Estate planning in a digital world: What you need to know

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Be sure to consider your digital assets in your estate
These four steps could help ensure that your online accounts and digital assets can be accessed should the need arise.
From the Merrill Edge Minute e-newsletter.

Key points

  • Much of the information your heirs will need to manage your estate is likely stored online or on your digital devices — not on paper
  • Creating an inventory of websites, passwords and important documents stored on your devices can be a big help for those empowered to act on your behalf
  • Your will or a power of attorney should spell out how you want your digital information and assets managed in the event of your death or incapacitation
  • Read Read How to Organize Access to Your Digital Assets
The digital world is now an integral and important part of our financial and personal lives. We go online to pay our bills, manage our health care, invest — and more — using our computers and/or mobile devices. We may also have digital "assets," which consist of anything that belongs to us that's stored electronically, including photos, videos or important documents.
This raises important questions: How would someone without access to your online accounts pay your bills and manage your finances on your behalf if you were to become incapacitated or die? Are there steps you can take now so that your loved ones would be able to simply and efficiently manage your affairs if the need arose?
"With traditional paperwork, heirs or trustees were almost always able to eventually find what they were looking for," says Jean Kim-Wall, director and wealth strategist at Merrill Lynch. "Now, with less of a true paper trail, encryptions, passwords and the advice from some to never write any security information down, there's a real possibility that your loved ones may not be able to find critical information if something happens to you," Kim-Wall says.
It's always a good idea to revisit your estate plan from time to time, which includes your will, as well as any power of attorney you might have granted. In doing this, give some particular thought to your digital assets and accounts. Kim-Wall suggests these four steps to help ensure that your loved ones are able to carry out your wishes as you intend, should they need to.

Step 1: Print your year-end statements

At the end of each year, print one copy of all paperless statements you receive and make a paper file for them. Be sure to include:
  • debt documents — mortgage, credit cards and loans
  • bank accounts
  • investment accounts
  • insurance plans
  • other active accounts
Those statements won't contain your log-in details, but each will have your account number and a general information phone number to call. "At least the statements show where the accounts are held, so even if they have no other information, your executor or the person to whom you've given power of attorney — often referred to as your agent — will have a good place to start," Kim-Wall says.
Many accounts now deliver monthly invoices and communicate primarily through email, so your email password is one of the most important items to record.
— Jean Kim-Wall,
director and wealth strategist, Merrill Lynch

Step 2: Organize your usernames and passwords

A 2013 survey by U.S. Trust found that 63% of respondents had not outlined their wishes and instructions for their digital assets, and 45% had not organized the usernames and passwords to their online accounts. So it's a good idea to take an inventory of your online life by documenting the website accounts you regularly use along with:
  • usernames
  • passwords
  • security questions needed to access them
Watch 'Keep your financial information safe - both online and off'
"Many accounts now deliver monthly invoices and communicate primarily through email, so your email password is one of the most important items to record," Kim-Wall notes. Don't forget to include nonfinancial sites with automatic billing linked to your credit card, such as movie streaming sites, health clubs or a toll-payment service, so unneeded services can be easily canceled. Remember to update this document whenever you open a new account.

Step 3: Choose someone to handle your digital affairs

The rules on access to digital accounts by heirs and executors vary by state, according to the Pew Research Center.Footnote 1 So to reduce any uncertainty, consider asking the executor of your will or your agent if he or she is comfortable navigating the digital world to access your online accounts and other digital assets. If they are not fully comfortable doing so, then name another person you trust to help. This would include your email accounts, digital videos and photographs, and anything else stored on computers, mobile devices or hard drives you may own or on the "cloud".
The same advice also applies if you're incapacitated, whether temporarily or permanently. Making sure the person to whom you've given your power of attorney can easily gain access to your online accounts could be a big help.
Once you've determined who you would like to handle your online accounts and digital assets, either give that person a copy of the inventory you've created or place it in a secure location and provide them with instructions for accessing it. For instance, you could store your important documents on Learn about Merrill Edge's secure online storage service Documents Vault (log in required), Merrill Edge's secure online storage service, or give a copy to your attorney, as well as put it in a safe deposit box.
Giving someone the means to access your online accounts is not the same thing as officially authorizing them to make decisions about those accounts — any more than giving them your checkbook authorizes them to write checks in your name.
— Jean Kim-Wall,
director and wealth strategist, Merrill Lynch

Step 4: Give clear direction

Your revocable trust, will or power of attorney should spell out how you want your digital information and assets managed in the future, should you become incapacitated or die, Kim-Wall says. These tips may help.
  • Don't feel you have to treat all accounts the same. Your email may contain very different private information than your bank account. So, you may choose not to give the same person access to all of your accounts. For example, your power of attorney can specify that the person you name as your agent will have access only to your financial accounts, not your other personal accounts, such as your email or social media. Think through whom you want to be responsible for what, and then talk to your attorney about how to make sure your wishes are reflected in arrangements for your estate and any proxy if you are incapacitated.
  • Make it legal. Kim-Wall stresses that giving someone the means to access your online accounts is not the same thing as officially authorizing them to make decisions about those accounts — any more than giving them your checkbook authorizes them to write checks in your name. "You want to be sure to follow the letter of the law in your state when someone is taking over management of another person's financial assets, whether they're accessed digitally or not," she says. "This is equally true for an estate and for a power of attorney."
  • Don't forget social media. Most sites, like Facebook and Twitter, have very specific policies for the accounts of people who have passed away. In some cases you can set your preferences ahead of time; for example, you may be able to choose whether you'd like your account to function as a memorial or would like it to be deleted. You'll have to learn about the options and manage the settings for each of your social media accounts separately. Think about leaving instructions for those accounts which don't allow you to make choices now.
In addition to helping provide access, many of the steps outlined here can also help you Learn how to protect your heirs' inheritance. By documenting your digital assets for your executor and/or agent, you've given them some of the tools they'll need to handle your digital estate the way you want. And remember, discussing your wishes and plans with them ahead of time can also help make what is likely to be a difficult time for them less stressful.
Next steps

Footnote 1 Pewresearch.org, "Proposed law would clarify who gets access to a deceased person's digital accounts"
http://www.pewresearch.org/fact-tank/2014/05/06/proposed-law-would-clarify-who-gets-access-to-a-deceased-persons-digital-accounts/

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