What happens after you die is one of life’s greatest mysteries, but one thing is for sure: You won’t be able to take your wealth with you.
Most people choose to pass their assets to their loved ones or a charity they want to support. For most of your assets, this process is relatively straightforward, especially if you’ve already conducted careful estate planning. Bank balances can be transferred, and homes can be passed along to the next generation.
But digital assets are trickier. Losing a password can keep your beneficiaries locked out for months, or forever!
In a worst-case scenario, digital assets can be lost entirely, because your loved ones never knew that they existed in the first place.
To safeguard your digital assets for the next generation, you need to put a concrete plan in place now.
Let’s break down what digital assets are, what happens to them after you die, and how you can put a plan in place to make sure their value lives on.
What Are Digital Assets?
In the broadest sense of the term, digital assets are a virtual representation of value that isn’t tied to a physical object. Digital asset investments can look like virtual items, tokens, or accounts that can be exchanged for value.
Some well-known examples of digital assets are cryptocurrencies like Bitcoin or Ethereum. Cryptocurrencies exist only in the virtual space, and their value isn’t overseen by any governing body or tied to any national currency. Their ownership is recorded on the blockchain, a distributed database where transactions are tracked. Non-fungible tokens (NFTs) are another type of digital asset that is also recorded on the blockchain.
Cryptocurrencies and NFTs may be two of the most talked-about examples of digital assets currently, but they’re far from the only ones around.
Digital assets can also include things like:
- websites and domain names
- ecommerce stores
- SaaS platforms
- a PayPal balance
- revenue-generating social media accounts
- digital files
- Credit card points
Digital assets have seen explosive growth in recent years. In 2021, the global market was already valued at nearly $2 billion. It's expected to grow at an impressive CAGR of almost 60% for the next five years!
According to Deloitte’s 2021 Blockchain Survey, “leaders at financial services institutions globally regard digital assets and blockchain technologies as a strategic priority.” President Biden has even signed an executive order to ensure the responsible development of digital assets.
The value of digital assets continues to grow, and people are getting involved. But are they taking the proper steps to protect them and pass them on?
What Happens to Your Digital Assets When You Die?
The process for transferring traditional assets like real estate, bank account balances, and family heirlooms with sentimental value is well-established and straightforward, especially if you have a will or a trust in place.
After a person’s death, their estate goes through the probate process. Assets, debts, and possessions are cataloged and distributed according to the will, if there is one. The probate process is overseen by the executor of the estate, who is often a family member designated in the will.
On paper, the process for digital assets is the same.
The problem is that digital assets are often harder to locate. Your family members might not know that they even exist, especially if you don’t have a centralized record of what they are and how much they are worth.
On top of that, digital assets are password protected. Even if your family members know where your digital assets are, without the right passwords, those hard-earned investments are stuck out of reach.
If you run an online business or ecommerce website, losing access to your online accounts and/or financial portals like PayPal can have even bigger repercussions. Without access, your beneficiaries have no way to pay your employees or fulfill customer orders.
It’s easy to forget about your digital assets if you don’t make a concerted effort to conduct digital asset estate planning because they are often overlooked due to their “invisibility.” But if you don’t include your digital assets in your estate planning process, you lose control over what happens to them and you run the risk of making a difficult time even harder for your loved ones.
The Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA)
Legislation often lags behind technology, but there are some laws that dictate how digital assets can be accessed after a person’s death.
The Revised Uniform Fiduciary Access to Digital Assets Act, or RUFADAA, is a U.S. law passed in 2015 that governs access to a person’s online accounts after that person dies or is incapacitated. The law grants the executor of a will or trustee the ability to manage digital assets like websites, domain names, and virtual currency while also protecting the deceased person’s privacy. RUFADAA also restricts access to personal communications like email accounts, text messages, and social media accounts, unless permission was explicitly granted in the will.
Estate Planning for Your Digital Assets
Making sure that your loved ones have access to your digital assets after your death is the only way for them to reap the benefits of your investments. To do that, you’ll want to put a few practical and legal protections in place.
Practical Estate Planning
The first step is to know exactly what you have, where it is, and how to access it.
Take stock of everything and gather that information in one place, like a spreadsheet or a wealth management platform (more on that later). Store everything in a secure place and add instructions on how to access it in your will, so your future estate administrator can find it easily. Finally, set a reminder to update this information regularly.
For security, avoid keeping records of your passwords with the rest of your account information. Instead, use a password manager like 1Password or create a separate document with login information for all of your digital accounts and store it separately and securely. For example, 1Password recommends creating an “emergency kit” and saving it in a safety deposit box. You should also add this master list to your will.
Legal Estate Planning
Once you have an idea of where your digital assets are and how much they are worth, you’ll want to set up a will.
According to a 2021 Gallup poll, only 46% of Americans have a will. Without a will, a deceased person’s assets can be held up in probate for months or even years, especially if there are disputes between beneficiaries or if assets are hard to locate.
If your estate planning is simple, you can try to set up a will yourself with free tools available online. But if you have a more complicated situation — or if you’re worried about making a mistake that could cost your beneficiaries in the future — your best bet is to speak to an estate planning attorney. The National Association of Estate Planners & Councils is a good place to start.
A professional estate planner can help you write your will, set up a trust fund if necessary, and help you designate an executor for your assets. If you choose, you can also select a separate digital executor, who will be in charge of managing your digital property.
Use Wealth Management Software to Keep Track of Your Digital Assets
Spreadsheets are one solution for digital assets management, but they have several drawbacks: they can be lost, they can be stolen by bad actors, and they need to be updated manually several times a year to stay useful.
If you’ve invested in a portfolio diversification strategy that has you managing lots of digital assets, a spreadsheet just isn’t going to cut it. You need a digital vault where your information is updated automatically so that you can store, track, and access all of your assets in one place.
This is exactly why we created Kubera.
Kubera is a robust personal balance sheet with wealth management software that allows you to safely store all of your investment information in one place so that nothing is ever lost — and your loved ones can find everything you want them to when the time comes.
With Kubera, you can track and optimize your entire portfolio in one place, including digital assets like cryptocurrencies, NFTs, and domain names — as well as more traditional assets like bank accounts, credit cards, stocks, fiat currencies, vehicles, and even real estate. (Get an idea of all the ways we integrate here!) It’s as easy as updating a spreadsheet — without any of the drawbacks.
Once all of your many types of assets are added to the platform, you can use Kubera to automatically find IRR for investments (more on that here.) And any time you want a performance check-in, just use our recap screen to see how individual assets are performing on a granular scale — as well as how they’re impacting your net worth and your overall portfolio.
But most importantly for today’s discussion, with Kubera your loved ones don’t have to worry about tracking down accounts and information for even the most obscure digital assets during a difficult time.
That’s because Kubera makes beneficiary management easy. Our “Safe Deposit Box” feature allows you to securely store all of your estate planning documents alongside your portfolio. And you can designate a beneficiary to receive access to your digital accounts, assets, and critical documents when you’re no longer able to manage them.
Our secure, automated “account manager” lets you grant your named beneficiary automatic access to your account after a set period of inactivity (and multiple email prompts). Your beneficiary will receive access to your Kubera information and financial assets only when the time comes, and not before.
And if for some reason your primary beneficiary can’t access your account, Kubera also gives you the option to designate a secondary beneficiary, who will only receive access in the event that your main beneficiary can’t get in.
Kubera gives you the added peace of mind of knowing your wealth and all of your assets will end up in the right hands. Sign up today to ensure your family and loved ones can access your digital assets at the moment they need to.
And don’t worry, you can still work with Kubera alongside your financial advisor, wealth manager, or other financial pro. They can request a demo to see our white-label platform in action and learn how it can help them help their clients — like you — manage their digital assets more effectively!