5 tips for digital estate planning

5 tips for digital estate planning

Most clients have made plans to dispose of their tangible property after they’ve gone. But these days, people have an awful lot of intangible property to deal with as well.

No one is too worried about what’s going to happen to their Twitter account, but there are some significant financial issues that should be considered when it comes to a client’s digital footprint. Many advisors have even gone so far as to set up digital estate plans for their more wired clients.

Clients considering a digital estate plan should focus on their financial life online, which for many of us has grown into a many tentacled beast. Here are some things to keep in mind:

Clients should maintain a list of all the financial sites they access. Some of these are obvious, like bank and brokerage accounts, credit cards, mortgage accounts, loans, utility bills and other online payments. Others are less obvious, such as accounts at places like Amazon, eBay and iTunes. There are also online payment accounts, such as PayPal, that should be noted.

The deposit accounts, which may seem like the most serious concern, are probably the least of the client’s worries. The money in those accounts will be accounted for in the client’s will, and banks and brokerages are used to dealing with customers who pass away.

Other accounts may require more attention. The client may have money in a PayPal account or may have debts to be paid because of eBay purchases. There may be transferable benefits from a frequent-flyer account. These aren’t likely to be significant amounts of money, but they still ought to be accounted for.

The client should name a “digital executor.” This is the person empowered to deal with all the client’s digital assets, and he or she should have access to the list of online accounts, including all passwords and directions. There’s no legal status for this person, but it should be someone whom the client trusts and who has a facility with online maneuvering. (A grandchild might be a good choice.)

See also: How to use old-fashioned selling methods in a new media age

Google, which is generally ahead of the curve, has created a program that can be of help in this area. Google’s Inactive Account Manager allows the client to name an heir of sorts who can gain access to the client’s online data once his or her accounts have been inactive for a certain period of time.

Are there digital heirlooms worth preserving? Aside from the financial considerations, most of us live a good deal of our personal lives online. It’s worth your clients’ time to consider how much of this should be curated after they’re gone. Perhaps the have a personal or company website they’d like to see continued. Perhaps they have a blog they’d rather see shut down than persist into eternity. Maybe they have accumulated photos on Facebook or Instagram that they’d like to see put into the hands of the proper persons before they disappear into the ether. Most clients haven’t thought about this issue and would likely appreciate their advisor’s concern, even if they do absolutely nothing about it.

Find a safe place to put all this information. Security is of prime concern here, since identity theft could be a real problem if all the information fell into the wrong hands. A printed copy of all passwords and other data, kept in a safe or other secure place, could be one option.

There are online solutions as well. Legacy Locker stores all your information in the cloud and requires the client to name two separate people to contact in case of death. (They even have to provide a copy of the death certificate.) That prevents anyone from trying to claim the client has died in order to get to their data. Legacy Locker also lets the client name different beneficiaries for different online accounts. A similar offering, Secure Safe, is from Switzerland — and the Swiss know their way around secure accounts.

A different type of security is provided by Javont Vault, which doesn’t connect to the Internet at all but simply sits on your home PC. That keeps hackers and other breaches to a minimum. The client’s digital executor would be the only other person granted access to the account.

Finally, put a plan in writing. No one is going to go digging around the decedent’s computer looking for postmortem instructions. Make sure their wishes are clear and easily findable. When it comes to one’s online legacy, it can’t all be done online.

The importance of digital asset planning explained

5 Ways to Avoid Estate Planning Disasters

So much can go wrong in estate planning. Financial accounts can be frozen for lengthy periods. Conflicts can arise among heirs over disbursement of property and assets. Blended families can experience trauma as tensions arise between step-siblings, step-parents, and natural heirs.  Taxes can take a huge chunk of a family’s estate.

And all of these problems occur as a family is grieving the loss of a significant person in their lives.

As a financial advisor, you are on the front lines of helping families avoid estate planning disasters which will lessen the chance for survivor disputes, and allow the family to more fully heal.

Here are 5 specific ways you can help families succeed:

  1. Build rapport with both spouses. A death is no time for the surviving spouse to get to know you. Having a relationship with you will help the survivor feel more confident after the death of their loved one. Even if it seems a little forced at first, have both spouses involved in the estate planning process as much as possible upfront. Have candid discussions about legacy wishes, including the transfer of assets to step-children.
  2. Get to know the next generation. Connecting with your clients’ heirs and communicating your client’s legacy wishes is vital to avoid estate planning issues. Consider an open house or family legacy planning retreat where you gather as many of the heirs as possible to discuss wealth transfer and values. You should also explain your process so the next generation will feel more comfortable with your advice, and see you as a trustworthy guide.
  3. Devise a transfer plan for non-beneficiary accounts. Accounts such as trusts and IRAs with named beneficiaries transfer quite easily after a death. But gaining access to a brokerage, checking or savings account can be difficult once the custodian is notified of the death. Make sure you have a plan to re-title or transfer accounts immediately upon the death – or place the accounts within a revocable trust. This will help heirs avoid awkward disruptions in disbursements, or being frozen out of checking accounts.
  4. Coordinate with allied professionals.Get to know your clients’ other advisors by offering to send copies of their statements and insurance policies to their attorney and CPA. Ensure that all the estate-planning details are covered, including:
    • Naming of trustees, administrators and healthcare proxies.
    • Designation of beneficiaries on life insurance policies, retirement accounts, and annuities.
    • End-of-life planning such as medical and health directives, and issues of incapacity with durable powers of attorney.
    • Funding of revocable trusts to control all assets not previously assigned through beneficiary designations, including real estate.
    • Re-titling of clients’ home, rental property, securities, and personal property into the revocable trust.
    • Charitable gifting plans.
    • Business-succession plans, including buy-outs and life insurance.
  5. Become more knowledgeable. Estate planning can be complicated. But the good news is you don’t have to know everything to serve as a valuable facilitator for your clients. Find two or three well-regarded estate planning lawyers in your general geographic area with whom you can start doing work. You can find them through client referral, the American College of Trust and Estate Counsel, local estate planning councils, or the state bar association. Find CPAs, as well, through client referral, or the American Institute of Certified Public Accountants. Educate yourself about estate planning basics on Elder Law Answers, so you can familiarize yourself with the various kinds of trusts and tax exemptions.

By taking these steps,  you’ll help clients minimize their tax burden, avoid probate, as well as avoid intra-family disputes. That’s a win-win situation.

Local Lawyers Answer: What Happens to Digital Assets When I Die? (video)

Local Lawyers Answer: What Happens to Digital Assets When I Die? (video)

The evolution of the law is slightly slower than the evolution of internet technology, creating fascinating opportunities, and frustrations, for estate planning attorneys who want to help their clients leave their digital assets in competent hands.

For years Patricia E. Kefalas Dudek of Farmington Hills and Howard H. Collens of Huntington Woods have helped clients document their final wishes, but it wasn’t until a few years ago that people’s needs started changing. A whole new area of law is forming as litigation and legislation delve into what happens to people’s online “stuff” when they become incapacitated or die.

Though they each own their own law firm, the pair is bound by their passion for this new area of the law. They recently presented what they’ve learned to a group of students at Wayne State University Law School, in a class called “Digital Assets: What Happens When I Die?” In addition to giving presentations like this, Collens has joined Updating Michigan Law Committee of the Probate and Estate Planning Section of the State Bar of Michigan to help shape this kind of law.

For Kefalas, she was drawn in by the intrigue of situations that came her way through her work. “I have some rather racy clients,” she said. “Some of them happen to have lives they don’t want their parents or children to find out about that are digital, and said ‘I want you, as my lawyer, to be the one to come in and clean this all out before anybody sees it.’ And then I was like ‘Oh, this is a whole ‘nother area of planning I never thought about before.”

There are two main categories of digital data to think about: what is on devices and what is on the web. Obvious assets on a computer, phone or storage could be photo, video and music files. But financial records are another possession to consider.

“People don’t think about their financial info,” Kefalas said. ‘More and more our clients are pretty sophisticated. They’re not all hand-doing their ledger in their checkbooks any more, they’re doing online banking…We’ve started to work with them when they’re older and starting to diminish in capacity and we’ve gone to technology for additional assistance or their agent has gone to technology because the agent may live an hour away and can still help mom and dad paying bills online that way. And so the issue is how do we maintain that access without the bank, if something happens, closing or shutting that [account access] down.

Even without a third party involved, access can be a challenge. “We want to think about passwords,” said Collens. “Think about the person who has the Quick Books on their computer that’s their whole business… and then they become incapacitated and the only place that their passwords exist is in their head. That’s a real mess… No access to the back office stuff that tell you who the bills are supposed to be paid by and who the money’s owed to.”

One way to manage passwords is to assign a successor, tell them that will be their job, and let them know where they can find the passwords when the time comes. It’s also recommended that instructions be provided to them about wishes and expectations, and an inventory of all accounts and important files.

Some people will make sure their attorney is given a copy of their most recent password changes. There are also apps that people can use to track them. Collens advised against including passwords and logins in legal documents, saying it is a “terrible idea because they could become public records,” and that “if it’s a good password its changing on a fairly regular basis.”

Much like personal belongings, most digital assets have little to no financial value. However some things may, and there is ongoing dispute for how to handle some of those situations. For example, Kefalas had purchased many digital books for her Kindle while she was recovering from an injury, and there is a good possibility that when she dies her children will not have access to them. People who spend money on iTunes are often disappointed to learn that they content they bought is non-transferable. And different companies have different policies for things like frequent flier miles, bonus points or even online gaming assets like well-developed accounts or accounts where money is used to buy certain powers.

Social media accounts are another thing to take into account in estate planning. Each site has different polices for loved ones to access a site once someone is unable to do so. Facebook has an option for memorializing a site to keep the page visible only to confirmed friends, and so friends can post their sentiments. There is also an option to have the page deleted. Twitter will allow a family to keep documentation of a person’s public tweets, and to delete the page. These options could change as the sites refine their practices. Checking terms of service for each site is the starting point for determining one’s rights.

Copyright law adds another layer of complexity to one’s digital legacy.

“The most important thing you need is to talk to your successor,” Kefalas said. Collens encouraged the law students to keep digital assets in mind not only for themselves but for the people they serve. “From a client approach, people will thank you for raising this topic because people don’t think about it,” he said. “It’s like a light bulb going off.”

Tips for Planning Your Estate for the Digital Age

Tips for Planning Your Estate for the Digital Age

As we spend more of our lives online — banking, collecting credit card rewards points, playing virtual reality games, creating photo albums, emailing, tweeting — it’s increasingly important to consider how beneficiaries can access those accounts and any assets they hold, once we’re gone.

“It used to be when someone passed away, there were all these clues — a paper trail around the house about what the deceased person owned and owed,” says Karin C. Prangley, an estate attorney at Krasnow Saunders Kaplan & Beninati in Chicago. “Now there is no more paper trail. All of that is digital. It’s a big deal because it’s hard to get at that digital information.”

Ignorance can be costly. “If you can’t get into this person’s email account, if you have no idea where this person banks … the [deceased] person may have a million dollar account at Fidelity, but you just don’t know, says Prangley. “Maybe the person had an insurance policy, maybe the person had an online store selling a specialized product, maybe there was some sort of business you as the heir don’t know about. The money goes right to the grave.”

Not having access to the deceased’s online accounts or email alerts could mean that bills normally paid online go unpaid. Since the estate is responsible for existing debt, missing those payments could cause headaches as you straighten out the problem, says Deborah L. Jacobs, author of “Estate Planning Smarts.” “If you don’t find credit card accounts quickly and bill paying is delayed and finance charges are assessed, you can most likely get the credit card companies to forgive the finance charges,” Jacobs says. “But you may have to fight them.”

The opposite situation is also a problem. Recurring bills that are on auto-pay may continue to be paid even after the product or service is no longer needed. “We’ve seen instances where someone has been dead for years and they’re still paying for The Economist online,” says Jacobs.

Finding financial accounts
Without a list of financial accounts, finding them can be tricky, but there are steps you can take. The easiest: check the person’s wallet, pocket, desk and drawers for the receipts, Jacobs says. “Even if you’re doing almost everything online, those receipts may be in their pockets.”

To find open accounts, such as credit cards that aren’t regularly being used and generating receipts or bills, you can get a copy of the deceased person’s credit report from one or all of the three consumer credit reporting agencies, TransUnion, Experian and Equifax. But you’ll need documentation, agency representatives say.

For example, all three require a copy of the death certificate and proof that you have power of attorney or are executor of the estate.

In addition to banking and investment accounts, many people access their airline, hotel and other rewards programs online, says Glenn C. Williamson, CEO and founder of WebCease Inc. in Portland, Ore., which helps heirs track down those digital assets. “I personally have half a million Hyatt points, valued at $35,000 to $45,000,” Williamson says.

The potential dollar loss goes beyond financial accounts and rewards programs to items you may not think of immediately, Prangley says. “What’s the cost of losing a lifetime of photos? What happens to unique weapons held by a World of Warcraft master? What about wins in offshore, online poker accounts?”

North American respondents to a survey by security giant McAfee valued their digital assets at an average of $54,722 with listed assets including music downloads, photos, emails, financial and health records, career information and contacts, and hobbies and creative projects.

Even a great-grandfather may have digital assets if he’s been online, says Williamson. “We did one 91-year-old guy who didn’t even have an email address and he had hotel points,” he says. Another man in his 80s had a separate Facebook account for selling RVs — news to his family, Williamson says.

Finding assets online can be time-consuming. First, heirs have to know an account exists. Second, they have to be able to gain access to that account via usernames and passwords.

“People are grieving,” says Jacobs, the author. “This is adding an extra hardship.”

Williamson estimates it took him 25 hours to find his mother’s online accounts after she passed away, which gave him the idea for WebCease. WebCease routinely searches about 60 nonfinancial online accounts, including photography sites such as Flickr, hotel and airline rewards programs, social media sites and e-commerce sites including Amazon, PayPal, Netflix and eBay.

WebCease researchers will personalize the search and look for additional accounts when necessary, Williamson says. For instance, in the case of the RV enthusiast, they searched various campground websites to see if the deceased had a membership with valuable rewards or resale potential. “We wouldn’t typically search on those, but when my researchers make a correlation they will go further than our standard list.”

WebCease lets its clients know what it finds, and then gives them each site’s policies and information on how to transfer the digital assets and how to shut down the account, Williamson says.

Rescuing vital records
Passwords are the next hurdle. Even if you as the executor or heir have written permission from the deceased account holder to access accounts, without the proper passwords, online providers may not give you the content, says Hazel Sanchez, estate planning attorney at the Law Offices of Rhonda H. Brink in Austin, Texas.

“Each one has different procedures,” says Sanchez. “Some online providers, if they were to find out the account holder is deceased, would simply close the account and delete all the information on it.”

Sanchez recommends that if you do have access to usernames and passwords, you print out hard copies of financial information so that even if the accounts are later deleted, you’ll have the information you need.

Technically in these cases, you could be liable for unlawful access of data, but it’s not likely an heir would be prosecuted. “They talk about liability of unauthorized access, but nobody ever enforces it,” Sanchez says. “It’s more important for the fiduciary to gain control of assets and prevent deletion of information before anything happens.”

Shutting down fraud
Eventually, though, you’ll want to make sure you close accounts for security reasons. The identities of nearly 2.5 million people are misused every year to apply for credit, according to a 2012 study by ID Analytics.

“You don’t want mom’s profile out there,” says WebCease’s Williamson. “When you die, it’s public record. It’s so much easier to steal a deceased person’s identity.”

To prevent fraud and identity theft, notify credit card companies and other lenders that the person has died, says Maxine Sweet, president of public education at Experian. “They will report the deceased status to the credit reporting companies and it will automatically become part of the file, preventing fraud,” she says. “If the deceased was receiving Social Security benefits, the Social Security Administration also should be notified and [SSA] will also report that information to us.”

Even if you’re not looking for open accounts, you still should contact the credit reporting agencies with a copy of the death certificate, so the credit file can be updated, says Clifton O’Neal, vice president of corporate communications at TransUnion.

You may also want to contact the Direct Marketing Association to have the deceased removed from marketing mailing lists, Sweet says. “Having those arrive in the mail can be painful for the relatives,” she says.

Planning your digital afterlife
You can prevent many of these hassles for your own heirs by making preparations now. A few simple measures can lessen or eliminate the need for your loved ones to become online sleuths after you’re gone.

  • Keep a snail mail trail
    Even if you do business mostly online, elect to receive some paper statements so your heirs will find out about your accounts from mail delivery, says Jacobs, the author. “Even though I favor cutting down on the paper in our lives, this is not the place to do it,” she says.
  • Consolidate your accounts
    Combining financial accounts or at least moving assets to a small number of providers makes them easier to keep track of, Jacobs says. “I know of a number of elderly people who have certificates of deposit at 50 different banks,” Jacobs says.

Finding the records could be sheer luck. Jacobs and her husband went to one bank her mother-in-law used to cash in one of her CDs and the bank officer told the couple she had a second CD that they hadn’t known about.

  • List account information
    Make a list of accounts with the name of the financial institution, account number and how it’s titled and put it in a folder if you’re comfortable having that information at your house, Jacobs says.

If not, make one list of user IDs and a separate list of passwords, Sanchez suggests. Give each list to a different person and tell your executor those people’s names so the two lists can be put together when you pass away, she says.

She acknowledges that keeping the list up to date could be time-consuming, but says it’s necessary. “We think it’s very important for everybody to make a list inventory of what they have,” Sanchez says.

  • Name an online executor
    As you make that list of user names and passwords, consider naming an online executor, who could be separate from your overall estate executor, says Prangley, the estate attorney. An online executor would identify and provide information to your family about your online accounts and digital assets and they could sell what might be useful to others, she says. Further, the online executor could delete any emails or other online communication that might hurt your family members, she says.

“Some people have separate online lives,” she says. “Your executor might delete your online flirting.”

  •  Additional resources
    Am industry has cropped up to cater to today’s digital estate planning needs. For example, Eterniam, founded in 2013, preserves all your digital assets — photos, videos, documents and content from social media sites. You can bequeath each asset to chosen beneficiaries.

The Digital Beyond, created by John Romano and Evan Carroll, is a think tank for digital death and legacy issues. Its website, thedigitalbeyond.com, maintains a list of online services designed to help you plan for the future of your online content.

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