Remember, a loved one may need to use that Internet banking password after you die.(Photo: Thinkstock)
Estate planning is one of the most difficult aspects of personal finance. As humans, we tend to procrastinate on dealing with our own mortality and often focus on seemingly more important issues facing us today. However, estate plans play a significant role in reducing frustration for loved ones, especially in the digital age.
While most people realize that estate plans should be created to help distribute physical property such as real estate or jewelry, there is a growing need to consider intangible property. The Internet is increasingly becoming the main storage of our financial lives. A recent survey from Pew Research revealed that 51% of American adults bank online, and 32% bank using their mobile phones. In fact, with almost nine out of 10 Americans using the Internet, there are a wide variety of digital assets that should be included in estate plans.
“Digital assets hold both financial and sentimental value to family and friends that should be addressed in the estate planning and administration process,” said James Lamm, an estate planning and tax attorney, to Ally Bank. “The first challenges are finding the person’s digital property and identifying which digital property is valuable or significant. Additional obstacles with digital property that you don’t have with traditional property are passwords, encryption, computer crime laws, and data privacy laws. Any one of them can make it practically impossible to do anything with the digital property unless you’ve planned ahead.”
In order to protect your digital assets, Lamm and Ally Bank recommend including them in a will or trust and designating a fiduciary to execute your wishes. You should also include an enhancement in your estate plan that grants your fiduciary access to your online accounts and data in the event of your incapacity or death.
Taking inventory of your digital assets is the first step people should take in this process. Make sure to include usernames and passwords for your electronic devices, bank accounts, utility accounts, email accounts, insurance plans, and any other significant online accounts you use throughout the year. If there is certain information that you do not want disclosed to family and friends, you need to provide instructions in your estate plan on how that information should be handled. Since a will eventually becomes public, it should merely contain instructions on where to find your usernames and passwords, such as a safe deposit box.
Even social media websites such as Facebook should be included in your inventory list if they hold sentimental value. For example, users of Facebook can have their profile memorialized upon their death by having someone send a valid request to the company. Verified immediate family members may even request the removal of a loved one’s account from Facebook.