownership of digital assets has risen sharply as individuals increasingly spend time online, acquiring digital goods. However, this shift often goes unnoticed by many. As more demographic groups continue to accumulate digital assets and engage with various online platforms, it is clear that estate planning must evolve to incorporate these assets into wills and trusts. It will become increasingly necessary to address how digital assets fit into the broader framework of asset management and distribution in the future.

LATEST POST

SYNERGY Blog

Articles, events, industry best practices, and news.

Get in touch with our career team!

We are passionate, intelligent and forward-looking team of financial advisers with an eye on the markets and the future.

We provide a wide range of solutions to cover you

Discover insurance that can cover medical care, rehabilitation, and property loss. Fill out the form for a quote today!