The excerpt below comes from Vanguard and ties into the work I’ve been doing recently to get clients to organize store important online documents and coordinate communication with trusted advisers. Every bank, accounting system and trust company may offer its own version of secure cloud-based asset management, but the concept is the same. I like the Balance Financial platform because of its flexibility and control options for the account owner.
This also ties in with the very popular article I posted called “Sample letter of instruction for estate planning” on my personal Web site. (This article is among the top ten pages referred by Google among the thousands that I’ve produced). The simple point is that you must communicate with your guardian, executive or heirs the specific details of how to get your valuable online information.
The easiest functional and secure scenario I can imagine for most people who use a tech-savvy accountant/adviser, the adviser and your designated executor simply have knowledge of the existence of the online locker and the ability to contact each other when necessary.
The most important thing to avoid is having a third party corporate gatekeeper (like an Internet service provider like Google or Intuit, for example) that does not have the ability to immediately honor the request of the executor.
Digital assets: Help your heirs from getting lost in the cloud
October 26, 2012
For many of us, stashing information has moved from old-fashioned filing cabinets, desk drawers, and shoeboxes into the digital "cloud."
The first thing that comes to mind when you think of online storage might be your collection of tunes or photos. But what about your vital financial records? And what happens when you’re no longer here to tell your loved ones about your financial accounts, including those with your bank, investment management firms—particularly if, like many of us, you’ve switched from paper statements to electronic versions? Will your heirs be able to find out what you own (and what you owe) if you can’t log on and show them?
The answer may be no. A BMO Retirement Institute study found that 57% of respondents hadn’t made provisions to pass their digital financial records on to their heirs, even though more than half of those with digital property believed that it’s important to do so.
"Before account information moved online, no one challenged an executor’s right to open a file drawer," said Thomas Wall, who leads Vanguard’s Wealth Transfer Services team. "Now the information is locked behind a user name and password, with many companies requiring documentation before even acknowledging an account exists."
Your list of "digital assets" may be a lot longer than you realize. A complete inventory could include obvious things like your bank accounts, mortgage, credit cards, and investments, but also accounts with e-commerce sites like eBay, PayPal, and amazon.com. Do you own a web domain? Subscribe to Netflix or other online content providers? Participate in online role-playing games? Those things also count. A study by security software firm McAfee found that Americans estimate they have as much as $55,000 worth of digital assets.
The legal status for digital assets is still unclear. There’s no federal law or regulation specifically covering this issue, and only five states (Connecticut, Rhode Island, Indiana, Oklahoma, and Idaho) have laws in place. However, taking a few simple steps now can help make things easier for your loved ones.
Have a plan for your assets, whether they’re digital or not
Whether your estate is digital or physical—and whether it’s large or small—plan ahead for how you want your assets disbursed, and to whom. Drafting a will is a good idea. You can use a do-it-yourself template or consult with an attorney for help to draft one that provides instructions for your heirs. You should also create an inventory of your assets, including those you have online. The list should include company and website names and contact information, but should not list user names or passwords.
As with any important financial document, make sure your will and list of accounts is secure. Consider storing them in a safe-deposit box at your bank, a fireproof lockbox at home, or online in a password-protected "digital lockbox" from a trusted provider.
Of course, it’s also essential to tell your executor, attorney, or someone else you trust how to access the documents when the time comes. That conversation might be awkward, but you’ll feel better when it’s done—and it’ll help ensure that your digital assets don’t get trapped in the cloud, but instead get distributed according to your intentions.
A well-designed estate plan is another tool to help you accomplish this. It can also help you provide for your loved ones when you’re gone, preserve wealth for future generations of your family, minimize estate taxes, or simplify the process for your loved ones when they settle your financial matters after your death.