Incorporating digital assets into estate planning for small business owners
The traditional approach to estate planning is to think about cash amounts and specific property items passing to heirs in the event of someone dying. Given the health pandemic of 2020, our society has become even more virtual than ever before, so it is prudent to also address digital assets when creating an estate plan. Digital assets can potentially be an important part of a small business owner’s estate, so it is important to take the necessary steps to protect these assets. Digital assets of small business owners include social media accounts, email accounts, photos, videos, online payment platforms, and domain names (e.g., business website). The initial thing for small business owners to do when incorporating digital assets into their estate plan is to have an awareness of what digital assets they possess and create a list of them. Further steps include maintaining the security and organization of the digital assets, consulting with an estate planning attorney, and addressing privacy concerns.
Maintaining the security and organization of the digital assets
Small business owners should organize their login credentials, account numbers, and any necessary access codes in a secure area, which can be accomplished by using a secure document service. Digital assets can contain sensitive information, which is why security of them is the top priority. Organization of digital assets is important as well since this makes it easier for heirs to access them and provides clarity in the event of a small business owner’s death.
Consulting with an estate planning attorney
I already recommend that my small business owner clients consult with an estate planning attorney for traditional estate plan matters. With digital assets involved, I believe this would create even more of a reason to consult with an estate planning attorney as the issues associated with digital assets can be complex. Note that it is prudent for small business owners to find out if the attorney they hire has experience incorporating digital assets in an estate plan. Additionally, small business owners should clearly outline to their estate planning attorney (to be included in their Last Will & Testament) how they want their digital assets to be managed and transferred in the event of their death.
Addressing privacy concerns
Small business owners should be aware of privacy laws and considerations that are applicable with the disclosure of digital asset information. Data privacy laws do not allow online account service providers to disclose content of electronic communications to anyone other than the owner. As a result, social media websites and other companies could lock up content unless a small business owner gives permission for another person to access it. Privacy laws are in place to protect consumers so without lawful consent, it can be extremely difficult and costly for heirs to access digital assets in the estate of a small business owner.
I list hypothetical examples below to illustrate reasons that would prompt small business owners to take the action of incorporating digital assets into their estate plan by consulting with an estate planning attorney and addressing privacy concerns.
Frank is a successful owner of a catering business. He consistently posts content (recipes, etc.) on Instagram, which has been his most effective marketing strategy that has led to the exponential growth of his business. Given its importance to his business growth, Frank consulted with his estate planning attorney about giving his wife permission to access his Instagram account in the event of him dying prematurely.
Matthew is a sole proprietor who owns a wedding photography business. As a sole proprietor, he is an owner-operator and responsible for all aspects of his business, which includes communications with clients about their wedding photos. Matthew consulted with his estate planning attorney about giving his wife permission to access his email account (to contact his clients) and clients’ wedding photos in the event of him dying prematurely.
Kate owns a freelance writing business and has implemented an extensive social media marketing strategy on LinkedIn that includes daily posts, consistent connection requests, a weekly newsletter, and engagement with content shared by her connections. Given that her online presence is such an integral part of her business operations, Kate consulted with her estate planning attorney about giving her husband permission to access her LinkedIn account in the event of her dying prematurely.
Review of your estate planning
Estate planning is a fundamental part of any responsible financial plan for small business owners as it provides peace of mind and financial security for the owner’s family and business in the event of an incapacity or death. I am not an attorney and do not provide legal advice, but I proactively address these key estate planning considerations (including digital assets) with my small business owner clients to help them safeguard their financial legacies to their families.