Creating a succession plan for data after death

Creating a succession plan for data after death

The one certainty in life is death.

The experience will be traumatic, scary and confusing for those left behind. For that reason, estate planning is the last conversation that any person wants to have. It’s critical, however, for consumers to ensure that their personal and professional assets remain in good hands.

For business owners and solo-entrepreneurs, succession planning can be much more complicated.

In the event of a founder’s unexpected passing, the remaining team needs to carry on without interruptions.

Mark Snow

Attorneys and financial advisors can help facilitate a smooth transition for business operations, proprietary documents and plans. But what happens to intangible assets, like a business owner’s data?

“Today, business succession planning is multifaceted, taking into account more than just who will take over a business or company,” says estate planning lawyer Gary Altman. “In response to our technologically advanced world, we now include planning for one’s digital estate.”

A digital estate, according to Altman, includes financial accounts, passwords, social media content and any other data being utilized by a business. Business owners need a clear plan for who receives access to information and how long a successor should have access.

“These details should be spelled out in advance,” says Altman.

More than spreadsheets

Altman points out that a succession plan can be as simple as a password-protected Word or Excel document on a secure computer.

“These systems could have all the business digital data and access to information that will be needed after the owner passes,” says Altman. “There are several companies offering various forms of data security and even companies that store passwords and provide access to those authorized.”

These documents should be prepared as part of a larger strategy and vision.

“The first step is to meet with an experienced estate and business planning attorney to discuss what the owner’s intentions are,” says Altman.

These professionals can provide direction toward the most effective tools and resources for accomplishing key intentions.

“The only way to ensure a smooth transition of data to successors is to have a legally documented plan, as well as to authorize someone else access to the full range of business data,” says Altman. “The plan will give clear authority to the chosen successor and explain what this person needs to do.”

Process management

Mark Snow and his team built SafelyFiled, an Internet-based company to assist individuals in the organization and storage of important documents, after dealing with the experience of settling their family members’ estates.

“My father had an insurance agency when he died, and though he was a very organized man, his method of organizing was not apparent until just about all the documents were found,” says Snow. “We realized that there had to be an easier way to deal with the masses of documents created by a business.”

With so many records in digital form, heirs may be unaware of assets and important files.

“We created SafelyFiled to help,” says Snow. “Secure cloud storage is ideal for this function. By not having the data on premises or on a desktop, it is protected from natural disasters like floods, tornadoes and fires.”

Snow says that a well-designed cloud service will provide protection from malware or cybertheft.

“It is critical that the cloud storage service also provide a way to make sure data is not changed,” says Snow. “If the data can be changed, there should be a complete audit trail.”

For instance, these records can be valuable in the event of an IRS audit or dispute with internal stakeholders. For accounting purposes, there should be strict limitations around deletion of files so that there is a traceable record of assets and liabilities.

Snow emphasizes that a succession plan should be designed with the future in mind.

“Assets like client lists or trade secrets need to be protected and secured, with reasonable assurances to the buyer that these assets have not been leaked,” says Snow.

The power tool that Snow recommends to maintain order? A checklist.

“The plan must be simple enough that it will actually be used,” he says.

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.

Digital death is still a problem. A widow’s battle to access her husband’s Apple account

Ch II : Planning For The Digital Afterlife

Transferring property, wealth, assets, and family heirlooms from one generation to another has always been a primary focus of proper estate planning. The electronic and technological innovations of the twentieth century, society’s reliance on the Internet and electronic commerce (“e-commerce”), and the growth of cloud computing have given rise to a new digital world of assets which may be accessible across the world through a variety of mediums. Due to their importance in our everyday life, financial and sentimental value, and continuing growth, digital assets should be considered as a part of any estate plan. Digital assets and online accounts have the potential to continue indefinitely. As with any asset that can exceed the lifespan of the original owner, estate planning for digital assets is a vital part of the preservation of one’s legacy and property disposition. Many individuals unknowingly leave a significant amount of digital assets unaccounted for after death. For example, by the end of 2012, over 30 million Facebook users have died, leaving no directions as to the handling of their accounts. Failure to consider digital assets as part of the estate planning can result in loss of items that contain sentimental and financial value for the deceased relatives. According to a 2011 McAfee study, the average Internet user places a value of $37,438 on their digital assets,3 while a U.S.-based Internet user values their digital assets near $55,000.  The growth and development of the digital world has also changed the manner in which businesses operate, store information, market products, and reach consumers. The U.S. e-commerce industry is valued at nearly $225 billion.  Today, businesses often rely on a wide range of digital assets to ensure a strong web presence through online storefronts, e-commerce services, and cloud-based products, as many consumers expect businesses to have both brick-and-mortar locations while offering online access. These digitized assets are crucial to the company’s success and functionality and, at the same time, represent the growing digitalization of business assets. The average business insists that up to 20% of its digitally stored information is critical to operations. This percentage is likely to increase over time as companies continue to rely upon electronically stored information. Accordingly, proper estate planning and business succession plans are needed to protect and manage digitized business assets. Digital assets, without a doubt, add a new wrinkle to the already complex legal practice of estate planning. Digital estate planning can be especially problematic because digital assets are often difficult to locate without proper guidance from the decedent. Without a well-designed digital estate plan, locating and disseminating digital assets is akin to searching for buried treasure with neither a treasure map nor a shovel. Further, accessibility and transferability issues can arise as these digital assets are often spread across various social networks, email accounts, online service providers, and digital devices. Providing access and location information regarding digital assets via wills creates security concerns as their location and passwords may become public.

The expansive nature of digital assets and the aforementioned issues surrounding this novel area of law triggers the need for more precise and well-developed asset management systems. This Essay defines the scope of digital assets, discusses unique challenges digital assets provide for traditional estate planning, and concludes with a viable strategy for the creation of a well-developed and manageable digital estate plan

Your Digital Legacy

Your Digital Legacy

This week saw the passing of one of our VA colleagues and it got me thinking… what do you do with your digital footprint once you’ve passed?

We hear a lot in business about risk management, succession planning,

ensuring your partner has access to your passwords, insurance policies and so on. Some businesses even write a plan for what to do in the event of illness or accident. But how many of those actually include information about what to do with your online presence – your website, Facebook, Twitter, LinkedIn, Google+, Pinterest – the list is endless!

It seems like I wasn’t the only one thinking about this. Recently the Courier Mail/Sunday Mail ran an article about just this topic.

Your social media accounts store years of memories, pictures, data and activities. So it seems that now, lawyers are advising people to think about including a clause in their Will about what should be done with social media accounts on their demise.

Facebook’s policy is that a profile can be deleted at the request of an immediate family member or memorialised so that others can post tributes to them on the Wall. You can see more info about this at the Facebook Blog. Similarly, immediate family members or a person authorised to act on behalf of the user’s Estate can deactivate the person’s Twitter account.

Make a list of all your online accounts and notify your Executor or partner of those. You might keep this list (together with access passwords) with your Will at your lawyer’s office. At the very least let your partner know where they can find them. They’ll have enough to deal with in the event of your death without having to try and remember every online space you have inhabited during your life.

The same applies to your website – include information about who is hosting the site, contact details; the domain name registry; domain expiry information etc so that your family can get in touch with the right people with the least amount of fuss.

If you haven’t thought about it before, now might be the time – before something happens or you fall ill. It’s something none of us like to think about but, as the saying goes, none of us are getting out of this alive, so making things as easy as possible for those left behind should be your focus.

Do you have any ideas for helping your family sort out your digital legacy? Share them below!