Estate Planning 101: Making Sense of Digital Assets

Kim Hall

May 13, 2022

Estate planning isn’t anyone’s idea of a good time – but it’s one of the most important steps you can take to make the transition easier for your loved ones after you’ve passed on. 

A big piece of estate planning that’s often overlooked is digital assets. Today, we’re walking through the basics of organizing your digital assets to include in your estate plan – let’s get started. 

What are Digital Assets?

Digital assets are anything you own that exists via a computer or the internet. Your list of digital assets might include:

  • Social media accounts, such as Facebook, Youtube or Instagram
  • Online shopping accounts (Amazon, Apple, etc.)
  • Television streaming subscriptions (Netflix, Hulu, etc.)
  • An online journal or blog
  • Email accounts

Think about the various ways you use your computer on a daily basis – what websites do you visit? What documents do you have stored online? Where do you have accounts set up with a username and password?

Why Do You Need a Digital Estate Plan?

There are several reasons why you might want to invest in a digital estate plan. Whether it’s ensuring your accounts are properly closed or keeping your loved ones in the loop, here are a few key steps you can take to organize and protect your computer-based commodities. 

To Close Accounts

After you’ve passed, your accounts will need to be properly shut down – especially any that are set up to automatically pay a monthly bill straight from your bank account credit cards. If you pass away in February but Netflix doesn’t hear the news until August, that’s several months’ worth of subscription fees down the drain. It may not seem like much, but if you have several such accounts, it can add up quickly.

In addition to costs, open accounts leave you at risk for stolen information. Think about how much personal information is stored online these days – your name, birthdate, mailing address, payment information, and so on. 

Sometimes shutting down an account is as easy as clicking “unsubscribe.” In other cases, there may be more hoops your loved ones will have to jump through to reach the finish line. 

For example, Google allows you to name someone as your Inactive Account Manager by providing the phone number of a trusted person who will be the sole person able to download your personal data from Drive, Gmail and other Google services. 

On Amazon, loved ones can simply call customer service in order to start the process of closing an account, but they may request a death certificate as proof in some cases. 

You can help make things easier on loved ones by keeping your passwords in one place so they can access the accounts themselves. To learn about ways to safely store your passwords, read our previous blog on password security.

To Keep Loved Ones in the Loop

Another reason to get your digital assets organized? To keep your not-so-local loved ones in the loop. 

Although your closest family and friends will likely know of your passing quickly, you might have others who’d like to know that you’ve passed. Social media and email can help here.

Facebook allows you to create a legacy contact, someone you have chosen to manage your profile after your death. They will be able to make all decisions relating to your account, such as posting on your behalf to share memorial information or deleting the profile entirely. 

If you’re not big on the social media circuit, you may also want to leave your email login for your spouse or another trusted confidant. They will be able to set up an autoreply email informing anyone who attempts to contact you via email that you’ve passed. 

For Organization’s Sake

The last major reason to organize your digital assets is fairly obvious: to be organized. After you’re gone, your loved ones will be busy grieving and processing the loss, as well as trying to sift through all the pieces you’ve left behind. Organization on your part ahead of time can help ease this burden.

Let your spouse, child or trusted family member know where important documents are stored online and how to get to them. You should also write down what can be deleted and what should be saved, and for what purposes. 

How to Handle Digital Assets

The best way to get a handle on your digital assets is with a list. Make a list of all the accounts you currently own, then keep it by your computer for a few days to add more items as you think of them.

As we’ve mentioned, part of estate planning is finding someone you trust to help out after you’re no longer around. When it comes to digital assets, this person is called a digital executor. 

Your digital executor should be tech-savvy and know their way around the web. They could be the same person serving as executor of your will, if that makes the most sense for your situation. 

Next, you’ll want to create a spreadsheet that lists all accounts – you can use your list from earlier as reference. Include the login information and detailed notes on exactly what you wish to be done with the account. 

Click here to download or make a copy of our Digital Assets spreadsheet to help you get started!

You don’t need to include your list of accounts with login info in your will. Rather, your will should only state who you’ve chosen as your digital executor and then give instructions on how to find this information.

With an organized and detailed spreadsheet that includes all of your online accounts, your loved ones will be set to easily parse through your digital assets after your passing. 

Protect Your Estate Plan with Clarity

Ready to get your estate plan in order? Click here to connect with a Clarity team member today – we’d be happy to help!

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Just Found Out You’re the Beneficiary of a Trust? Here Are 14 Questions & Answers You Need to Know

Just Found Out You’re the Beneficiary of a Trust? Here Are 14 Questions & Answers You Need to Know

If you have been named as a beneficiary of a trust, you probably have many questions about what comes next. Trusts can take many forms and may be governed by unique provisions established by the creator of the trust or “grantor.” As a trust beneficiary, you have certain rights. But to ensure that your financial and other interests are fully protected, you need some basic information about different trust structures and their management.

Trust Basics

At their most basic, trusts can be grouped into two broad categories – living trusts and testamentary trusts. A living trust is created by an individual during his or her lifetime. The grantor transfers property to a trust that is managed for the trust beneficiaries by a trustee. The grantor may act as trustee, or he or she may appoint another family member or family advisor, such as an attorney or accountant to be the trustee. A testamentary trust is established by will upon the death of the person whose assets it represents. Testamentary trusts can be used for many purposes; chief among them to provide for current and future beneficiaries.

In either case, it is the trustee who is charged with administering the trust in strict accordance with its terms. If this so-called fiduciary duty of the trustee is breached in some way, beneficiaries have the right to protect their interests by taking legal action against the trustee.

Role of the Trustee

Following is a brief overview of the trustee’s role and responsibilities.

• Asset collection and protection – Two of the trustee’s key responsibilities are collecting assets earmarked for the trust and ensuring the protection of those assets. For instance, if real estate is included as a trust asset, the trustee is responsible for the maintenance and upkeep of the property and maintaining appropriate insurance on the property. In the case of financial assets, such as cash or securities, the trustee must maintain one or more separate accounts on behalf of trust beneficiaries.

• Investment oversight – The trustee ensures there is a plan in place to address the needs and interests of current and future beneficiaries. Typically, trust investments are expected to generate income for beneficiaries while also retaining and reinvesting principal. In some cases, the trustee may have the authority to make distributions of principal to beneficiaries.

• Taxes – The trustee reports all income generated by trust assets and pays tax on any undistributed income as well as capital gains realized by the trust. In addition, the trustee informs beneficiaries of the amounts that they must report on their personal income tax returns as a result of trust distributions.

• Recordkeeping – The trustee is responsible for documenting every transaction that takes place in the trust accounts. Prior to final settlement, the trustee must demonstrate to the beneficiaries that all assets and income have been properly administered and distributed.

Beneficiary Right to Action

In addition to regular accounting of trust assets, beneficiaries have a right to request a special accounting from the trustee if there is reason to suspect a problem with the trustee’s performance of his or her fiduciary role. If it is found that the trustee is in violation of his or her responsibilities or fails to provide proper documentation of trust activity, then the beneficiary has the right to take legal action, including removing the trustee and requesting a replacement. Such action is normally handled by filing a petition with the local probate court.

Revocable vs. Irrevocable Trusts

Living trusts may be revocable or irrevocable. As its name implies, property held in a revocable trust may be “revoked” at any time; the terms of the trust may be changed and assets returned to the grantor. He or she can establish detailed instructions as to the handling of trust assets during his or her life and ensure continuity of management upon incapacity or death. Revocable trusts need not be filed in probate court after death, thus maintaining family privacy. However, the grantor will be subject to income and estate tax as if the property were owned outright.

In contrast, assets placed in an irrevocable trust are permanently removed from the grantor’s estate, and any income and/or capital gains taxes owed on assets in the trust are paid by the trust. Upon the grantor’s death, the assets in the trust are not considered part of his or her estate and are therefore not subject to estate taxes.

Irrevocable Trusts Offer Lifetime Giving to Beneficiaries

While requiring some loss of grantor control, a properly drafted irrevocable living trust allows individuals of substantial wealth to begin transferring assets to beneficiaries during their lifetime without incurring gift or estate tax. (Please note that a three-year survival period may be required in certan situations).

For example, the normal annual limit on tax-free gifts is $14,000 per beneficiary in 2015, an amount that may be indexed for inflation in future years. Under some circumstances, a taxpayer may include amounts above that in his or her unified estate and gift tax exclusion amount ($5.43 milliion in 2015 for an individual, twice that for a married couple, and subject to indexing for inflation in subsequent years). In addition, upon the grantor’s death, appreciation on the remaining trust assets is not subject to estate tax (assuming any three-year survival requirements are met).

Being named as a beneficiary of a trust is indeed a welcome event, but not without its complications and, if handled improperly, unfortunate consequences. For help understanding your rights and protecting your inheritance, it may be wise to engage the services of an experienced trust attorney.

Financial Planning Association
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