Transferring Digital Accounts for Estate Planning

An overlooked area of Estate Planning is the transfer of digital information. More senior Americans spend a lot of time online than a few years ago, and this online activity is as much personal as for business and must be cnosdered in your estate planning. This needs to be factored into your estate plan. Provide for the transfer or termination of these online accounts and be sure your executor has details about them.

There are two main types of online information, and they should be treated differently in your estate planning.

One category is personal accounts. These can include e-mail, Facebook, subscriptions, sites that store photos and other data, and a host of other possible items. Keep track of all the sites you visit over the course of a month or so that require passwords. For these personal accounts, the usual approach is to maintain a list of sites or accounts, their passwords, and how you want them handled. E-mail accounts, for example, generally are terminated after a period of time. You definitely want a list of subscriptions, so that your payment card or bank account is not regularly assessed the fee. The executor generally cancels these. You can leave specific instructions about photo sites and others, or designate an heir who can handle the information however he or she wants.

Some sites, such as Facebook, have specific rules. Facebook apparently shifts the site into ?memorial status? some time after the service learns of the owner’s passing. Then, there is limited ability to access or change the account, and I’m told after a time all of the site might not be viewable. You should plan something different if you don’t want this to be the result.

The second category of accounts is business and financial data, such as banking or paying bills online, investing through web sites, or running most of your business’s finances online. Related to this are vendors that automatically draft against payment cards or bank accounts.

Your executor obviously needs to know about these accounts. You need to keep a list of the accounts and sites, the access information, and perhaps a description of how you use each. The executor then can access them and manage your estate. He’ll be able to pay bills, document income, and manage investments. He’ll also be able to make distributions or transfer ownership or terminate the accounts as directed in the will.

A major issue is how and where to maintain these lists. For financial accounts you’re advised to use ?strong passwords,? those with numbers, letters, and special characters, and that don’t include known words and phrases. You’re also supposed to have different passwords for each account, change them regularly, and keep your list of them secure.

There are several options for storage.

One option is to use a web-based service that generates random passwords for your accounts and keeps a record of them, such as LastPass.com and KeePass.com. The record is maintained in a password-protected file, so you only have to give your executor the one password and web site. But you depend on the web site to stay in business and keep its operations secure.

Another option is to keep a written list or maintain one in a program such as Microsoft Word or Excel. You would have to make the computer file password-protected and protect the file’s password.

There also are online services, now known as cloud services, that will keep your file on their servers in a password-protected account. Or you can store an encrypted file online in a storage service. Anyone who finds the address can download the file, but they’ll need to crack the password to view it.

There are other estate planning options, such as storing the file on a USB flash drive or other device.

In this area, it seems to me the easiest and safest approach is the old-fashioned one. Maintain a written list and keep it secure in a fireproof home safe or a safe deposit box. Or maintain a Word or Excel file, put it on a USB drive, and keep that in the safe. Then be sure your executor and any other key people know where it is and how to get it.

Don’t forget bills and invoices you receive only online or in electronic form. Be sure your executor knows about these bills, so your estate isn’t silently racking up past due bills, penalties, and interest.

RW July 2011