Taking the time to properly plan for your virtual estate has never been more important than it is today. Just think about your digital footprint for a second. What comes to mind? I feel like most would likely think of social media sites like Facebook, Twitter, Instagram, and LinkedIn based on the amount of time spent on them. However, think about how bills are paid, where priceless family videos and pictures are stored, and where other valuable information such as tax returns and emails are stored. When creating an estate-plan, it is easy to underestimate the breadth of your digital foot print.
So, what happens to these assets in the event of your death? What would happen if you were incapacitated due to dementia or Alzheimer’s?
If you haven’t even given this a second thought, don’t feel bad. Most haven’t. In fact, only recently has the concept of planning for digital assets really become something that most attorneys and financial planners even include in their standard set of services. So, take a deep breath and relax, I’ll tell you what you need to consider when developing a plan.
Importance of Planning
Following are some common issues a proper plan can address at death or disability:
- No Access - if heirs do not know usernames or passwords, access to various accounts may be next to impossible.
- Financial Loss - without access to, or even the awareness of, online accounts the individual or their estate may suffer losses due to failure to pay online bills. For example, the home insurance policy may lapse, which can cause a lapse in coverage. In addition, utilities could be shut off, which may cause additional, unintended damages. For example, if the power is shut off and the furnace isn’t running, this may cause pipes to freeze and subsequently burst.
- Priceless Family Heirlooms - the frustration and emotion that an heir would feel if they could not access priceless family photos or videos of their loved one would be immense. Over time, this would probably leave the greatest emotional scar.
Right now, we’re living in a time where the law is feverishly trying to catch up with technology. I’d probably liken it to a comparison between a fax machine and a new iPhone. That’s how far behind Johnny law is and tech surely isn’t slowing down.
Here’s the core issue. When we sign up for an online account or service, we need to complete a Terms of Service Agreement. We’re all too familiar. It’s that jumble of words we generally click on without thinking twice. I will admit, I’m not scrutinizing these either. Let’s be honest, if it’s a service we need now, the possibility of some potential trouble at our death is not going to stop us from obtaining that service, right?
Anyway, built into these “click-wrap” agreements are provisions pertaining to what would happen to the account at the owner’s death. Generally, these state that only the account owner shall have legal access. Therefore, under current federal law, it may be a criminal act if an unauthorized user gains access to the account, causing a violation of the Terms of Service Agreement. Keep in mind, these “click-wrap” agreements have historically been upheld in courts.
So, this can be pretty scary stuff for a son or daughter trying to go through mom or dad’s things.
For most of us, our digital assets are both financially and emotionally valuable. Therefore, it makes sense to take the time to develop a proper plan.
As I mentioned, the law is still trying to play catch up to technology and is continuously changing so I strongly recommended discussing this in greater detail with your attorney.
However, here are some common strategies that can be implemented.
- Durable Power of Attorney - this can be used to authorize an agent to obtain access to your digital accounts. This appointed individual is generally able to step in and manage your affairs.
- Create an Online Inventory List - I would recommend creating a comprehensive listing of all websites, usernames, and passwords. Now, you could do one master list or break this up into two listings based on financially sensitive and non-financially sensitive criteria.
- Financially sensitive - you will want to keep this listing safe and secure, but in a location where it can be accessed by an authorized user. For example, you can save it to a password protected thumb-drive or keep the document in the same location as your Will, trust, and/or power of attorney documents.
- Non-Financially sensitive - this listing can be kept in an easy to find place or even be shared with individuals during your lifetime to ensure access will not be an issue.
- Do NOT Include in your Will - your Will is going to be filed and public record, so you do not want this information made public.
Alexander P. Kowerko, CFP®, ChFC®, CLU®, FLMI® is a contributing author to the blog. For the past 7 years, he has held a Senior Advanced Planner position where he is responsible for developing comprehensive financial plans for clients.