An increasing issue for estate planners and individuals acting as power of attorney or executor is the identification, management and disposition of “digital assets”.

In this day and age, most people use their computers for any number of tasks, including email, storing photos and videos, social networking, management of financial assets, recordkeeping for income taxes, medical records, small business management, online banking and brokerage accounts, etc. It is critically important that someone can access this information when you are unable to do so yourself.

There are several reasons why it is important to have a plan in place for these types of assets:

1. To make things easier- for family members, attorney-in-fact and/or executor. In many cases, individuals may have dozens of online accounts, each with a different user ID, password and security questions. Unless a list of this login information is created and updated as changes are made, anyone needing to access this information will have a daunting, if not impossible, task ahead of them.
2. To prevent identity theft- following an individual’s death, a criminal can open credit cards, apply for jobs under the decedent’s name and get State identification cards. With access to the online accounts, steps can be taken to ensure this does not happen.
3. To prevent losses to the estate- it is becoming a more common practice that invoices, statements and tax information are generated online, with no paper statements being mailed. If the assets are not identified or dealt with in a timely fashion, there may be losses that could have been avoided if online access was immediately available. Any electronic statements for loans, insurance, etc. need to be identified quickly to avoid cancellation of coverage, or loss of service.
4. To preserve family history- whether it be a family tree, genealogical information, photos and videos, emails, or journals, these items may not have any monetary value, but would be a great loss to the family and friends if they were unidentified or inaccessible.

It is important to bear in mind that various online service providers have different policies regarding what will happen on the death of an account holder. While everyone generally has to click a box and accept the terms and conditions before an account will be opened online, few people actually read the whole agreement or consider its impact under various circumstances down the road. Google has just introduced an “Inactive Account Manager” feature which enables the user to give consent to transfer data to an executor or other designee. Other service providers are bound to follow. In the meantime, the Courts have typically upheld the online contracts when cases have been presented. Further complicating matters is the fact that different States have a variety of statutes and policies addressing the treatment of digital assets. As is often the case, the legislation has not kept pace with this fast changing arena. On both the federal and State level, there is proposed legislation that will give fiduciaries the authority to manage and distribute digital assets, but until that happens, the contracts with the various service providers will prevail in most cases.

So now that you’ve recognized the importance of maintaining records about your digital assets, how do you accomplish that? An inventory of these assets should be established and updated as passwords change, accounts open and close, etc. This would include the website, login information and answers to security questions.

The next issue is where to store this information, since you’ve now put all of your highly confidential account access information into one document. Providing it to a family member now (even if that individual will be your Attorney in Fact or Executor in the future) may not be the wisest choice. Consider a parent giving access to their online bank account to one child so they can help with bill paying and monitoring transactions. While that child may be extremely trustworthy and conscientious, the other children may disagree and make accusations about misuse of funds, or even worse, that child’s circumstances may change and they actually do misappropriate funds for their own use.

Attorneys are now routinely advising their clients to do an inventory of both their physical and digital assets when going through the estate planning process. This document can be stored with your Will and other legal documents, but should be reviewed on a regular basis to keep it current. Another alternative is web sites that offer password storage options, but your fiduciary or attorney will need to know where to find it.

How CNB Can Help

Our trust and estate advisors average more than 20 years experience in helping clients maximize their legacy and ease the burden on loved ones at a difficult time. Contact us today with any questions about your estate plan at 585-419-0670.