More clients are calling on financial advisors to assist with estate and legacy planning issues, and while that presents an opportunity for deeper connections and added value, there are also some big risks and potential complications to consider.
In fact, in the experience of Jamie Hopkins, the financial planning expert and attorney heading Bryn Mawr Trust's private wealth management business, there is one area in particular in which most people's estate plans are woefully out of date — even when they are working with skilled advisors and attorneys.
Specifically, few people are planning adequately for the ownership transition of valuable digital assets, which can range from social media profiles, digital artwork and personal websites to online-only businesses and cryptocurrencies. When it comes to such planning, all the usual complexities of traditional estate planning are present, but they are deepened by the evolving and often murky rules of the digital world.
Hopkins made this case in a video posted recently to his profile on LinkedIn, during which he urged advisors and their clients to think carefully about the challenges that come with the access, ownership and transferability of digital assets.
What's the Digital Estate Planning Issue?
Most Americans own some form of digital assets, Hopkins said, and their digital property tends to expand and evolve rapidly over time. For example, even taking to LinkedIn and posting a short commentary video involves the creation of a digital asset, although its monetary value is debatable. And then there are more substantial digital creations to consider, such as lucrative social media profiles or a successful online vendor.
Despite this, most trust documents, powers of attorney and wills have not been updated since the creation nearly a decade ago of a set of rules created under RUFADAA, or the Revised Uniform Fiduciary Access to Digital Asset Act.
"The reality is that this law started coming into existence about a decade-plus ago," Hopkins noted, "and it's been passed, or a version of it, in most states."
RUFADAA requires estate planning documents, including wills and powers of attorney, to be very specific with the language used in giving various parties access to or ownership of such digital assets upon the original owner's death.
"This is something that is out of a lot of people's minds," Hopkins warned. "We don't think about it when creating our estate, but the reality is that there is a lot of risk with not doing this properly."
The Complexity Challenge
As Hopkins observed, digital assets in themselves can be very complex when it comes to seemingly simple questions about ownership, asset location and valuation.
