With the outburst of the Coronavirus pandemic, we are left with a pressing need to re-evaluate our priorities and to get all our affairs in order. Even though it is difficult to think of unfortunate possibilities that can befall our usual way of living, it is better to prepare now. Our families and loved ones will not be burdened with stressful and unorganized financial dealings they are not prepared for while dealing with your assets.
That is why estate planning becomes an essential part of organizing your financial affairs in case an unfortunate event occurs - worse being your passing. Traditionally, estate planning is a pile of documents kept safely somewhere for the family to access after someone dies.
Yet, with the advances of technologies in the digital era, traditional documentation of estate plans are modified in parallel to the digitalization of modern lifestyles. Therefore digital estate planning has become a paramount part of organizing your assets and financial accounts.
What are Digital Assets?
Digital assets are non-physical electronic files, data and records stored and maintained online. These data are only accessible through electronic devices such as your mobile phone and secured with passwords.
Your digital assets include all your;
- Digital property - online bank accounts, digital investment accounts, electronic currency
- Digital records - texts, images, videos stored online
- Digital accounts – social media accounts, Online accounts for utilities
Have you ever thought about what would happen to these digital assets if something happened to you?
What Is a Digital Estate Plan?
A digital estate plan is a method of protecting all your digital assets from risks of theft or fraud and providing your family access to all your digital assets if something happens to you. Furthermore, this method allows your family to find the logins and passwords and take the necessary steps to manage your assets after you die. There is a risk of your accounts being deleted or deactivated after a certain time.
What to Consider In Digital Estate Planning?
- Tax Treatment
You must consider the tax treatment of life planning in the same way as with other intangible assets.
- Drawing a list of all the digital assets
As a part of digital estate planning, make a list of all your digital assets to avoid the risk of your assets being overlooked. As your digital assets have no particular physical existence, this list will help your family administer your estate without missing any of your data stored online.
- Maintaining a list of access information
Creating a list of access information such as passwords and logins for all your important online accounts and keeping them in a secure location can protect your accounts from identity theft, fraud and hacking.
How to Create a Digital Estate Plan
Creating a digital estate plan is easier than dealing with the confusion that may arise if you do not maintain one. Here, we have briefed a step by step guideline to help you create a clear system of a digital estate plan for the use of your digital representative after your death or your incapacity to manage your assets.
- Write down a list of all your online accounts, records and properties, along with the usernames, passwords and required login information.
- Some websites may ask questions to allow access. Make sure to write down the answers you have provided.
- List down an inventory of all the websites and digital tools you use in all your electronic devices.
- Keep maintaining a list as you create new accounts.
- Select a password storage tool to secure all your passwords and logins.
- This tool will further assist you to organize and centralize all your protected data in one place. This tool would require only one master password with which your trusted executor will easily gain access to all your online accounts.
- You can find many password storage tools online. Most of them are free or require a cheap annual fee. Do your research and find what suits your liking.
- Create a protected digital file to list down your accounts and passwords for the use of your family or your digital executor.
- Frequently update your tool.
Here are some tools for your reference.
- Appoint a trusted digital executor to access your online password storage tool.
- The appointed executor will have access to all your digital assets once you incapacitated or die and will have the authority to find, download, convert, distribute or destroy these assets.
- You can choose an attorney, a close friend or a family member to entrust your master password.
- Contact a legal representative to secure your digital asset plan is legally binding and is available for your beneficiaries in the time of need.
Essential Laws Associated with Digital Estate Planning
Many states in the UK do not yet legally acknowledge digital estate plans. Although many social media websites and platforms have introduced features to transfer, close or memorialize your accounts via a legacy contact, knowing what is essential to make your digital asset plan legally binding is important.
The Wills Act 1837 and Administrations of Estates Act 1925 in the UK allow you to draft Wills and plan your succession but fail to recognize inheritance of digital assets. While the digital executor you appoint to access your digital assets is not legally binding, you should compulsorily name the designated person in your Will or estate plan.
Benefits of Having an Estate Plan
- One benefit of having an estate plan and a digital estate plan is that it gives you complete peace of mind.
- You can pre-decide how your online accounts should be managed and, who should handle your digital assets.
- Other benefits include the security provided to your account and easy access to all your online assets.
- Digital estate planning relieves the major burdens of administering your assets off the shoulders of your loved ones after your death.
The majority of the people have negative experiences in accessing digital assets on death or incapacity of a family member, frequently causing frustration and distress. Simply, creating a digital estate plan is as preeminent as creating your will and selecting your beneficiaries.