Creating a personalized estate plan has become more and more important these days. Estate plans nowadays need to include digital estate planning as well. What does that mean? A digital asset is basically anything that is either based on a computer or involves the internet. Common examples are email accounts and online businesses. Who will inherit those unique assets when you pass away? Better yet, why is it important?
Digital assets are more and more common
Communications technology has become more and more popular. As this has happened, digital assets have also become more common. Only a decade ago, not many of us would have even considered a phone to be one of our most important possessions. Today, however, most of us rely almost entirely on our cell phones to communicate, conduct business, store sensitive information, and much more. Although the phone itself is not a digital asset, the information it contains is an asset. Cell phones are also a way to access other digital assets you might own.
What does digital estate planning involve?
Digital estate planning involves issues such as how to protect the assets contained on a cell phone or laptop; who will have the authority to access your email accounts and online bank accounts. More importantly, who will have the basic knowledge that these various digital assets even exist? Consider this example. You sell items online using an eBay or PayPal account, which is linked to your bank account. Someone needs to know how to access those accounts and be allowed to transfer money if you become incapacitated, for instance. Even after you die, your executor needs to know which accounts exist and how to access them. You also need to decide who will ultimately inherit them. This is what a digital estate plan is for.
Times have surely changed
Historically, an estate has consisted of a will, trusts, power of attorney appointment, life insurance policies, and any property that a person owned, including financial accounts. Back then, paper documentation was the only method of recording these estate planning tools and they would often be collected in a folder in a safe or desk drawer. That way, family members would easily be able to find the information after the person passed away. Other information, like bank statements and bills, could be obtained through the mail.
Now, however, most of this information is routinely digitized. So your financial, business, personal, and administrative documents will likely exist in a digital form. While many people manage their finances, businesses, and personal lives online, very few actually have organized or centralized accounts. This can mean that managing and distributing these digital assets will be very difficult after the owner has died, and can lead to confusion, or even worse, denial of access.
Why digital access is important even after death
Even though you may have a business with an actual building, you are certain to still have some digital assets that are tied to that business, such as online access to a bank account. In that situation, there is still significant value in being able to access the online components of your accounts because they can provide easy access to key information that may be necessary for settling your estate.
What can a digital estate plan really do for my family?
There are many ways a digital estate plan can be very helpful to your family. Here are a few examples:
- Locate any accounts you have online
- Access those accounts or the information in those accounts
- Determine if your digital property has any financial value that needs to be reported and perhaps submitted to probate
- Distribute or transfer any digital assets to the appropriate parties
- Avoid online identity theft
Why small businesses generally need an estate plan
In general, estate planning can protect your business assets from taxes, control how your assets will be distributed and more. Everyone benefits from a basic estate plan, no matter what their wealth or status may bees. This is also true for small business and family-owned businesses. Understanding why small businesses need an estate plan will help you in making decisions on how to organize and business and plan for succession of that business.
Join us for a free seminar! If you have questions regarding digital assets, or any other estate planning needs, please contact the experienced estate planning lawyers at the Schomer Law Group for a consultation, either online or by calling us at (310) 337-7696.