Why It’s Important to Have a Digital Estate Plan
Technology has become an integral part of daily living. How often do you reach for a laptop, smartphone, or tablet to talk to loved ones, check your bank account, or get updates on social media?
In the past, estate planning was traditionally designed as a folder of documents, often kept in a safety deposit box for the family to access after someone dies. Now, paper documentation is a thing of the past – most documents are digital. As such, it’s essential to consider how modern estate planning accounts for digital assets, online passwords, and more.
What Happens to Your Digital Assets?
The convenience of using cloud-based services enables you to maintain your files and personal information from any location. But many people don’t have a method for centralizing or organizing their online passwords and documents.
If you became incapacitated or died suddenly, would your family be able to access your digital information? What will happen to your digital property? Even though you regularly use these online resources, loved ones won’t have access unless you create a digital estate plan:
- Online bank statements
- Digital investment accounts
- Bills and invoices due
- Account passwords
- Cloud photo storage
In fact, without a digital estate plan, your loved ones may not know what websites you use or where to find the logins and passwords.
What is a Digital Estate and Why is it Important?
A digital estate plan is a method for organizing your online information. This information provides access so your chosen digital executor can find the necessary credentials for managing your digital accounts.
In a digital world, people manage many details of their lives online. However, if you aren’t proactive about creating a digital estate plan, it could be challenging (or even impossible) for your family to access the necessary information after you die.
Without a digital estate plan, it’s likely that your online accounts will be overlooked. Even worse, funds available in financial accounts aren’t available for distribution to beneficiaries. After a certain amount of time, online service providers may delete or deactivate the accounts.
Additionally, a digital estate plan protects your online assets against certain risks, such as fraud, hacking, and identity theft.
Create a Digital Estate Plan
With a few simple steps, you can organize your digital estate plan and leave a clear system for your digital executor to use after you die. This part of estate planning is just as crucial as choosing beneficiaries and signing a will.
Step 1: Take Inventory
Begin by writing down every online account you have, including the username and password you use for each account. Then, pay attention to any websites that require security questions so you can include these answers in your digital estate plan as well.
Include any and all types of digital assets in your inventory. Here are a few examples of digital assets you can add to your digital estate plan:
- Email accounts
- Online banking accounts
- Website domains and blogs
- Social media accounts
- Loyalty program benefits
- Online shopping accounts
- Cloud storage accounts
- Subscription services accounts
- Utility provider accounts
Write down a complete list of all websites and digital tools you use on your computer and phone. Often, this list needs ongoing maintenance as you remember other websites to add.
Step 2: Choose a Password Storage Tool
Most people don’t write down a list of websites and passwords – for obvious reasons because of the security concerns if that list falls into the wrong hands. So instead of having a handwritten paper in the filing cabinet or an unsecured document on your computer hard drive for password storage, it’s smarter to create a protected digital file for your family.
A password storage tool is a secure, effective way to centralize all of your account information. With one master password, your digital executor has immediate access to all of your online accounts and credentials.
Many of these password storage tools are free or come at a low annual cost. Here are a few popular password storage tools to consider:
Be proactive about updating your password storage tool in the upcoming months and years. Not only does this tool provide your executor access to your digital accounts, but it is also convenient for you to use when you are logging in online.
Step 3: Appoint a Digital Executor
Now it’s time to choose the person you will entrust with overseeing the details for your digital assets. When you are incapacitated or die, this person receives access to all of your online accounts. Not only do they manage the assets, but they are also responsible for distributing or destroying these assets.
You can choose anyone to be your digital executor. Consider choosing a family member, close friend, or an attorney to be your digital executor. Specify this executor in your will.
Step 4: Secure a Legally Binding Estate Plan
Keep in mind that your digital estate plan goes hand-in-hand with a full estate plan. Work with legal representation to ensure your plans are legally binding and ready for your beneficiaries at the appropriate time.
For example, you might have an online bank account as a digital asset and enter the credentials in your password storage system. However, while the username and password might be considered a digital asset, the liquid funds within the account are not a digital asset – they are part of the estate. Therefore, different laws apply to the management and distribution of these funds.
Create a written digital estate plan that your family can rely on after you are gone. Detailed information minimizes problems in probate court and reduces the stress on your loved ones.
Certain states don’t acknowledge digital estate plans, so it’s important to formalize the information with a note in your will. As a result, you’ll need two separate documents: your digital estate plan and your will. Keeping the digital estate plan separate from your will is vital for two reasons:
- Account Privacy: When you die, your will becomes public information. Keeping your digital asset information in another document prevents strangers from having access to your website credentials.
- Updated Information: It’s normal to make ongoing changes to your websites, usernames, and passwords. A digital estate plan allows you to create, change, or delete online accounts as needed without the burdensome step of updating your last will and testament.
Digital Estate Planning Brings Peace of Mind
There’s no reason to wait: start working on digital estate planning, so your online information is ready in case anything happens unexpectedly. Then, when you catalog and organize your online assets, your loved ones have clear instructions to follow – without the stress of storing through years of online account usage.