We live in a digital age. Technology has revolutionized the world and made our lives a whole lot easier. There are new questions that come to mind when it comes to using internet applications and social media platforms. As new legislature is being enacted, internet companies have refined their […]
INSIGHT: Supporting Your Clients’ Digital Legacy
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The proliferation of digital footprints in our online communities raise demand for consumer tools and options for dealing with digital assets upon incapacity and death. Is your business ready? Trust and estate practitioners (TEPs) Jennifer Zegel and Sharon Hartung say retain them while they’re living; make it easy for loved ones when they’re dead.
Since the mainstream adoption of the Internet, most consumers’ online relationships with retailers, financial institutions, and the government has skyrocketed. Many companies and institutions from household utilities to small entrepreneurs are encouraging, if not pushing, their clients to digital interactions enhancing convenience, brand loyalty, and the user experience. Online money management, bill payment, client communications, service or product ordering and fulfillment not only save administrative costs, but for businesses to remain competitive in the digital age, they are table stakes. All the while, consumers are amassing a broad new spectrum of digital assets with financial and sentimental value.
Over this past year, there was an unprecedented number of reports on the growing number of profiles of dead people lingering on social media platforms like Facebook. If you’re in the tech sector, or a business relying on the Internet, the burgeoning interest in consumer rights upon incapacity or death should be on your radar. It might appear as an isolated social media problem, but consumer estate planning questions will hit your business sooner than you realize, if they haven’t already. Despite the ease and convenience online activities offer individuals while they are living, things get complicated upon incapacity and death. Transferring a person’s digital life––assets, accounts, and identity while preserving a digital legacy after death is just not that simple, and the issues raised are relatively novel in uncharted territory.
Digital assets and why consumers should care about service provider engagement?
(Throughout this article we’ll refer to businesses and organizations that provide online services or hold digital assets as “service providers.”)
There are various definitions of digital assets depending on the global source cited. The U.S. definition, under the U.S. Uniform Law Commission’s model legislation (RUFADAA), digital assets are defined as “an electronic record in which an individual has a right or an interest. This term does not include an underlying asset or liability unless the asset or liability is itself an electronic record.” RUFADAA defines electronic, “as relating to technology or having electrical, digital, magnetic, wireless, optical, electromagnetic, or similar capabilities.” These definitions are intentionally broad to account for future expansion of this asset class. Digital assets are all of the data saved on computers and devices, information accounts, and communications managed online; however, devices, smartphones, and computers are not considered digital assets.
In consumer vernacular, digital photos; loyalty or reward points; access to online banking; unregulated crypto currencies; gaming tokens; cloud repositories; electronic books and music; social media accounts; loyalty programs; websites; trademarks; social media accounts and other digital assets associated with a monetary value that are maintained or managed online or electronically are considered digital assets. As with physical property and property rights, consumers will have wishes and expectations for their digital estates, and will want to define who gets their loyalty points or crypto assets after they are deceased, and whether or not they want their social media lives to carry on into perpetuity.
What is unique for consumers about digital assets upon incapacity and death?
Jurisdictionally there are a number of laws that could impact a user’s digital estate during life and death. Depending on the type of asset and its use will determine what happens to it upon the owner’s death. Fiduciary access laws outline what the executor or attorney is allowed to do with digital assets, and jurisdictional legislation can differ from one country to another. In the U.S., almost all the states have adopted a version of RUFADAA that defines what actions a fiduciary is permitted to take. Many people don’t realize that not all digital assets and accounts can be conveyed without pre-planning in advance of incapacity or death.
Digital assets, accessed or managed by an online provider, are subject to Terms of Service Agreements (TOSAs) that may limit the user’s right to transfer the asset or account. As of this writing, the majority of U.S. states have adopted a version of RUFADAA that provides a hierarchy for fiduciary access to digital assets: online tools (below defined), estate planning documents, and TOSAs. Regardless of jurisdictional laws and TOSAs, the implication for global businesses and online providers is that consumers, once more fully aware, will desire more options to maintain their digital assets and legacies. We further expect consumers will seek and expect the same spectrum of options for their digital assets that are available for traditional estate planning of physical assets.
Digital assets by their nature are virtual and may be difficult to find without a paper trail. There is a misconception that leaving passwords for the fiduciary is the simple solution, but passwords can’t convey important user wishes upon death. Consider what happened the last time you lost a password or got locked out of an account. Was it a time-consuming hassle to reset account access? Probably. However, the inconvenience experienced in regaining access will pale in comparison to the potential access problems likely to be suffered by your fiduciary (executor or agent). Unauthorized access, even with a password, could also be a breach of TOSAs or may be a violation of other laws, such as the U.S.’s Computer Fraud and Abuse Act, and the Stored Communications Act. In general, the lack of ability to share passwords and by implication the contravention of TOSAs is a global problem and major constraint to accessing most online accounts and digital assets after death, even by the decedent’s fiduciary.
As a result of these unique features of digital assets, clients and consumers will expect options and pre-planning tools for their digital assets and digital footprints. Addressing these new requirements can provide companies a competitive edge or brand advantage over the competition. If a consumer is presented the option of using a vendor that forces loyalty points to expire on death, or the provider that allows the selection of a beneficiary for accumulated points upon death—which business would you choose?
The unintended consequences of digital assets upon incapacity and death.
New heights of online convenience and competitive necessity is snowballing into explosive growth of digital assets creating the urgency for digital estate management similar to physical asset management. But, according to the AARP, less than 60% of Americans have a will. This statistic is similar in Canada at 50% and the UK at 54%. It will become common practice that when creating a general estate plan –– financial powers of attorney, wills, and trusts that you will also include provisions for a digital estate plan addressing digital assets, electronic communications, online accounts, and digital identities. Without an integrated estate plan, the estate could be left with the unintended consequence of the inability to close the estate in a timely manner or suffer a loss of assets.
A digital estate plan should contemplate and address access and/or disposition of the following:
- digital assets that have some form of exchange or financial value, such as loyalty points, travel rewards, cryptocurrency, gaming tokens, and the digital assets of a business;
- digital assets having sentimental value such as digitally stored photos and videos, cloud storage, and social media accounts; and
- privacy, cybersecurity, and risk concerns over digitally stored information and content, and the protection of digital identities at incapacity or death.
With heightened awareness of digital estate planning, consumers will demand more choices than what are currently available by service providers to pre-plan or address online access to digital assets and accounts after incapacity or death. For the few that do offer pre-planning, such as Facebook and Google, most consumers are either unaware or have not activated these choices. Facebook and Google offer Legacy Contact and Inactive Manager, respectively, which are online tools provided through their platforms to designate third-party account access or management, such as instructions for account deletion. Under the U.S. RUFADAA, an online tool is an agreement between the user and service provider, separate from the TOSA, that allows the user to authorize or not authorize a third party to access a user’s digital assets.
Options for third-party authorized access isn’t yet an industry priority. However, consumer demand amplified by social media will continue to grow and ultimately reshape the estate planning process and the death care industry. The death positive community (#deathpositive) is a movement spreading across many parts of the world aimed at reshaping the cultural taboo surrounding the discussion of death and death planning. Recently, Twitter announced they would shut down inactive accounts after six months, but after a raging tweet storm, they subsequently retracted their statement and instead will be looking at pre-planning options. According to a study out of Queen Mary School of Law Legal Studies (Beyond the Cloud Research Project), very few cloud providers have addressed in their TOSAs what happens to an account at the holder’s death, never mind addressing incapacity issues and the broader business community considerations in these matters.
Writ large: the tech industry needs to learn more about estate planning; and the estate planning community needs to learn more about tech.
CONCEPTS FOR DESIGN CONSIDERATION
Addressing digital assets as a strategic advantage
It’s likely to evolve to best practice that providers should offer pre-planning options allowing the account holder to direct instructions for their digital assets and online accounts upon incapacity and death.
To seed this discussion, we looked to several sources:
- providers currently offering pre-planning;
- emerging tech entrepreneurs;
- traditional estate planning constructs; and
- future tech and conjecture on their models to address pre-planning.
These ideas must be driven by consumer preferences and industry willingness to provide. But, consumers will have skin in the game: if these concepts are developed and offered, user engagement will be required for set-up; potentially with a price; and effort for integration with other estate planning. Any new concept requires testing and balancing with jurisdictional, legal, fiscal, risk, and other business constraints. Consider the following concepts as a starting point for this emerging requirement:
Service providers, and businesses generally, should consider including terms and conditions that specify what will happen upon incapacity or death of the online account holder, or the owner of any digital assets held by the custodian, and if access will be granted to a fiduciary of the account holder in the absence of utilizing an online tool. Service providers should also analyze what happens to digital assets, accounts, and information (especially, personal and private information of an account holder) if the company ceases operations or if the account is inactive for an extended period of time. Further analysis on whether or not updates to TOSAs should also lead to reshaping policies on data privacy and storage of consumer information to comply with other jurisdictional laws, such as the European General Data Protection Regulation, or the California Consumer Privacy Act. Even if businesses may not currently be subject to such laws, as privacy and data protection laws spread to more jurisdictions, compliance will likely be required by more businesses.
2. Pre-planning tools and user selected options for online accounts
More service providers should consider incorporating online tools in their platforms to allow the original account owner more options and choices to pre-select what happens to the account or digital asset and/or who has access in the event of both incapacity and death. Just as you would expect for traditional estate planning, consumers may want to identify alternate individuals to have access to the accounts if the first choice is also deceased and/or incapacitated. Ideally, these options would also consider the specific differences between incapacity and death, and provide realistic timelines for a fiduciary to have access to digital accounts, assets, or information given the immediacy the fiduciary will need to access this information to meet the administration requirements of the fiduciary to manage the account holder’s assets upon incapacity or death.
Currently, some service providers offer a distinction between business and personal user accounts. Business user accounts often have additional functionality such as administrator access, third-party access and other constructs that facilitate business succession planning and multiple user access. Similar options or functions could be potentially extended to personal accounts.
3. Joint account ownership of online accounts
This concept would be similar to joint property ownership rights, where two or more people can sign up for an online account, such that when one of the owners die, the remaining members retain full access and rights to the contents of the account or digital asset. This is akin to owning other forms of property (real estate and bank accounts) as joint tenancy with rights of survivorship. This option, if permissible by service providers, would likely require each joint account holder to be assigned their own unique username and password to avoid issues stemming from sharing of passwords, impersonating a user, and unauthorized access issues. This type of option should also consider how to separate a joint account at a later point if the owners no longer want it to be joint.
4. Beneficiary designation(s) for online accounts
This concept is similar to the construct found with insurance policies, registered/non-registered plans, or pension plans held by clients where the account holder pre-selected a beneficiary as having rights to the digital asset or online account after death. A beneficiary designation is slightly akin to using an online tool to designate what happens to an account with a service provider. However, in the situation where the digital asset is not subject to TOSAs, having the ability to designate a beneficiary that is attached to the digital asset could streamline access and transfer of the asset.
A simple example would be building a beneficiary designation into options under consumer loyalty points or travel reward programs. A more complex example would be incorporating a beneficiary designation into the code of a smart contract. A smart contract is a legal agreement reduced to code using “if this, then that” statements. However, it is important to keep in mind that the rules of code and the rules of the law don’t always align and special care is needed to ensure assets transferred in this manner would still be subject to all the requisite income, estate, and inheritance taxes, or other transfer taxes.
5. Digital trusts
Another concept would be to allow for the creation of a trust relationship that is structured to allow for the transfer and management of online accounts and/or digital assets of an individual(s); or is created to be the recipient of online accounts and/or digital assets of an individual at incapacity or death. This type of structure today would likely be a violation of certain TOSAs, which would need to be analyzed and updated before accounts could be opened or moved into a digital trust. However, for digital assets not subject to TOSAs (or not in violation of them), this could be a great way to pass on digital assets and information to the designated beneficiaries of the trust in a streamlined and efficient manner. There are many ways this type of trust could be structured and an estate planning legal advisor (e.g., attorney) should be consulted in connection with this planning option.
6. A limited liability company to own digital assets and accounts
Using U.S. terminology, this would be similar to creating a trust to hold and manage digital assets, accounts, and information; an entity as opposed to a trust could be established for the same purpose. As mentioned above, some service providers offer business accounts that allow secure multiple users access. By creating such an entity, in theory, there wouldn’t be access issues if an account holder dies or becomes incapacitated since anyone authorized on behalf of the entity can access the account. The entity could be transferred or ownership interests changed without disrupting access to the assets. TOSAs would need to be analyzed and updated to allow for these kinds of accounts.
7. Custodian, commercial, or government recognized third-party services
We have already seen the emergence of tech entrepreneurs offering estate administration platforms. Described in a STEP Journal article called Bolster Your Digital Armoury, they are referred to as “Service Provider Digital Vaults” and “Smart Digital Vaults.” The general idea is these firms provide a pre-planning platform which offers functionality such as identifying digital assets, capturing wishes, documenting directives, all without the general need of account holder passwords. In some cases, they then offer administrative support services upon the incapacity and/or death of the account holder.
To illustrate other innovation we might see in the future, consider for example, the use of single sign-on (e.g., signing onto an account using your credentials to a third-party account). This is a popular method for accessing various online accounts through access authentication by an intermediary single provider. We expect to see similar approaches to consolidation of access and extensions to the digital estate planning space, such as signing up with one provider that manages estate planning options and choices across multiple providers. Similar in concept to outsourcing, these custodians, commercial or government recognized third-party services contemplate that service providers may not want to create their own options and services and would prefer to buy or procure that service. Further the end consumer may wish to set up and procure services in advance with one solution instead of dealing with multiple service providers.
8. Future estate tech
Innovative solutions are emerging but we’ve yet to see radical adaptation such as electronic wills on a blockchain, tokenization of assets, smart contracts, or smart wills that encapsulate probate processes.
BALANCE AND CONSTRAINT
Digital solutions need balance:
Within a business context all new concepts are moderated by less visible but equally important issues such as legal compliance, marketability, budgets, security, and privacy considerations. To complement the concepts offered above, here are some additional thoughts:
1. Jurisdictional laws
TOSAs and other pre-planning options will need to address and clarify which jurisdictional laws apply, and will need to consider highlighting or identifying processes for dealing with cross-jurisdictional issues or conflicts of law that will likely occur. Situations frequently arise where an account owner is in one jurisdiction, and situs of the business (provider or custodian) providing the online access or holding the digital asset is in another. Digital assets by their nature are often borderless and there is no uniformity or consistency in the treatment of digital assets from jurisdiction to jurisdiction in connection with legal access, transfer of property rights, and tax treatment. Privacy laws of varying jurisdictions may also need to be considered in establishing pre-planning options to ensure compliance with those laws which could impact other jurisdictions. Intellectual property rights laws may be involved with physical assets that have digital counterparts or associated digital assets.
2. Appointment conflict with fiduciary
If service providers or businesses include a pre-planning option to allow owners to appoint a third party to access the account or asset of the owner at death or incapacity, service providers should also highlight conflicts and consequences that may arise if the designated third party is different from any legally named fiduciary. In the U.S., information regarding the hierarchy of fiduciary access to digital assets under RUFADAA should also be provided if applicable, and if not, the laws that govern access should be made available. If the online tool offers options to appoint any individual who might not be the fiduciary, the service provider should also be given information about the potential conflict when the third party designated in the online tool is not the fiduciary appointed in a power of attorney, a will, or a beneficiary under the will.
3. Challenges dealing with the volume of online accounts and digital assets
The fact that consumers are accumulating a growing volume of online accounts and digital assets has already spawned tech solutions such as password managers, and in the estate planning space as mentioned above, digital and custodian vaults. Further, there are solution specific options emerging for certain types of digital assets such as unregulated cryptocurrencies. If you consider we’ve already seen account access move to single sign-on through intermediaries, the benefit for the client is the ability to manage a larger volume of unique usernames and passwords for a variety of accounts. Conceptually, we expect that similar solutions and creative options will also need to emerge to address the growing volume and differences among planning for consumer online accounts and digital assets.
4. Solutions and processes to deal with online accounts that provide access to underlying assets
A tricky area, but the best example is financial institutions that provide their clients online access to banking and money transfer services and functions. Fiduciaries should not be accessing these accounts using another person’s username and password and should go to the underlying institution with the proper document to address access. With the fiduciaries’ traditional role now frustrated with the lack of a paper trail and only a digital trail, financial institutions and insurance companies among others with underlying assets will need to consider how to address inquires for information and access. First, we expect that institutions will see a larger volume of fiduciaries on fishing expeditions looking for underlying assets of an incapacitated or deceased person. Secondly, the institution’s interaction with the named fiduciary will most likely require authentication; completion of forms and documentation; all which offer an opportunity for automation to reduce errors and improve processing times. We expect this will drive underlying asset providers to consider offering pre-onboarding processes and tools for named fiduciaries.
5. This is not an estate industry problem
All online and digital asset businesses will eventually need to address these client requirements for clarity upon incapacity and death. Considerations include estate industry cooperation, collaboration, or forums similar to other cross-industry or industry-specific groups established to address common challenges or interoperability. Minimally, what is required is consistency in terminology. Ideally there are industry forums or industry standard organizations that will result in the standardization of options and terms to reduce confusion and improve consumer adoption and compliance. These forums will also address where these solutions and options fit within the context of estate planning, as well as jurisdictional laws and rules. There will be a number of areas to address, such as user names; how does the account owner, and subsequently the fiduciary, prove that the account owner set up or held a specific account that is often identified by the username that may be different than the account owner’s legal name.
Many businesses have not given adequate consideration to how online accounts and digital assets will be handled upon a client’s incapacity and death. Consumers need to be more educated on the need for digital planning, and we have yet to see cases tested on jurisdictional laws that govern digital accounts and assets. There is an opportunity for businesses to lead in defining a new path for this space. In time, addressing these issues will be critical for online service providers as consumers’ digital footprints grow and the population ages. Consumers and their beneficiaries will expect the same spectrum of options they are accustomed to for physical assets and will not be quiet about the inability for their fiduciary to transfer and access their digital assets and accounts upon incapacity and death, and will likely take to social media to express their displeasure with the lack of available options.
The opportunity, in the short term, is for businesses to engage clients in a conversation about what planning options they would like for their digital assets and accounts. Just like other criteria a consumer considers when deciding which company to do business with, the preservation of either financial or sentimental value of their digital assets and accounts will factor into decision making. As we’ve seen in other industries, there is an opening for businesses and organizations to partner and collaborate in defining common terms, developing standards, and optimally the synchronization of options to reduce cost across the entire estate industry. There is also an opportunity to define and differentiate competitive advantage, get engaged, and lead on the topic of digital estate pre-planning before someone else does.
This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.
Sharon Hartung, Captain (Ret’d) Royal Canadian Air Force, TEP, is the founder and principal of Your Digital Undertaker and has over 30 years of experience in IT management, project management and consulting. She is the author of the recently published Your Digital Undertaker — Exploring Death in the Digital Age in Canada. Sharon is a Society of Trust and Estate Practitioners (STEP) member and committee member of the STEP Global Digital Assets Special Interest Group. Sharon is reachable at www.yourdigitalundertaker.ca, and Twitter @UndertakerTech.
Jennifer L. Zegel, Esquire, LL.M., is the Practice Leader of Kleinbard LLC’s Trusts and Estates Group. Jennifer maintains a traditional estates and trusts practice but is unique in that she has a special focus in estate and business planning and the estate administration of digital assets, a fast growing and increasingly complex area. Jennifer co-created the Digital Planning Podcast (DPP), which is dedicated to exploring all things digital in connection with estate planning, business planning, and estate administration. Jennifer is a Society of Trust and Estate Practitioners (STEP) member and committee member of the STEP Global Digital Assets Special Interest Group. For more information on Jennifer, The Digital Planning Podcast, and Kleinbard LLC visit the Firm’s website at www.kleinbard.com.
Disclaimer: The intent of information provided in this article is to encourage individuals, businesses and organizations to consider the importance of digital assets in the context of a will, estate planning and estate administration. The authors do not warrant or guarantee the accuracy or currency of the information provided herein. The laws in a jurisdiction change and are potentially different than what was presented here. The authors are not providing advice, and you are encouraged to seek qualified professional advice authorized in your jurisdiction for your sp
Digital Assets after Death: Why Thousands of People are Choosing to Protect Them Through Their Will
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What happens to someone’s digital assets after death?
It depends on what is in their Will. A person’s Will covers what happens to their physical assets (such as property, bank account, money, shares etc.). However, it rarely covers what happens to their digital assets. This is more important than you might think.
A recent case highlights the importance of considering your digital assets along with your physical assets in your Will.
Key Takeaway Points
- Your digital assets (including all your digital devices and the data and information held on them such as photos, videos, documents, applications, music, software etc.) should be included in your Will. Otherwise, your family, friends, business associates etc. may need to obtain a court order to access them.
- If your family or business needs to wait to access your digital assets then they may lose money due to missing information, documents, photos etc. or through not having access to your PayPal account, business web site, on-line store, social media accounts, etc.
- Once they have obtained a court order, your family or business associates may be able to access all your on-line accounts, private folders, cloud based images and videos etc. some of which you might have wanted deleted or erased before giving them access.
- With more people storing more personal information and data digitally and many individuals having on-line accounts with credit (e.g. PayPal, share trading accounts etc.) and money making services (such as on-line stores, lucrative web sites etc.), it is increasingly important to have these covered in your Will.
- A Digital Assets Directory held by your solicitor can list and include the login details for all your hardware, software, on-line accounts, web sites, etc. and what you want to have happen to them on your death. It may be that you want to have some assets transferred and some erased before your loved ones or business associates have access to them. You can state your wishes in this directory.
Else Solicitors maintain a Digital Assets Directory which can be mentioned in your Will. This gives specific directions to your Executors to access your devices and accounts (along with the required login details) and what they are to do with the various digital assets held on them.
You can also include specific gifts of digital photos/music libraries etc. in your Will to ensure your wishes are clear. If you would like to update or write a Will that includes your digital assets and gives you the peace of mind that they will be dealt with according to your wishes, then please contact our Head of Wills and Probate, Kathryn Caple, on 01283 526230 or at firstname.lastname@example.org.
What are Your Digital Assets?
Your digital assets include your:
- Digital music players (e.g. iPod)
- Digital cameras
- e-readers (e.g. Kindle)
- External hard drives and flash drives
Along with any information or data that is stored on these or in the cloud, such as:
- Personal photos and videos
- Purchased or your own music, film and TV programmes
It also includes all your on-line accounts such as:
- e-mail accounts and their content
- Social media
- Shopping accounts
- Photo and video sharing
- Any website or blogs you manage
It also includes domain names and your intellectual property including copyrighted materials, trademarks, and any code you may have written and own.
Many accounts that may have a positive balance are held entirely online such as your:
- PayPal account;
- Digital currencies like BitCoin;
- Gambling sites;
- Share trading services;
- Points accumulated in loyalty programs etc.
It is important that you outline what you want to have happen to these including which data, photos, videos, music etc. should be:
- Transferred to family members, friends, or business colleagues
- Archived and saved
- Deleted or erased
What Happens if my Digital Assets Aren’t Covered in My Will?
A recent case highlights the problems of not including your digital assets in your Will.
A 20-year old man died following a brutal assault on Halloween in 2015. In the summer 2016, his father, Colin, was told by Apple that he must obtain a court order to access the photos and memories on his murdered son’s computer.
Colin had provided Apple with death and probate certificates but was told that he would need a court order to access the data on his son’s Macbook. The issue is that computers along with other digital devices and on-line accounts are password protected. In this case, the data and computer belonged to his son but as he did not have the password, Apple controlled the access to this data.
An Apple spokesman said: “In the absence of permission for third party access to an account, it is impossible to be certain what access the user would have wanted and we do not consider it appropriate that Apple make the decision. However, in such cases, we can assist subject to an appropriate court order.”
This means that his family must seek a court order to access his photos and memories.
In certain situations, this may have financial, as well as emotional implications. For example, if someone needs to access your on-line store or if your business needs the documents or information that you were working on or access to their own web site that you managed on their behalf.
Note: many web services and social media sites require you to sign their Terms and Conditions. In some cases, these terms will prevent your family, friends and colleagues from accessing your accounts even if they have your login and password details. So, it is important that you give the relevant people specific authority to use these accounts in your Will.
There is no easy answer as the law is primarily focused on physical possessions. However, by identifying your digital assets and stating what is to happen to them then your wishes are recorded and known. It is important that you create your digital legacy and with things changing constantly the best way to achieve this is by using a Digital Assets Directory, such as the one maintained by Else.
If you are concerned about what happens to your digital assets on death and who will and who will not have access to them then you are invited to contact our Head of Wills and Probate, Kathryn Caple, on 01283 526230 or at email@example.com.
She will explain your options and how our Digital Assets Directory works so that you can rest assured that your wishes will be respected.
Download our FREE Estate Planning Guide
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What a strange time to be alive.
Some people have been in quarantine for nearly two months, while others are still adjusting after “only” (those are sarcastic quotation marks) a few weeks in isolation.
No matter which way you slice it, Coronavirus (COVID-19) has affected all of us.
I’ve talked with a lot of people over the past month who desperately want to create or update their estate plans to deal with Coronavirus but who don’t want to go to an attorney’s office.
Although I have written before about the dangers of “Do It Yourself” estate planning, here are 7 things you can do during quarantine to organize your affairs WITHOUT needing to leave home:
1. Draft a letter of instruction.
If you died today, would your representatives know how to settle your estate?
The purpose of an estate planning letter of instruction is to provide information to help guide your loved ones or other representatives through the process of settling your affairs.
I’m not talking about advice regarding probate or other legal matters. I’m talking about information that isn’t included in any of the documents you will get from an attorney.
A letter of instruction can answer questions such as:
- Who should be notified of your death?
- How can your family claim benefits under a life insurance policy?
- What information is needed to obtain retirement benefits?
- Who is your lawyer? financial advisor? CPA? insurance agent?
- What subscriptions should be canceled after your death?
- Where is the key to your safe deposit box?
- How should your representative dispose of your personal effects and belongings?
- Etc., etc., etc.
Imagine that you could stand over the shoulders of your representatives and tell them exactly what needs to be done to settle your estate. That’s how you should approach your letter of instruction.
For more ideas, read my article about writing an estate planning letter of instruction.
2. Review beneficiary designations.
When did your last review the beneficiaries named on your IRA, 401(k), or insurance policies?
This is very easy to do while you are stuck at home. And it can avoid a lot of trouble.
Failing to review your beneficiary designations — and to coordinate them with your estate plan — can lead to unintended, even disastrous consequences. Consider these examples:
Example 1: Your son James is designated as the beneficiary on your life insurance policy. Sadly, however, James dies before you and you forget ti name a replacement beneficiary. If you die without a living beneficiary named, then that policy may need to be probated.
Example 2: After your first child, Mary, is born, you purchase a $1 million life insurance policy and name her as the beneficiary. Several years later you have another child, Sam, and decide to make a Will leaving everything equally to your two children. But if you don’t add Sam as a beneficiary on the life insurance policy, Mary will get $1 million more than Sam after your death.
Example 3: Your IRA lists your two kids, Jack and Jill, as beneficiaries. But then you and Jill have a falling out, so you make a Trust that says Jill gets nothing. Unless you remove Jill as a beneficiary on the IRA, then she will still get half of the IRA after your death — regardless of what the Trust says.
I could list a dozen other examples, but they all speak to the same point: It is crucial that you regularly review and, if necessary, update the beneficiaries named on your assets.
Just remember: beneficiary designations can override the terms of your estate plan.
So before making any changes, read this article about mistakes to avoid when naming beneficiaries.
Additionally, I suggest consulting with your estate planning attorney and/or your financial advisor when changing beneficiaries to make sure the change won’t have any undesirable effects.
3. Inventory your assets.
When you die, how will your representatives know where all your “stuff” is?
Your family may know where you bank or what cars you have, but do they know the legal description of your mineral rights? Whether you have a prepaid funeral plan? Who manages your IRA or 401(k)?
To help your representatives, make an inventory of your assets including:
- A description of the asset (e.g., the year, make, model, and VIN for a car)
- Where the asset is located (e.g., at which bank an account is held)
- Information needed to access the asset (e.g., a password or other security information)
- Where the title, if any, can be found (e.g., where do you keep the deed to your house?)
- An approximate or best-guess value of the asset
- Any other information you think is relevant.
Making an inventory is one of the easiest items on this list. The key is simply to update it regularly.
Remember, however, that an inventory will NOT convey those assets to the persons you want to have them. It is for reference only and is not a substitute for a Will or a Trust.
4. Create a digital estate plan.
You have digital assets, even if you don’t realize it.
There are a lot of definitions of “digital assets” out there, but it includes basically everything you have that is stored online or in digital or electronic form: social media accounts, photos, computer documents, email accounts, domain names, ebooks, music, apps, etc.
And like other assets, something has to happen to your digital assets after your death. So ask yourself:
- What will happen to your Facebook account after your die?
- Will your photos on Flickr or Instagram be deleted?
- Can someone save your family videos from a private YouTube channel?
- How can you make sure someone inherits your Bitcoin?
- Who gets control of your e-mail account?
The answer to all of these questions depends on your digital estate plan.
Although some aspects of digital estate planning must be included or authorized in a Will or Trust, there are a lot of things you can do on your own while in quarantine.
Read my 5 tips on how to create a digital estate plan for more information.
5. Organize your business information.
An estate plan for an entrepreneur or business owner should include another dimension: instructions for the management or winding up of your business after your death.
Often, only one member of the family understands the operations and finances of a family business.
But what happens when that family member dies?
Even if you have talked with a child or other relative about running the business, it is still overwhelming for that person to take over the business when he cannot find all the information that he needs.
You can make that transition much easier by organizing your business information in one place.
Think of this document like the business version of the personal letter of instruction explained above. What information (e.g., tax, utility, subscriptions or services) would someone need to know to run the business?
You can take things a step further by creating a business succession plan to make the legal transition of the business after your death a lot smoother.
But unlike the other items in this list, I highly recommend that a succession plan be prepared by or with the advice of an attorney. So maybe wait until after quarantine for that part.
6. Conduct a “fire drill”
A letter of instruction is great, but writing is sometimes vague and things often get lost in translation.
That is why you should also conduct an estate planning “fire drill.”
Just as fire drills in school let you know what to do in the event of a fire, an estate planning fire drill is meant to let your family know what to do after your death.
To hold an estate planning fire drill, walk your family through the process of everything they must do to set your affairs in order after you have died.
Yes, it’s a morbid way to spend time with family.
But it makes administering your estate so much easier on your loved ones after your death. Because even though they will be grieving, they will at least know what to do.
For ideas about what to discuss with your family, read our post on holding an estate planning fire drill.
7. Download our FREE Estate Planning Guide
Education is crucial in estate planning.
At Postic & Bates, we strive to help our clients understand all of the estate planning options available to them and what their documents mean.
But you can also educate yourself.
That’s why we created a 60+ page guide full of detailed information about estate planning.
Simply click the button below to get your FREE copy of our Estate Planning Guide:
Consult with an estate planning attorney
There’s no time like the present to tackle the tasks discussed above, especially when you’re trapped at home in quarantine and really don’t have any other choice…
However, just because you can do something by yourself doesn’t mean you will do it correctly or that the things you do will not have unintended consequences on the rest of your estate plan.
To consult with a legal professional about the issues discussed above — or to discuss creating or updating your estate plan — contact the experienced Oklahoma City estate planning attorneys at Postic & Bates for a free, no-obligation telephone consultation by clicking the button below.
[As with all our posts, the contents of this article do not constitute legal advice and are subject to our site-wide disclaimer.]
Thinking about retirement? Don’t forget about your tech.
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By Anne-Frances Hutchinson
Here’s an open secret about Americans on the cusp of retirement age: They know how to use technology. Having been in the workforce as the digital age gestated from a fever dream into the driver of nearly every aspect of work and life in the developed world, this cohort understands its transformative power at a level digital natives have yet to grasp. Over the next decade, roughly 132 million Americans 50 and older will spend over $84 billion annually on technology.
As they approach retirement, affluent, well educated seniors are still driving technological development, participating in the digital economy as it grows and changes, and preparing for an aging process that will be largely dependent on emerging technologies to increase satisfaction, comfort, and life expectancy.
However, one of the profound changes retirement brings is access to technology. Leaving the workplace can mean losing a wealth of expensive support, from high speed internet connections and the software programs that allow seamless communication, to hardware that can be impossible to afford on a budget. And yes, that includes the person in IT who knows how to convert documents into PDFs. (Here’s another deeply held secret from a boomer: They absolutely know how to do that. They just love to see your reaction when they ask for your help. Eyerolls are always funny.)
Teasing aside, here are five critical considerations to make before transitioning out of the tech rich workplace.
- Make cyber security a priority. The loss of a workplace IT infrastructure means heightened exposure to hacking, so deepening your personal knowledge about security breaches and investing in affordable, personal use security tools is a must. Don’t be put off by any implied condescension you might perceive by seeking simplified help – Internet 101.org is a great place to start the process.
- Forget about remembering passwords. Leaving the office shouldn’t mean swapping strong protection of digital assets for passwords that are easy to remember and a breeze for hackers to exploit. Encrypted password managers such as 1Password provide affordable protection, generous storage, and email support.
- Enroll in autopay. Just because you’re retired doesn’t mean the bills stop. Making sure they get paid automatically, on time, every month will take a huge weight off your shoulders. On the flip side, any income you have still have coming in: social security, a pension, etc., you can arrange to be automatically deposited in the account of your choosing. Being retired means you should be out there enjoying life, not spending several hours a week doing amateur accounting.
- Set up online trading. You want your money to last through a long retirement. Now that you have more time, you might want to take a more hands-on approach to your investments. Services such as Ally Invest and E-Trade make it simple and easy to manage your portfolio and do self-directed trades on a daily basis.
- Compromise smartly. The temptation to sacrifice capability for cost can be very compelling, especially when it comes to smartphones. While there is a fun new crop of flip phones hitting the market that may take you back to the simpler days of flip up and gab, like the updated foldable Motorola Razr, prioritize the features that are most important to you — whether it’s a great camera, the ability to use multiple apps, or mil-std ruggedization — and make sure the phone of your choice makes the grade. You’ll want something that can still keep up with your lifestyle and let you video chat with the grandkids.
- Think before you ditch. Switching away from a “does it all” desktop system to a tablet or laptop may make sense from a portability standpoint, but be sure your computer investments match the quality of life you’re expecting. Desktops can be much cheaper to buy than laptops, giving you the freedom to buy both. Desktop performance is better, more flexible, and far more robust than tablets; laptops that offer equivalent desktop performance are typically cumbersome and heavy despite being optimized for mobility. If you’re a gamer, crafter, or have a penchant for art, having a desktop in your post-work tech arsenal will be a very worthwhile spend.
- Plan your digital estate. You’re planning to leave your work environment, not your entire life, but now is the time to think about what may happen to your digital identity and it’s a risky aspect of estate planning to neglect. In the Digital Cheat Sheet, Everplans recommends the following steps to take:
- Make a list of all your digital assets and make a plan on how they should be accessed after your passing. This includes your personal data, passwords, and hardware.
- Choose an executor for these assets who will follow your wishes on erasing, preserving, or sharing data, and with whom you want your digital legacy to be shared.
- Store this information where it can be readily accessed by a trusted family member, attorney, or your appointed executor.
- Legalize your wishes. With the exception of Louisiana, Kentucky, and the District of Columbia, there are state provisions for digital asset legalization. Work with your estate planner to incorporate your digital assets into your will. Remember: Never include passwords or private data in your will, as it is a public document that anyone can access.
Retirement isn’t the end of your life, it’s the beginning of enjoying what you’ve worked so hard for. Set yourself up for success much the same way you did in your career. There’s a whole world of things to do that you might have missed out on. A smart retirement will enable you to make the most of your time while living on the go. Get after it!