Planning for Digital Assets in New York: What Your Estate Plan Should Address

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Most people preparing an estate plan can readily identify their house, bank accounts, investment accounts, retirement assets, and personal property. What is often overlooked is the substantial amount of information and property that now exists only in digital form or is accessible primarily through an online account.

A person’s digital footprint may include email, cloud storage, photographs, social media accounts, online financial records, cryptocurrency, websites, domain names, electronically stored business records, and subscription services. Some of these assets have financial value. Others have significant personal value. Still others may contain information that an executor or trustee needs in order to identify and administer property that exists outside the digital account itself.

For Long Island residents, addressing these issues is increasingly an ordinary part of New York estate planning. The objective is not simply to create a list of passwords. A useful digital asset plan should consider who will have legal authority to obtain information, what the service provider is permitted to disclose, what the account holder has directed the provider to do, and how the fiduciary will know that an account exists in the first place.

What Counts as a Digital Asset?

New York’s Estates, Powers and Trusts Law addresses digital assets in EPTL Article 13-A. The statute is broader than many people expect and establishes rules governing fiduciary access to digital assets and electronic communications.

In practical estate planning, digital assets can fall into several categories.

Financial and Investment Assets

Some digital assets have readily identifiable monetary value. Cryptocurrency and other blockchain-based assets are common examples. Online payment accounts and certain digital marketplaces may also hold funds or property rights.

An important distinction exists between an asset that is digital and an online account that merely provides access to a conventional asset. A bank account does not become a different type of property simply because the owner uses online banking. Nevertheless, access to the online account may provide an executor with information needed to locate the account, obtain statements, and determine the value of the estate.

Electronic Communications and Personal Files

Email accounts, text or messaging histories, cloud storage, and online photographs may have little market value but substantial personal or administrative importance.

An email account, for example, may contain communications with financial institutions, attorneys, accountants, insurance companies, or business associates. An executor who cannot identify the decedent’s accounts may have difficulty reconstructing the decedent’s financial affairs.

At the same time, the law treats access to the content of electronic communications differently from access to certain other digital assets. An estate plan therefore should not assume that appointing an executor automatically gives that person unrestricted access to everything stored online.

Business and Intellectual Property

For a business owner, digital assets may include domain names, websites, online storefronts, customer information, electronically stored records, intellectual property, and accounts used to manage business operations.

These assets require particular attention when the business depends upon one individual who controls the passwords or authentication process. The legal authority to manage an asset and the practical ability to access it are separate problems, and both should be addressed.

New York’s Digital Asset Law and Fiduciary Access

EPTL Article 13-A establishes New York’s statutory framework for the administration of digital assets. It addresses access by fiduciaries such as executors, administrators, trustees, agents acting under powers of attorney, and guardians.

One of the most important provisions is EPTL § 13-A-2.2, which permits a user to provide directions concerning disclosure of digital assets.

The statute recognizes what is sometimes called an “online tool” provided by a custodian or service provider. Depending on the provider, this may allow the account holder to designate someone to receive information or otherwise determine what happens to the account.

The relationship between an online direction and an estate planning document is important. Under EPTL § 13-A-2.2, if the user employs a qualifying online tool that allows the direction to be modified or deleted at all times, that direction can override a contrary direction contained in a will, trust, power of attorney, or other record.

If no such online direction has been made, the statute permits a user to address disclosure in a will, trust, power of attorney, or other record.

This means that digital asset planning should involve more than adding a paragraph to a will. The attorney and client should consider both the estate planning documents and any directions the client has already made directly through online service providers.

Why a Password List Is Not an Estate Plan

Clients sometimes believe they have solved the digital asset problem by giving a family member a list of usernames and passwords. Maintaining an inventory can certainly be useful, but it does not replace legal planning.

First, possession of a password does not necessarily establish legal authority to access or control an account. A fiduciary’s authority is governed by applicable law, the governing estate planning documents, and potentially the provider’s terms of service.

Second, passwords change. Multi-factor authentication may require access to a separate telephone, email address, or authentication application. A carefully prepared password list can become obsolete quickly.

Third, placing passwords directly in a will is generally a poor method of managing credentials. A will may eventually become part of a court proceeding and should not function as a repository for sensitive access information.

A more practical approach is to maintain a separate, secure inventory that identifies important accounts and explains where necessary information can be found. The estate planning documents can then address fiduciary authority and disclosure without containing credentials that require frequent updating.

Cryptocurrency Presents a Different Practical Problem

Cryptocurrency illustrates why legal authority alone may be insufficient.

A conventional financial institution can generally respond to appropriate documentation from a duly appointed fiduciary. Cryptocurrency held through an exchange may present a somewhat comparable process, depending on the provider and circumstances. Assets held in a self-custodied wallet are different.

If access depends upon a private key or seed phrase and that information is permanently lost, obtaining letters testamentary from the Surrogate’s Court does not recreate the missing credentials. A court order cannot restore a private key that no one can locate.

Accordingly, a person who owns cryptocurrency should consider both succession and custody. The plan should allow an authorized person to identify the asset and obtain whatever information is necessary to access it, while avoiding an arrangement that exposes the asset to theft during the owner’s lifetime.

The appropriate solution depends upon the type and value of the holdings, the custody arrangement, and the sophistication of the intended beneficiaries and fiduciaries. Significant cryptocurrency holdings may require coordination among estate planning, tax, and digital-security professionals.

The Role of Your Executor, Trustee, and Agent

Choosing a fiduciary for an estate involving substantial digital property requires consideration of practical competence as well as trustworthiness.

An executor does not necessarily need to be technologically sophisticated, but the executor should be capable of identifying when specialized assistance is required. The same is true of a trustee responsible for administering digital property over an extended period.

A power of attorney also deserves attention. Incapacity can create digital access problems before death. Bills may be delivered electronically, financial records may exist primarily online, and important communications may be sent to an email account that no one else can access.

EPTL Article 13-A contains provisions governing disclosure of digital assets to fiduciaries in several different capacities. Estate planning documents should be coordinated so that the authority granted to an executor, trustee, or agent is consistent with the client’s intentions concerning digital information.

It is also important to distinguish between the person with fiduciary authority and a person who merely has technical knowledge. New York law does not establish a separate fiduciary office simply because someone is informally described as a “digital executor.” A will can give an executor appropriate authority and can address digital assets, but using an informal title should not create confusion about who actually holds legal responsibility for estate administration.

Creating a Practical Digital Asset Inventory

An effective digital asset inventory does not need to list every online shopping account or newsletter subscription. It should focus on information that a fiduciary may reasonably need.

Useful categories may include:

  • Primary email accounts and cloud storage services.
  • Online banking, brokerage, and payment accounts.
  • Cryptocurrency exchanges, wallets, and custody arrangements.
  • Social media and professional networking accounts.
  • Domain names, websites, and online businesses.
  • Digital photographs and other personally significant files.
  • Online accounts associated with recurring charges or subscriptions.
  • Business records maintained electronically.
  • Devices containing important information.
  • Password managers and authentication methods.

The inventory should explain how the fiduciary can locate necessary information without unnecessarily exposing passwords, private keys, or other credentials during the owner’s lifetime.

It should also be reviewed periodically. An inventory prepared five years ago may omit the accounts that now contain the most important information.

Coordinating Digital Assets With the Rest of the Estate Plan

Digital asset planning works best when it is integrated with the rest of the estate plan rather than treated as a standalone document.

A will should address appropriate fiduciary authority. A trust may require provisions concerning digital property held in or administered through the trust. A power of attorney should be reviewed for authority relevant to digital assets during incapacity. The client should also consider directions made through online tools offered by individual service providers.

This coordination is particularly important because EPTL § 13-A-2.2 establishes a hierarchy in which certain directions made through a qualifying online tool can override contrary instructions in a will, trust, power of attorney, or other record. A client who updates an estate plan but ignores an earlier online designation may therefore produce an unintended result.

Good estate planning also considers the relationship between digital information and conventional property. An executor who knows that an investment account exists but cannot locate statements may face unnecessary administrative work. A trustee who inherits responsibility for an online business may need immediate access to operational information. Planning should identify these dependencies before incapacity or death makes them urgent.

For clients on the East End and elsewhere on Long Island, another practical concern is geographic separation among family members. Children and other intended fiduciaries may live outside New York. A secure and organized system for identifying assets can make administration considerably more manageable than leaving family members to reconstruct a digital footprint after death.

When to Speak With a New York Estate Planning Attorney

Digital asset planning becomes particularly important when a person owns cryptocurrency, operates a business online, maintains valuable intellectual property electronically, stores important family records in the cloud, or has financial affairs that are managed primarily through online accounts.

It is also worth reviewing an existing estate plan if the documents were prepared before digital asset provisions became a routine part of estate planning. The objective is to determine whether the documents provide appropriate authority, whether online account directions are consistent with those documents, and whether the fiduciary will have enough information to locate important assets.

For individuals and families in Hampton Bays, the East End, and throughout Suffolk County and Long Island, questions about digital assets should be considered as part of the broader estate plan rather than after a fiduciary encounters an inaccessible account. To discuss a New York estate plan, contact the office or review additional information about William G. Goode and his estate and Surrogate’s Court practice.

References

  1. New York Estates, Powers and Trusts Law, Article 13-A, Administration of Digital Assets, New York State Senate.
  2. New York Estates, Powers and Trusts Law § 13-A-2.2, User Direction for Disclosure of Digital Assets, New York State Senate.

Short FAQ

Does my executor automatically get access to all of my online accounts?

Not necessarily. Access depends on New York law, the type of digital asset, directions you made to the service provider, your estate planning documents, and potentially the provider’s terms of service. The content of electronic communications can also be treated differently from other digital assets.

Should I put my passwords in my will?

Generally, a will is not an appropriate place to maintain passwords or other credentials that change frequently and require confidentiality. A separate secure inventory or password-management system can provide practical access information while the estate planning documents address legal authority.

What happens to cryptocurrency when the owner dies?

Cryptocurrency can pass as property, but the practical ability to access it depends heavily on how it is held. If self-custodied assets require a private key or seed phrase that has been permanently lost, legal appointment as executor may not be enough to recover the assets.

Can an online account designation override my will?

In some circumstances, yes. Under EPTL § 13-A-2.2, a direction made through a qualifying online tool that can be modified or deleted at all times can override a contrary direction in a will, trust, power of attorney, or other record.

What digital assets should I include in my estate planning inventory?

The inventory should focus on accounts and information that a fiduciary may need to identify, value, access, preserve, or administer property. Common examples include email, cloud storage, financial accounts, cryptocurrency, websites, domain names, digital business records, and important electronic files.

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Disclaimer

This article is for general informational purposes only and is not legal advice. Reading this article does not create an attorney-client relationship. Estate and Surrogate’s Court matters are fact-specific, and individuals should consult with an attorney regarding their particular circumstances. Prior results do not guarantee a similar outcome. This may be considered attorney advertising.