Complete Estate Planning Guide In The Digital Age
An important note: This Estate Planning article highlights many legal elements and is not meant to offer advice. See disclosure. It is important to talk with a lawyer when it comes to planning out your estate documents. This article is meant to give a high-level view of what a complete estate plan should consist of given the nature of today’s digital age.
What would happen to everything you own if you were to pass away tomorrow? Do any of your family members or loved ones know where your online passwords are for everything? Do they have access to your Facebook account or to your bank account? Or would they be left scrambling to piece everything together? Given the nature of our digital world, today, as well as the privacy, security and identity theft precautions you must take, you might not want to simply just have a notepad in a drawer somewhere. What would happen if it was taken or copied? Or, if your home were to burn down?
1 Why Everyone Needs An Estate Plan
2 High Level Look At The Estate Planning Documents You Need
2.1 Living Will
2.2 Power of Attorney
2.3 HIPAA Release
2.4 Last Will (Also Known As A Pour-Over Will)
3 A Word On Trust ID Numbers
4 Have A Legacy Binder or Safe (Central Location For All Documents)
5 Digital Estate Planning Tools & Steps To Follow
6 The Process That I Am Using
7 Hold An Annual Meeting & Stick To It
8 Take These Steps Today
Why Everyone Needs An Estate Plan
The purpose of this article is to not only lay out the basics of an Estate plan and make you aware of why everyone needs an estate plan but also to provide you with some valuable digital options when it comes to your assets. Today, there are solutions that exist to make it simple for you to handoff your assets when you pass in a secure and seamless manner.
Today, 55% of people die without a will or a trust. What this means is that when you die your loved ones have little to no say over how what you own and have saved is managed upon your passing. You will want to have a plan in place for when you pass. In many ways, there is no better way to say I love you to your loved ones than to have a plan in place for when you pass away.
High Level Look At The Estate Planning Documents You Need
A living will is a document that outlines whether or not you would like to be kept on artificial life support if you fall into a state whereby you cannot be kept alive on your own. A living will is also sometimes referred to as a Health Care Directive.
Power of Attorney
Powers of Attorney give someone the ability to make decisions on your behalf. Sometimes you might hear a Power of Attorney as durable or non-durable. A Durable Power of Attorney is for a single reason such as a Power of Attorney for Health Care or a Finance whereas a simple Power of Attorney has much broader jurisdiction.
A HIPAA release also sometimes known as a HIPAA release and authorization form is a simple form that states how you would like your health data treated and handled.
Last Will (Also Known As A Pour-Over Will)
A Will is an absolute must for anyone. It’s important to remember that a Last Will or Pour Over Will is different from a Living Will. A Will outlines what it is that you want to happen to your assets when you pass. A Will can be overturned in certain circumstances. I can’t stress this enough…almost everyone should have a will, regardless of the amount of your assets. A will can be a very effective means of directing how your property will pass after your death.
A Trust can be viewed as a higher level Last Will which gives you greater protections when it comes to protecting your assets against a probate court. Trusts are a bit more complicated and are more expensive to set up than a Will but in many states are needed. This is because if the value of assets exceeds certain thresholds in certain states your assets would be forced to go through probate even if you have a Will in place. With a Trust, you are the Trustee of the Trust until you become incapacitated or pass. Once you become incapacitated or pass away whoever you name as successor trustee/executor takes over. This is usually a spouse or family loved one who is competent enough to manage the assets. A Trust also avoids having all of your assets become public record.
There are a couple of very important things to note when it comes to a Trust. First, after you establish a Trust you must fund the trust. What this means is that your assets need to be retitled into the name of the trust. This could include naming the trust as the beneficiary of your assets. This is a helpful article outlining the steps to find a trust if you are a Fidelity, Vanguard or Merrill Edge customer.
Important note, an individual retirement account (IRA) of any kind including but not limited to Roth, Traditional, 401k, etc cannot be owned by a trust. Therefore, when it comes to an IRA a Trust should stay away! This includes the fact that you never want to name your Trust as the beneficiary of an IRA. The bottom line…when it comes to retirement accounts (Roth, SEP, Traditional, Etc) the owner should never be listed as the Trust AND…the beneficiary should never be listed as the trust unless the beneficiary is children under the age of 18. Always put the owner of a retirement account and beneficiary of a retirement account as people, not the trust!
If you own a business make sure that your Trust owns your business and (as stated above) that you are the trustee of the Trust.
Overall, there are many benefits to establishing a Trust. A great book that goes over Trusts in greater detail that I recommend is “The Bogleheads’ Guide to Retirement Planning”
There is also what is known as a revocable living trust and an irrevocable living trust. I won’t go into the details here but if you are interested this is a great article on the differences between a revocable and irrevocable trust.
Be sure to talk with an estate planning attorney. In my experience, there is a great advantage of utilizing an estate planning attorney instead of a lawyer that handles a wide range of legal topics. The website: gyst.com (short for Get Your Shit Together) has a number of helpful links including one on finding an estate planning attorney in your area. There are many other factors that go into utilizing the full benefit and details of a trust and if it is right for you Fidelity has listed 6 reasons you should consider a Trust. If you want to learn in greater depths the reasons you should consider a Trust a great book I recommend is “Living Trusts For Everyone”
A Word On Trust ID Numbers
Trusts are issued ID Numbers when created but don’t get overwhelmed by this. Normally, the Trust ID is either a Social Security Number of one of the trustees or an EIN number issued by the IRS. If there is a realty trust or an irrevocable trust, then you would most likely get an EIN number.
Have A Legacy Binder or Safe (Central Location For All Documents)
Once you have established your Estate Planning documents it is important to have one location where all important documents are maintained and are accessible by your trustee. This central location can come in the form of a safe at your home or simply a binder stored in a safe place. The following is just a sample of the documents created by Fidsafe (more to come on FidSafe below) that should be contained in your safe/legacy binder.
Durable Power of Attorney (Healthcare, Financial, Real Estate, etc)
HIPAA Release Form
Child Support Documents
Identification & Licenses
Social Security Card
People & Places
List of Safety Deposit Boxes
List of Financial/Bank Accounts (Including IRAs, Pensions, etc)
Additional Financial Documents
Annual Income Tax Records
Property Tax Statements
Insurance & Property
Life Insurance Policy
Health Insurance Card
Home Insurance Policy
Auto Insurance Policies
House /Land Deeds
Family medical history
List of usernames and passwords
Licenses to practice
Organization Membership Cards
Military Discharge Papers
Digital Estate Planning Tools & Steps To Follow
Today and on into the future more and more of our time and possessions will be housed online. If there is anything you can take away from this article let it be this – you absolutely must have a digital plan for upon your passing that is simple to follow and that two of your loved ones/trustees fully understand and are aware of. Don’t have just one person who knows everything. By having two people aware of everything you are much more likely to have your wishes carried out when you pass.
Today, you might be using tools such as Dropbox, 1Password, Last Pass, Google Drive/Docs, and many more. How many people have access to any or all of your online passwords? Thankfully, there are free tools you can use to make access to all of your critically important documents easier to access.
One great tool designed for managing the digital estate planning process is FidSafe. FidSafe is a free service to anyone. It is provided by Fidelity Investments but it is not required that you are a Fidelity customer to use the service. FidSafe gives you a free and secure way to store all of your documents, notes, and passwords in one place. It is very customizable and allows you to assign a designee if anything happens to you. FidSafe has also provided this excellent resource to get organized.
The Process That I Am Using
This process might not be the best for everyone but I wanted to share because I believe it could work for most people and to also leave it for my loved ones to have should anything happen to me. First, I utilize a secure physical safe at home that three loved ones have access to. In the safe, I have all original copies of important documents. These documents are the same documents listed above in the legacy binder/safe. In addition, I have an envelope that contains three passwords. One password is my computer password. This password is essential. The second is my login and password to my 1Password account. Finally, the login and password to my FidSafe account. I have it set so that my 1Password account is saved in my FidSafe account and my FidSafe account is saved in my 1Password so really only one of these two is necessary. Once my loved ones have access to this envelope in the safe they then have access to my 1Password account which contains all 800+ online and digital accounts. You might not believe you have this many but as you begin to use a password manager you will be surprised at just how many accounts you have out there. I recommend that everyone use a password manager such as 1Password or LastPass. LifeHacker has a selection of other great password managers to choose from.
Hold An Annual Meeting & Stick To It
Do a reading of your Estate Plan because it will save a lot of time, money and heartache after you pass on. Just like public companies hold quarterly meetings for their stock you should make it a point to hold at the very least an annual meeting on your estate. In my opinion, there is no better way to show how much you love your family than to do this. In fact, depending on the nature of your family dynamics you might even consider having your estate planning attorney conduct the meeting on your behalf. By doing this there is absolutely no way that arguments can arise upon your passing on the steps that will be taken when that day comes.
You might think that taking this step is overkill but trust me when I say it is not. Too often families can be torn apart upon a family members passing. Here are just some variables that can take place.
Older estate planning docs such as a Will or Power of Attorney could be floating around. Whenever you update your estate planning documents you want to make sure that you destroy any documents that came before the documents that you have just updated. It is hard to imagine but think of the possible confusion that could arise among family when one has one version of your Will and someone else has a newer or older version.
Estate planning laws change from state to state so you want to keep them updated especially if a major change has taken place in your life.
In some states, it takes a court order to open your safe deposit box, so it would be better in those cases to keep an original copy of your will — and any other documents that might require immediate access — with your attorney, at home in a fireproof safe, etc.
Take These Steps Today
I would argue it is difficult to come up with many things that are more important than protecting your family and loved ones. Having a complete estate plan in place has never been more important given the increased digital nature of our lives.