In an increasingly paperless world, we live much of our lives online. We conduct business online, we communicate electronically and we manage our finances through e-mail and websites. As a result, most people today have accumulated significant “digital assets” and information that require special consideration in your estate plan.
Lack of a Paper Trail and Death or Disability
When a person dies or becomes disabled, one of the first things his or her Executor, Agent, or family members must do is determine the assets and liabilities of the estate. In a paper-based world, that generally means reviewing the deceased’s mail, desk drawers and filing cabinets to look for tax returns, bank and brokerage account statements, bills, check registers, and loan documents.
In a digital world, however, it is not unusual for people to conduct many of these transactions online. In many instances, they do not leave a paper trail. Many people receive statements by e-mail, pay bills online, and use programs like QuickBooks to track and reconcile their bank accounts and other financial records.
Without careful planning, it may be difficult or even impossible for your representatives or loved ones to locate your assets or identify your creditors. Even if they do, they may not be able to gain access to or manage your accounts without your user name, password and other security information (at least not without following time-consuming procedures or seeking a court order).
If you have deposits made directly to your accounts or if bills are automatically debited from your accounts, how will your representatives find out about these transactions so that they can settle your financial affairs?
Furthermore, many family photographs and videos now reside only in a digital format – from the moment they are recorded they are never printed and only exist electronically. These photos may become some of your most cherished family heirlooms. You should provide your representatives information where to locate these photos and videos.
Create a Record
To ensure that none of your digital assets or debts fall through the cracks, it is critical to create a detailed record of these items, including website addresses, account numbers, usernames, passwords and other security information one might need to access and manage your accounts.
Your record should include e-mail accounts you use to receive statements or other financial information. If you use an online bill paying service, list creditors that you pay through the service, especially those whose bills are automatically debited from your bank account.
After you create your list, the question becomes, “What do I do with it?” Leaving a copy at home or in your office could be risky because of the possibility that someone could steal the list and use your usernames and passwords unlawfully.
You could store the list on your computer in a password-protected file – or use an “electronic wallet” program that stores passwords and other sensitive information. You would then need to give the master password to a family member or some other trusted person, something you may not be ready to do. Additionally, if the computer is stolen or the hard drive crashes, the information may be lost.
Another option is to keep the list in a safe deposit box. This can be inconvenient if you follow recommended digital security practices, including changing your passwords regularly. If you do leave it in your safety deposit box, you should allow access to the safety deposit box by one or more trusted individuals.
Not surprisingly, several companies have developed online solutions to this problem. Sometimes referred to as “virtual safe deposit boxes”, these services store all of your usernames, passwords and other electronic data on a secure website in an escrow-like arrangement. They can also store digital copies of important paper documents, such as insurance policies, wills, trusts, deeds and mortgages. After you die, your designated representatives can retrieve the information, typically by presenting identification and a death certificate. One website to review is the Digital Beyond at www.thedigitalbeyond.com.
Reduce the Amount of Work During a Difficult Time
Documenting your digital assets relieves your family of the difficult and often impossible task of tracking down these assets themselves during an already difficult time. Ask your estate planning advisor about whether a virtual safe deposit box makes sense for your situation.
Your online accounts hold two types of value – economic and sentimental. Both types of asset need to be considered carefully in building a proper digital estate plan.
If you have any questions regarding the above article or need assistance with your estate plan, please call us at (206) 621-1600 or e-mail Gary Gill at firstname.lastname@example.org.
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