Why digital estate planning matters
Most estate plans still focus on houses, bank accounts, and investments—but the average person now has dozens of online accounts that matter: email, cloud photo storage, social media, payment apps, subscription services, online businesses, and cryptocurrencies. When those accounts aren’t documented, families can face frozen finances, inaccessible memories, or unexpected tax issues. A 2020 CFPB survey and related studies show many consumers overlook digital assets when planning (Consumer Financial Protection Bureau).
In my practice I routinely see two common outcomes when clients neglect digital planning: time-consuming legal battles to gain access, and permanent loss of assets (for example, an unrecoverable crypto wallet). Addressing digital assets proactively reduces friction for heirs and preserves value and intent.
Inventory: the single most important step
Start by creating a secure inventory of every online account and digital asset. Break the inventory into categories so it’s actionable:
- Financial and transactional accounts: banks, brokerage platforms, PayPal, Venmo, cash-apps, cryptocurrency wallets (custodial and noncustodial). Note that the IRS treats cryptocurrency as property for tax purposes—capital gains rules can apply on transfer or sale (IRS guidance).
- Accounts with personal content: email providers, cloud storage (Google Drive, iCloud), photo libraries, blogs, and websites.
- Social media and messaging: Facebook, Instagram, Twitter/X, LinkedIn, WhatsApp, Slack.
- Digital property and business assets: domains, e-commerce stores, digital storefronts, subscription services, and software licenses.
- Digital records: password managers, digital vaults, and authentication apps (2FA keys/backups).
Record for each item: account name, username or email used, URL, role (owner vs admin), whether two-factor authentication is enabled, whether there’s a designated beneficiary or legacy contact option, and where any recovery keys are stored.
Store the inventory securely: use an encrypted password manager or an offline encrypted file in a locked safe. Never store passwords in plain text in a cloud note without encryption.
Legal tools and instructions
Digital assets can be handled through the same legal framework you use for other property—wills, trusts, powers of attorney (POA), and executor or trustee instructions. Key considerations:
- Will vs trust: A will can specify who gets digital assets at death, but assets that pass through a trust may avoid probate and provide privacy. For high-value digital businesses or large crypto holdings, consider a trust to allow orderly access and tax planning.
- Digital asset addendum: Many attorneys draft a separate digital assets addendum or schedule that lists accounts and access instructions so your executor knows where to look. Some states have adopted the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA), which affects how fiduciaries gain access to digital accounts—check your state law.
- Durable power of attorney (POA) for digital matters: A general POA may not explicitly grant access to digital accounts. Include express authorization for digital assets or a separate digital POA.
- Account-specific options: Many platforms offer “legacy” or “inactive account” settings (e.g., Google’s Inactive Account Manager) or allow a designated legacy contact (Facebook). Use those features and document them in your plan.
Talk to an estate attorney who knows digital asset law in your state; rules vary and are evolving.
Practical steps: technical and administrative actions
- Use a reputable password manager and store a record of where the master password or recovery key is kept. Modern password managers (1Password, LastPass, Bitwarden) include emergency access features—set them up.
- Enable platform legacy options where available (Google Inactive Account Manager, Facebook memorialization/legacy contact, Apple Digital Legacy). Document these choices in your plan and confirm the people you name are willing to act.
- For noncustodial crypto wallets, the private keys or seed phrase are the asset. Store them in a hardware wallet and consider splitting the recovery phrase using a secure method (multisig wallets or Shamir’s Secret Sharing) and placing shares with multiple trusted parties or in a safe deposit box. Be explicit in legal documents about how heirs can locate and access these keys.
- For custodial crypto held on exchanges, ensure account registration information and MFA recovery methods are documented—platforms will still require identity verification.
- Create a digital archive for photos and important documents and decide who will have access. Backups are essential; keep at least one offline backup.
- Update beneficiary designations where available. Some accounts (certain bank/investment accounts, Payable-on-Death instructions) may not accept digital-asset beneficiaries, but you can still name beneficiaries on accounts that allow it.
Social media and communications: respect privacy and intent
Each platform has different policies. Some will allow account transfer or memorialization when provided with a death certificate and proof of authority; others will permanently close the account. Document your wishes for social media—do you want accounts memorialized, closed, or handed to a family member to manage? Put those directions in writing and confirm whether the platform supports them.
Taxes and reporting considerations
Digital assets can have tax implications. The IRS treats cryptocurrency as property, which means selling or transferring can trigger capital gains; estates have reporting and valuation obligations (IRS guidance on virtual currency). Digital income—royalties from a blog, sales from a digital storefront, or online ad revenue—remains taxable and should be part of estate valuation and tax planning.
Work with a CPA or tax attorney familiar with digital assets to handle valuations (especially for unique digital property like NFTs or online businesses) and to prepare any estate tax filings that may be required.
Security and privacy best practices
- Limit who knows the master password or seed phrase—grant access only when necessary.
- Use multi-factor authentication and document recovery steps separately from login credentials (e.g., note that a trusted person should contact the phone carrier for SIM-related recovery only if authorized).
- Avoid including plain passwords in wills. Wills become public through probate in many states; treat wills as instructions, not secure containers for secrets.
- Consider appointing a technically capable executor or naming a co-executor who understands digital systems.
Maintenance: review and update regularly
Digital estates change fast. Make it a habit to review your inventory and legal instructions at least once a year or after major events: marriage, divorce, birth of a child, new business, or significant acquisitions (large crypto purchases, domain sales). See our guidance on When to Update Your Estate Plan: A Post-Event Checklist for more triggers and a timeline.
Common mistakes I see in practice
- Storing all passwords in an unencrypted file or emailing them to a family member.
- Assuming a bank or tech company will transfer control without legal proof—platforms typically require identity verification and legal documents.
- Forgetting to update account recovery options after a phone number or email changes.
- Treating a will as the sole method for transferring digital assets instead of combining technical, legal, and practical tools.
Quick starter checklist (actionable items)
- Make an encrypted inventory of accounts and assets.
- Set up or update a trusted password manager and emergency access.
- Use platform legacy options and name legacy contacts.
- Add digital assets instructions to your will or trust and confirm your executor or trustee can follow them.
- Securely store crypto keys and document how they can be retrieved.
- Consult an estate attorney to ensure documents conform with state law.
Where to find authoritative guidance
- Consumer Financial Protection Bureau (CFPB) covers consumer-facing guidance on digital assets and planning (consumerfinance.gov).
- IRS guidance on virtual currencies and taxation is essential for crypto (irs.gov/virtual-currencies).
- Federal Trade Commission (FTC) and platform help centers list specific account policies for memorialization and access.
For a deeper legal model and examples of organizing digital estate plans, read our related article on Estate Plans for Digital Assets and Online Accounts. If you’re updating your will after life changes, see Updating Your Estate Plan After a Divorce or Remarriage.
Professional tips from my practice
- Don’t put encryption keys or passwords in a will. Instead, reference where the encrypted inventory or purse is kept and who has access keys.
- Use layered access: a password manager plus an executor who has legal authority and an emergency contact who has technical ability.
- For high-value or business-related digital assets, build the plan into a trust and include detailed SOPs (standard operating procedures) for transferring domain ownership, business logins, or payment processors.
Disclaimer
This article is educational and does not constitute legal, tax, or financial advice. Laws on digital assets and access vary by state and by platform and change over time. Consult a licensed estate attorney and a tax professional about your specific circumstances.
Sources and further reading
- Consumer Financial Protection Bureau, digital assets guidance: https://www.consumerfinance.gov
- IRS, Virtual Currency Guidance: https://www.irs.gov/virtual-currencies
- Google, Inactive Account Manager; Facebook Help Center on legacy contacts; Apple Digital Legacy (platform help pages)
- Nolo, Digital Estate Planning overview: https://www.nolo.com/legal-encyclopedia/digital-estate-planning-what-you-need-know-29786.html
