There are many details to consider when helping a client set up a will or estate plan, from assigning an executor or power of attorney, to choosing beneficiaries, to setting up a trust and more.
The process of creating any good estate plan includes taking an inventory of valuable assets that will need to be managed or dispersed upon someone’s death, including:
- Real estate
- Investment accounts, cash, stocks and bonds
- A business or intellectual property
- Personal property such as jewelry, vehicles, artwork and furniture
Often, miscellaneous items or heirlooms that may not hold great monetary value but have significant meaning to individual family members are also included in estate planning.
Not that long ago, a list like that was considered to be a relatively comprehensive view of assets that warranted inclusion in a will or estate plan. Today, even as internet use and online accounts have become an everyday part of life for most clients, it can be easy to overlook or dismiss digital assets in your inventory. But including them as part of your estate planning approach is vitally important.
Examples of digital assets
Most advisors would be hard pressed to know someone who doesn’t use the internet, and we’re not just talking about younger generations. The gap between the oldest and youngest online users is narrowing, and the ubiquitous use of smartphones is making the internet more accessible than ever. Nearly all (96%) of those ages 50 to 64 use the internet, and those 65 and older aren’t far behind with 75% usage.1
The many daily online activities they’re engaged in leave trails of data and often involve multiple accounts on various platforms, which may include:
- Email or other electronic communications
- Social media sites, blogs or website domains
- Rewards programs for credit cards, hotels, travel, etc.
- Online shopping sites
- Financial accounts, including payment services, online banking and cryptocurrencies
- Cloud-based file storage of photos, videos, music, etc.
- Business data, including CRM databases, trade secrets, financials, and other confidential information
Consider all the online accounts you have set up passwords for. How many are there? It could be dozens, and your clients may face a similar situation. However, many people don’t create a list of those digital assets for other trusted individuals to manage in the event of death or incapacitation. That puts those assets at risk of being out of reach.
Why digital assets matter
It’s one thing for beneficiaries to not have access to a deceased loved one’s unfinished manuscript, family photos or videos, or to have the ability to manage a social media profile, as those digital assets may hold more sentimental value than monetary value. Consider, however, that a client may have opted to go paperless and manage the majority of their financial transactions online.
Heirs may not even be aware of various financial accounts held by their loved one or, if they are, may not know where to find the account information. It may be stored on a locked computer, smartphone or lost in an email account that is password protected. During a time when someone is grieving the loss of a loved one, the added burden of retrieving their personal information and dealing with administrative contacts at multiple online service providers can create further strain and heartache.
For example, immediate family members or representatives may make formal requests to email providers in the event that a deceased person didn’t leave clear instructions regarding their online accounts. But user agreements can stipulate that a company will not provide login credentials or full account access even after death as part of their user security policy.
That can impede access to important email communications, spreadsheets, personal documents, photos and more. Some providers may offer users options for handling their email and associated accounts after a period of inactivity — options that may include access to data as determined by the user before their death.
Advice for clients with digital property
When providing guidance to your clients, address the importance of including digital assets in their estate plans. An advance plan that includes a digital asset component can help minimize obstacles and administrative costs, and ensure that all digital property is accounted for and accessible in the event of their death.
Beyond password protection, many people have opted for biometric access to their devices, such as fingerprint or facial recognition. This presents an additional level of difficulty for those left in charge. Consider a backup plan from the beginning with a question or code that only a trusted individual has in case this becomes necessary. Help your clients address the following issues in their planning.
1. Create a complete list of digital assets
Include all online accounts, including social media, email, payment services, online shopping sites, streaming services, financial institutions, insurance companies and others along with usernames and passwords. Clients should let their power of attorney or a trusted individual know how to access this list when they need to, and provide their permission and the circumstances for use.
It’s imperative, however, to discuss cybersecurity with your clients; they should follow best practices to protect passwords, and store such a list in a secure location to prevent the information from getting into the wrong hands.
2. Back up important data
In the same way that someone may keep copies of important financial information, birth certificates or other documentation in a safe deposit box, clients can also use a virtual safe deposit box for important electronic information. Various online services are available for backing up electronic data in the cloud in the event a computer crashes. Likewise, any digital assets stored exclusively on the cloud should also be regularly backed up onto a computer or hard drive to make access easier.
3. Provide consent and instructions
Estate planning documents should include wording that authorizes someone to be the executor of the deceased person’s digital estate. Such a legal document prepared by an estate planning attorney may allow a designated person to access, cancel, deactivate or delete digital accounts as specified.
Even with legal documents in place, clients should review each platform’s individual terms of service. As previously mentioned, if an executor doesn’t have a list of usernames and passwords, the process for retrieving information can be arduous and access may be limited if not impossible.
Despite its widespread adoption, it’s good to be reminded that the internet is still a relatively new frontier for some people, especially older generations, and the world of online assets is still evolving. It’s best to work with clients to help eliminate ambiguity and difficulties for their loved ones when they’re gone by documenting their wishes and putting a digital asset plan in place.
In addition to educating clients about how to manage their online accounts, it’s important to heed the advice yourself and develop a plan for your own digital assets. As part of that plan, advisors should consider how they can improve their online engagement with clients and prospects. Use our Acceleration® resources and participate in our Setting Your Social Strategy module. It can help you develop a social strategy as a complementary addition to your business development plan. Access these resources below.
Written by: Marshall Heitzman, CFP®, ChFC, FLMI, CPCU, BFA™
Marshall is TruStage's Advanced Planning Expert and has more than 25 years of experience in the insurance and financial services industry. He consults Financial Professionals on advanced retirement planning concepts for retirement and wealth management clients.