Why digital estate planning matters

People increasingly hold significant value in online accounts and digital-only assets: bank and brokerage logins, photo libraries, domain names, social profiles, business accounts, subscription services, and cryptocurrencies. When these assets are unmanaged after death, heirs often face locked accounts, lost private keys, tax confusion, and inaccessible intellectual property. In my practice as a financial planner, I’ve seen estates where months of value — especially in cryptocurrency — were effectively irretrievable because no one had documented how to find or access private keys.

Two legal realities make planning necessary: (1) platform terms of service and federal privacy laws (for example, the Stored Communications Act) can limit what an executor can access; and (2) state laws based on the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA) vary in scope. That means a will alone is sometimes insufficient; technical steps and specific legal language are often required. For background on federal and IRS guidance for virtual currency, see the IRS virtual currency resources (IRS.gov) and general financial-security guidance from the Consumer Financial Protection Bureau (CFPB.gov).

Sources: IRS — Virtual Currency (https://www.irs.gov/businesses/small-businesses-self-employed/virtual-currencies); CFPB — Consumer tools and education (https://www.consumerfinance.gov/).

Who needs a digital estate plan?

Short answer: anyone with online accounts or digital assets. Typical examples:

  • Owners of cryptocurrencies (self‑custodied wallets or custodial exchange accounts)
  • People with online financial accounts and brokerages
  • Creators who hold IP or digital content (domain names, digital art, NFTs)
  • Anyone with account subscriptions, cloud photos, or business logins

If your family depends on digital income (ad revenue, subscription sites, ecommerce) or you hold meaningful crypto, a plan is essential.

Key components of a practical digital estate plan

  1. Digital inventory
  • Create a list of accounts, usernames, URLs, and the type of access (custodial vs self‑custody). Keep this inventory encrypted and update it annually.
  1. Access method
  • Use a reputable password manager (recommended) to store credentials and shared access notes. Grant a trusted fiduciary access via the manager’s emergency access or legacy feature.
  • For crypto, clearly document whether funds are on an exchange (custodial) or in self‑custodied wallets. Note wallet types (hardware, software, multisig), seed phrase location, and any multisig co‑signers.
  1. Legal authorization
  • Update your will and consider a trust with explicit digital asset language. Provide clear authorization for your executor or trustee to access, copy, and manage digital assets and decrypt devices.
  • Sample clause (consult an attorney): “I authorize my executor/trustee to access, manage, transfer, and delete my digital assets, including social media, email accounts, cloud storage, domain names, and cryptocurrency, and to use any access information required to accomplish these tasks.”
  1. Technical safeguards and instructions
  • Keep private keys and seed phrases offline in a secure form (hardware wallet, safe deposit box, or encrypted physical backup). Avoid plaintext digital copies.
  • For hardware wallets, record the device model, where it’s kept, and the exact seed backup method (e.g., 12/24-word phrase stored in split form if using multisig).
  1. Communicate
  • Tell at least one trusted person what to do and where key documents live. Provide high‑level instructions without exposing your secrets to multiple people.
  1. Tax and reporting guidance
  • Cryptocurrency is treated as property by the IRS. Beneficiaries typically receive a basis equal to the fair market value at the date of death (a step‑up), but rules and reporting requirements apply when coins are sold or moved. Consult a tax professional and see the IRS virtual currency guidance for details.

Managing different types of digital assets

  • Custodial exchange accounts (Coinbase, Kraken, etc.): These often require the exchange’s probate procedures. If an account is custodial, document account details and the related inheritance procedures for that exchange and keep records of KYC/ID needed for transfer.

  • Self‑custodied wallets (hardware/software wallets): Provide controlled, secure instructions for finding the hardware wallet and the seed phrase. Consider using a trusted multi‑signature setup that requires more than one key-holder to move funds.

  • Social media and email: Many platforms have memorialization or legacy contact options (e.g., Facebook legacy contact). Add instructions in your estate documents for whether to delete or preserve profiles.

  • Digital businesses and domains: Ensure business succession documents and domain credentials are included in the inventory. Consider placing business accounts under an entity’s control rather than an individual login.

Practical examples from practice

  • Case A: A client held three different hardware wallets with the only record of seed phrases in a desk drawer. After his sudden death, family members could not find the drawer. We resolved this by recommending that clients store seed backups in a bank safe deposit box and register the safe‑deposit access in a trust. That simple change saved the estate months of legal fees.

  • Case B: A small business owner used a personal email for Shopify, payment processors, and domain registration. When the owner became incapacitated, business operations halted. The fix: we moved critical logins to a company password manager with an emergency access policy and added succession steps in the operating agreement.

Common mistakes to avoid

  • Storing seed phrases or passwords in plain text on cloud drives without encryption.
  • Leaving only a will instruction; many providers require more precise documentation or specific disclosure authorizations.
  • Forgetting custodial account recovery procedures (2FA, recovery email access).
  • Not updating the digital inventory after major changes (new accounts, hardware swaps).

Sample checklist (actionable steps)

  1. Make a complete digital inventory and classify assets (financial, social, creative, business).
  2. Choose a digital fiduciary — the person who will carry out your instructions.
  3. Securely store credentials in a password manager; enable their emergency access features.
  4. For crypto, decide between leaving funds on an exchange (with its own legacy process) or instructing how to access self‑custody wallets.
  5. Add precise digital authorization language to your will or create a trust clause.
  6. Store critical physical backups (seed phrase, hardware wallet) in a secure location with instructions to the fiduciary.
  7. Review annually and after significant life events.

Legal and tax notes (what to check with professionals)

  • State law: RUFADAA provides a model but each state implements access rules differently; always confirm local law with an estate attorney.
  • Provider terms: Service providers’ terms of service can restrict transfers or impose memorial rules.
  • Taxes: The IRS treats crypto as property; capital gains tax and reporting rules apply when beneficiaries sell or move assets. See IRS virtual currency guidance: https://www.irs.gov/businesses/small-businesses-self-employed/virtual-currencies.

Tools and services (what I recommend)

  • Password managers with emergency/legacy access features (e.g., 1Password, LastPass — review current provider features and security audits).
  • Hardware wallets for private key custody (Ledger, Trezor — keep firmware updated and understand seed backup practices).
  • Multisig setups for high‑value crypto to reduce single‑point failure.
  • Trust or estate‑planning attorney experienced with digital assets to draft enforceable language.

Interlinking resources on FinHelp

For related guidance, see our articles:

Final recommendations

Start with a secure, encrypted inventory and involve an estate attorney and tax advisor to ensure your instructions are legally enforceable and tax‑efficient. In my experience, clients who couple technical safeguards (hardware wallets, password managers) with clear legal authority and documented procedures save their families time and expense after death.

Professional disclaimer: This article is educational and does not constitute legal, tax, or financial advice. Consult an estate planning attorney and tax advisor before implementing changes to your estate plan.

Authoritative references