KNOWLEDGE CENTER: Unlocking the digital vault — a guide to digital estate planning for small business owners

In the digital age, our lives and businesses are intricately woven into the fabric of the online world. From financial transactions to client communications, much of our business activity takes place in the digital realm. Yet, many small business owners overlook a crucial aspect of estate planning: the digital estate.

Digital estate planning is a critical aspect of overall estate planning for small business owners. Here, we outline essential considerations for your planning process.

Tracking Passwords

In the digital landscape, passwords are the keys to the kingdom. Many small business owners fail to keep track of their myriad passwords, leading to potential complications during estate settlement. Make a comprehensive list of all your online accounts, along with their passwords. Consider using a password manager to store this information securely.

RUFADAA Provisions and Document Updates

A few years ago, no legal guidance on dealing with digital assets existed. However, most states have passed a version of the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA), which helps govern access to digital assets by fiduciaries in the event of incapacity or death. Ensure your estate planning documents, such as wills, trusts and powers of attorney explicitly address RUFADAA provisions. Designate a trusted individual to manage your digital assets and give them the legal authority to access and manage them on your behalf.

Generally, digital asset ownership is first governed by the terms of service agreement set when you set up the account. Access to these assets post-death can be impacted by using an online digital estate tool and your estate documents. If you do not update these documents you will likely cut off access to many of your digital assets upon death, leaving a permanent mess for heirs.

Granting Access to Fiduciaries

Designate fiduciaries, such as executors or trustees, and ensure they have access to your digital accounts. Provide them with usernames, passwords, and any additional authentication methods required to access them. Communicate your wishes regarding the management of these assets to your designated fiduciaries. And, let them know your wishes for digital assets whether to preserve, destroy, or transfer them.

Angela Wagner, attorney, and wealth director for Bryn Mawr Trust says, “Today, with family living in other states and traveling, it is vitally important that those named to act in your Health Care and Durable General Powers of Appointment have access to those documents virtually. In an emergency, they can immediately act on your behalf.”

Correct Titling of Accounts

Ensure that all your digital accounts are correctly titled in the name of your business entity. This is crucial for clarity and legal compliance, especially in the event of business succession or transfer of ownership. Review the ownership details of all your digital accounts and make updates to ensure they are properly titled in the company’s name.

Avoid Single Points of Failure

Guard against single points of failure by diversifying access to your digital assets. Avoid relying solely on a single individual to manage or access critical accounts. Instead, designate multiple trusted individuals and establish clear protocols for accessing and managing these assets in your absence.

Digital estate planning is a critical aspect of overall estate planning for small business owners in the digital age. By proactively addressing issues, you can ensure the seamless transition of your digital assets and protect the interests of your business and loved ones. Consult with legal and financial professionals experienced in digital estate planning to develop a comprehensive plan tailored to your needs and circumstances.

Jamie P. Hopkins has extensive wealth management experience, bringing innovative thinking, transformative leadership, and a strong reputation for fostering client relationships. Hopkins graduated from Temple University School of Law, where he received his LL.M.; and Villanova University School of Law, where he earned his juris doctorate. He earned a master’s degree in financial planning from The American College of Financial Services and a master’s degree in business administration from Villanova University. Hopkins is director of private wealth management, Bryn Mawr Trust and CEO of Bryn Mawr Capital Management.