Dying has become increasingly complicated in the 21st century. With these complications comes the need to change how people think about their estate plan. Most people own assets that are purely digital, ranging from sentimental family photos to highly valuable enterprise documents, each of which must be accounted for in succession plans, trusts and wills. Estate planners must consider many new issues that, if not dealt with, could block survivors and beneficiaries from accessing assets.
Smart Business spoke with Isaiah Stidham, CPA, CFP®, associate wealth manager at Budros, Ruhlin & Roe, Inc., to learn more about estate planning in the digital age.
What are digital assets?
Digital assets comprise anything formatted as a binary code. That can include social media accounts and files stored on cloud servers or personal computers, such as documents, photos, music and movies. They also include online bank and investment accounts that require login credentials for access.
From a business perspective, many companies have chosen to go paperless, requiring clear procedures for continuing access to that digital information in the event of the business owner’s death.
Why should digital assets be accounted for in estate planning?
It’s easy to overlook digital assets until after someone has died. Even when these assets are properly identified, there are many questions about what happens to them.
Valuing digital assets can be particularly difficult, as not all of them have a clear monetary value. Family photos stored on a computer or a file-sharing website, for instance, do not have much or any monetary value, but can have significant sentimental value. For a professional photographer or author, however, images or a manuscript stored digitally can have substantial value.
Even more important than determining the value of a person’s digital assets, is insuring continued access to these assets. Without a plan, there is a risk that these assets may be inaccessible and in some cases lost forever. Authorization is required to work with banks to access online accounts, and it can be difficult if not impossible to be granted access to a private email account as those providers work to improve security. That’s why it’s important to pass along login information to survivors and specifically name successors when the option is available.
With digital assets that have primarily sentimental value, individuals should also consider how they want assets distributed among their beneficiaries. Similar to making a specific bequest of which child inherits grandma’s silverware, a person can decide during their lifetime how their digital assets should be divided. Although there may not be significant monetary value in the division of these assets, the emotional aspects of estate planning are often even more critical to family dynamics.
How can these assets be properly considered in an estate plan?
Inventory all digital assets. Keep track of user names and passwords either manually or through services that manage passwords for users, such as SecureSafe or entrustIT. They can track the online sites you’re using and the associated usernames and passwords. Users can leave a master access to those accounts to their executor or trustee, giving them one source from which they can access all of the individual’s digital information.
Insuring an executor, trustee or personal representative has access to online accounts upon someone’s death can be difficult because the law hasn’t kept up with this issue. That’s why it’s a good idea to add language to current estate documents that specifically grants power to an executor, trustee, power of attorney holders and personal representative to access, handle, distribute and dispose of digital assets both at death and in the case of an individual’s incompetency.
When a person passes without leaving a means of accessing their digital assets, their survivors are left in a lurch. Be proactive and communicate your desires for these assets while you are still living to ensure your wishes are fulfilled upon your death.
Insights Wealth Management is brought to you by Budros, Ruhlin & Roe, Inc.