Klitzman Law Group, PLLC

Estate Planning for Digital Assets

Almost every state has by now enacted laws giving executors the right to manage digital assets, including computer files, web domains and cryptocurrencies, reports a recent article from Forbes, “Smartphones, Email, Other Digital Assets And Your Estate Plan.” Another law, The Uniform Electronic Estate Planning Documents Act, is making its way through statehouses and would recognize electronic and digital signatures on trusts, wills and other estate planning documents, making paper and ink signatures a thing of the past.

 

Neither of these laws gives anyone, executor, spouse, or best friend, the legal right to access email, text messages, social media accounts and any other digital assets, unless the power to do so is given expressly in a will, trust, power of attorney, or court order. Without express permission, the digital door is permanently shut.

Making matters even more complicated, each digital platform has its own rules about allowing people other than the account owner to access digital assets, even if they have the username and password.

Another factor further complicating digital estate planning is the two-factor authentication many websites use today. This is done via biometrics, i.e., facial recognition or a code sent by text or email to the original owner's cell phone or email address needed for access.

Cyber thieves are aware of the problems facing unskilled executors, and stealing the identities of recently deceased individuals has become a fast-growing crime. When identity theft occurs online, the assets are often compromised before executors and survivors can access the decedent’s assets.

There are steps to take that will prevent your executor from grappling with these problems.

First, create an inventory of devices, including cell phones, tablets, laptops and desktop computers. If you have old devices that you no longer use, delete your personal data and label them as not in use. A tech-savvy person could use an old device to access your accounts.

Next, create an inventory of all your digital accounts. This includes everything from social media to websites, photo storage, device access, shopping sites, subscriptions, video games, cryptocurrency, bank accounts, investment accounts, medical portals and frequent flier miles. Add notes regarding two-factor authentication: Will your texts need to be accessible to gain access to the account, or have you activated facial recognition?

Go through each item and decide who you want to access each item. Your will, trusts and POA should include notes on who should have access to each of the digital assets. Without it, your executor will take far longer to complete their task.

Some online services allow you to name a legacy contact and give someone you name access to your accounts and phone after your death. For now, Apple, Google, Facebook and Instagram have these features. Set them up and include them in your digital inventory.

Your will needs to state very clearly who you want access to which accounts. However, it should not include any details about the account, especially not your username and password. If you don’t want your executor to access everything, you’ll need to specify which ones you want them to access and which you don’t want them to access. If that’s the case, you’ll want to have whoever does have access to review emails and other accounts regularly and share any information needed with the executor.

Digital assets are still a relatively new asset class. However, they require as much care as traditional assets.

Reference: Forbes (June 19, 2024) “Smartphones, Email, Other Digital Assets And Your Estate Plan”

What are the Best Ways to Protect Digital Assets?

Boomers may be the last generation to use cash and paper checks for financial transactions. However, according to a recent article from GO Banking Rates, “6 Ways for Boomers To Preserve Their Digital Estate and Online Assets,” many have switched to digital wallets.

With the rise of digital finance, it's crucial to stay vigilant. While hackers may be more skilled in the digital world, you have the power to protect your digital assets. Here’s what you can do.

Emails are rife with scammers. Even an email from your bank shouldn’t be trusted. Never click on links within an email—go to the website from your browser instead. “Phishing scams,” where an email from someone you know asks for quick action, should always be treated with the utmost care. Misspellings or weird URLs should be red flags to alert you to a scam.

Keep a close eye on financial accounts. Fraud is best detected early. Check for unknown charges on credit cards and bank statements. One common technique is to make a small charge on a credit card to see if it is detected, followed by a sizeable charge. Set up your accounts to send alerts for every transaction to fight this.

Don’t go online on unsecured networks. Your local coffee shop or library is not the place to conduct financial transactions. Public Wi-Fi networks are not secure, ever. It only takes one opportunity to clean out your bank accounts.

Take software updates on cell phones, laptops, tablets and desktop computers. Many software updates are sent when vulnerabilities are spotted. If you don’t take the software update, you could open yourself to hackers.

Go for the two-factor authentication. Some people feel that having to go through a two-step process to log into a favorite site is too much work. This added layer of security makes it harder for hackers to access financial information and access your systems. It’s worth the extra time.

Don’t use a wimpy password. Passwords are notoriously easy for hackers to figure out. Birthdays, pet names, street addresses and even the word “password” are common and quickly figured out. Did you know there’s software used to crack passwords? Hackers do. Make yours harder to figure out using a combination of letters, symbols and numbers.

While protecting your digital assets, don’t forget to protect your traditional assets. If you haven’t already secured your estate with a last will and testament and protected yourself with estate planning documents, like Power of Attorney, Healthcare Power of Attorney, Living Will, and medical directives, make an appointment with an experienced estate planning attorney. You’ll be glad to have both your digital and traditional assets protected.

Reference: GO Banking Rates (May 30, 2024) “6 Ways for Boomers To Preserve Their Digital Estate and Online Assets”

Who Gets Access to Your Digital Assets Account When You Die?

With so much of our lives now lived online, it’s hard to remember how we lived in a world without email, internet, or mobile phones. However, the question of what happens to our online lives after we die becomes a challenge for loved ones, says a recent article, “One day you’ll leave this earth, but your data will live on in a messy future” from WFIN.COM. Few people 65 and older have a digital estate plan, meaning the next generation must clean up what’s left behind.

Let’s start by defining digital assets and digital legacy. Digital assets are anything in digital format, including photos, videos, emails, social media account content, websites and cryptocurrency. A digital legacy is all the digital assets left behind when someone passes.

A digital legacy may include personal, financial and creative digital property. For instance, if you’re a prolific blogger, you own intellectual property. What do you want to have happen to your blogs after you’ve died? Or, if you have a craft business on Etsy, who will manage it?

Digital assets don’t disappear when you become incapacitated or die. They live on unless someone has been designated as a digital executor and there is a plan to manage the assets. What happens also depends upon the platform’s privacy and legacy policies. In some cases, accounts and their contents are deleted after a certain period of inactivity.

What happens if no digital estate planning takes place?

• Online financial assets, including bank accounts and cryptocurrency, have economic value your executor needs to be able to access and manage. If they can’t locate a username and password or are stymied by third-party verification like facial recognition, gaining access to your assets will take a long time.
• If you’re among the millions who enjoy creating a family history with genealogy websites, years of work you may have wanted to pass to the next generation may become inaccessible or vanish.
• Identity theft and fraud are common occurrences when digital assets are not managed or deleted after the original owner dies.
• Some platforms allow users to name a legacy contact who can access their accounts, gather and download content and close accounts. You’ll need to review your social accounts to determine what each platform permits and set up legacy or memory accounts.

A digital executor doesn’t always need passwords and usernames to delete, memorialize, or close your accounts. However, they will still need an inventory of your accounts and a clear directive explaining what you want to happen to your assets after your passing. Password sharing, while common, is not legal. Most states have passed some version of the RUFADAA—Revised Uniform Fiduciary Access to Digital Assets Act. Talk to your estate planning attorney about incorporating digital estate planning into your estate plan.

As a side note, if gathering your account information seems overly burdensome, imagine what would happen if your executor, already busy with so many tasks, needed to become a digital sleuth to determine what assets you have and how to access them.

Reference: WFIN.COM (May 11, 2024) “One day you’ll leave this earth, but your data will live on in a messy future”

How Younger Adults Take Charge of Estate Planning

However, recent anecdotal trends show a new, positive shift among millennials or Gen-Z individuals. According to a recent article from Forbes, “Why Gen-Z Is Suddenly Creating Wills And Trusts—And You Should Too,” within recent months, more and more millennials and Gen-Zers who are being told to create an estate plan are actually going ahead and doing so.

The article says Gen-Zers and millennials have become the “quiet leaders” of estate planning. Several things are driving this shift:

Digital Assets. Younger people, even those of modest means, have significant digital assets, including cryptocurrencies, online businesses and many social media accounts.

COVID. Living through a global pandemic and experiencing the unexpected loss of family members raised awareness relatively early in their adult years of the repercussions of not having an estate plan.

Changing Family Structures. “Modern Family” is more than entertainment. Today’s family is more likely to be different than the traditional family structure of the past, and clear directives are needed to prepare for asset distribution.

Valuing Philanthropy. Younger adults are more aware of the role nonprofits play, whether in their immediate communities or globally. They are also more likely to give a portion of their estate to nonprofit organizations.

Financial Savvy. Younger adults are more candid than past generations with their peers about money and how to protect it through estate planning as part of money management and investment strategies.

Having an estate plan can protect a legacy for family and children, while not having one could mean giving half of your estate to the government in taxes. An estate planning attorney can help to avoid or minimize probate, a court process requiring your will to become a public document. Probate can delay the distribution of property and can be costly.

Another reason to have a will is to minimize family conflict. Your family won’t be left guessing how you want your assets to be distributed. It is also less likely that there will be family fights or misunderstandings after you’ve passed.

Estate plans are not just for wealthy people but anyone who cares enough about their family to protect them. Younger adults embracing estate planning is a good sign for the future.

Reference: Forbes (April 17, 2024) “Why Gen-Z Is Suddenly Creating Wills And Trusts—And You Should Too”

Digital Life Lives on After You’re Gone, Unless You Plan Ahead

Every year, Americans receive Facebook reminders to wish departed friends a happy birthday. It’s a sad reminder, but it happens because most people don’t address digital footprints as part of their estate plans. A recent article from the Monterey Herald, “Liza Horvath, Senior Advocate: Your digital life does not die with you,” explains how to get started.

Ensure that your executor has a list of websites and apps where you are a user. This includes Facebook, Instagram, X (formerly known as Twitter), Linked In, Snapchat, WhatsApp, Google email, Microsoft Outlook, bank accounts, investment accounts, photo storage and any other sites you use. You can use an online password manager or paper to make a list. If you create a spreadsheet on your computer, you’ll want to encrypt it to prevent unwanted access and ensure that your executor has the password. Whatever method you use, make sure that your executor knows where the information can be found.

When you die, certain platforms allow you to name someone to become your Account Manager or Legacy contact. Google’s Account Manager lets you set up parameters to notify someone if you have been inactive for a certain period of time. Facebook enables you to name a person to manage your account after you pass away. Apple also has a Legacy Contact option.

Like everything else online, website guidelines change, so you’ll want to create a Digital Will establishing your wishes for your social media and online accounts, referred to as “Directives.”

If you have digital currency or cryptocurrency, you’ll need an executor who understands how crypto works. They should be able to access your digital wallet and “key”, so they may access your assets. These funds are frequently lost due to a lack of planning and no paper trail to follow.

Depending upon your state, you may be able to give your Power of Attorney access to your digital assets in case of incapacity. Speak with your estate planning attorney to be sure that your will or trust addresses the ability to manage digital assets according to the laws of your state.

If creating a list of digital accounts seems too much to deal with, imagine your executor having to figure out your digital life. Without digital estate planning, your assets could be lost. As a result, your entire online life is vulnerable to digital identity theft that could easily continue for decades.

Reference: Monterey Herald (March 1, 2024) “Liza Horvath, Senior Advocate: Your digital life does not die with you”

How to Make 2024 the Best for Retirement Finances

We all know what happens with New Year’s Resolutions—they’re mostly gone by February. A recent article from The Street, “9 Ways to Prioritize Your Financial Well-Being This Year,” explains how a proactive mindset can help you integrate positive management into your everyday life in 2024.

First, get organized! A cluttered environment can lead to a cluttered state of mind, increasing stress and reducing productivity. When was the last time you organized your finances? Preparing for taxes is a good time to take a day to go through old records, identify and gather what’s missing, update information, end unused subscriptions, set a budget, create your income tax folder and create a mindful bill-paying system.

Determine your financial goals for 2024 and beyond. If you’ve recently experienced a significant life event, like a divorce or marriage, or welcomed a new child or grandchild, now is the time to incorporate new goals, eliminate old goals and focus on the steps you need to achieve your new goals.

Have a values-based conversation with your spouse or partner. What is essential to both of you and how might you accomplish these goals? If you are single, make an appointment with your financial advisor to discuss your goals and what you can do to make them a reality.

Do you know what your net worth is? This is often used as a benchmark to understand your progress towards your goals. You should include investments, savings, equity in your home and other assets. Then assess your liabilities: mortgage, credit card debt, auto loans, personal loans, etc. Doing this every year will help you understand if you’re making good progress or may serve as a wake-up call.

Do you have an estate plan, or is your estate plan more than three to five years old? This is the greatest gift you can give your family. It includes how to settle your estate once you’re gone and how and who to manage your affairs while you’re living if you become incapacitated. An experienced estate planning attorney can create a plan aligned with your state’s law, so you don’t risk creating an invalid will, which will cause many challenges for loved ones.

Prepare digital assets. If you don’t have a list of all online accounts, including usernames, passwords, PINS and two-factor authentication information, start by taking inventory and documenting your information. Make sure your executor has access to this information.

Prepare a financial “go” bag. The news is filled with natural disasters. You won’t get a printed invitation if you need to evacuate in an emergency. Have copies of important documents, including IDs, insurance cards, healthcare directives, birth certificates and marriage certificates, ready to take with you at a moment’s notice. Include information about your prescriptions and other medical information.

It's always good to form good habits and tracking them keeps your activities and goals top of mind. Use a spreadsheet, calendar, or journal to hold yourself accountable and give yourself a feeling of satisfaction every day.

Finally, a values-based decision-making approach can help you reach your goals. An example is whether you want to make an extra mortgage payment or invest the money in your child’s 529 account. By identifying core values before setting goals, you can use your values to help prioritize what matters to you, aligning goals with values and actions.