Do You Have a Digital 'Guardian' for Your Estate?

(Image credit: Yuichiro Chino)

An estate plan is a cornerstone of any comprehensive financial strategy. On a practical level, it can help ensure that your assets are distributed in keeping with your wishes. It can also provide you with a significant emotional benefit. Simply knowing that your affairs are in order can give you peace-of-mind that your legacy will be carried out the way you intend, without creating needless legal or administrative burdens for your loved ones.

Your Estate Could Have a Serious Password Problem

Traditionally, estate plans have involved creating wills, naming beneficiaries for various financial accounts and establishing trusts. In today’s world, there’s an additional estate planning concern — determining how to manage your digital assets.

The growing importance of digital assets

Think about how much of your life is connected to your computer, mobile phone and other devices. Your digital footprint may be as basic as an email account or a social media page. But, if you’re like a growing number of consumers, your virtual assets may also include digital purchases made (books, music, movies), financial accounts, website domains and perhaps even cryptocurrencies like Bitcoin.

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Now imagine what will happen to your digital assets when you pass away. Will your loved ones have access to those assets and accounts or know how to manage them in line with your wishes?

If the answer is no, now’s the time to address this gap as part of your estate plan.

New legal solutions

In the past, it may have seemed sufficient to simply list out usernames and passwords and make sure that list was available to a trusted individual. However, if a third party had access to your login information, it didn’t necessarily mean they were recognized as an authorized user of the account. Their attempts to access your accounts could result in unintended consequences (i.e., they could be accused of hacking).

Recently, new legal solutions, such as the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA), have emerged to address this issue. RUFADDA, which applies in most states (check here to see if your state is included), allows individuals to designate a fiduciary to legally access their digital assets after their death or before their death if they lose the ability to manage the account. You can grant this authorization through a will, power of attorney or trust.

Meanwhile, some digital providers have started to offer ways for you to name authorized users within your account. For example, Google has a tool referred to as “Inactive Account Manager,” through which you can authorize another individual to access your account information in the event that you are no longer living or able to. Facebook has a similar feature that allows you to choose a “legacy contact” to take control of your account after you pass.

These are just some of the measures that make it easier for you to account for your digital assets as part of your estate plan.

How to Protect Your Digital Assets

Tips to get started

It will take a proactive approach to get your digital estate plan in order. But it’s well worth the effort. Here are five steps you can take to get started:

Take inventory of all of your digital assets. Include any online accounts, no matter how basic or complex.
Make sure you have username and password information documented in a secure place. You may want to consider using a password management tool. Designate a trusted individual who will have the ability to access to your login information after you die.
If RUFADAA is applicable in your state, determine if online accounts offer a way for you to spell out your legal custodians and, if so, complete any required electronic forms.
Update your will, trust and power of attorney documents to authorize the individuals you would like to serve as fiduciaries to access your digital assets. Indicate who will have access to what.
Enlist the support of professionals to help you manage the estate implications of your digital assets. An estate planning attorney and a financial adviser can work together to help you develop a comprehensive plan that matches your legacy wishes.

While none of us will live forever, our digital lives can, theoretically, continue indefinitely. Taking these steps can help you create a legacy consistent with your wishes and values.

How to Keep Your Heirs from Blowing Their Inheritance

Ameriprise Financial Services Inc. Member FINRA and SIPC.

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Marcy Keckler is the Senior Vice President, Financial Advice Strategy and Marketing at Ameriprise Financial. She leads the overall strategy for financial advice at the firm, including the Ameriprise Client Experience and Confident Retirement programs. Marcy has been with Ameriprise Financial (formerly American Express Financial Advisors) for more than 25 years in a variety of positions in financial planning, marketing and interactive development.