Does Estate Planning Include Your Account Passwords?
Good estate planning includes account passwords

Does Estate Planning Include Your Account Passwords?

With most bank customers receiving financial statements electronically instead of on paper, there are some actions you need to take to be sure your accounts are incorporated into your estate planning. Do you use passwords for your accounts? Of course you do. Should you incorporate your passwords into your estate planning? Absolutely you should. Not only your financial accounts, but what about your social media accounts such as Facebook? Would you like a loved one to take control of your Facebook account after you die or become disabled? How do they take control? When is the last time you saw a physical copy of a photograph? Nowadays photos are stored in the cloud. How does your family access those photos? Is sharing passwords the simple answer (it is not)? Does sharing passwords violate the law (it does)? Good estate planning no longer is limited to the stuff you can touch and feel. Much of our lives are saved in the cloud. This is what we call digital asset estate planning.

Kiplinger’s recent story, Your Estate Plan Isn’t Complete Without Fixing the Password Problem,” says that having online access to investments is a great convenience for us. We can monitor bank balances, conduct stock trades, transfer funds and many other services that not long ago required the help of another person.

The bad thing about these advancements, is that they can make for a very difficult situation for a surviving spouse or executor attempting to determine where the assets of a deceased person are held.

This was in the news recently, when the founder and CEO of a cryptocurrency exchange died unexpectedly. Gerry Cotten didn’t share the password to the exchange’s cold storage locker—leaving $190 million in cryptocurrency belonging to his clients totally inaccessible. Investors may never see their funds again.

You can see how important it is to provide a way for someone to access your data, if you become incapacitated or die.

The easiest, but least secure answer is to just give your passwords to a trusted family member. They’ll need passwords to access your accounts. They’ll also need a password to access your email, where electronic financial statements are sent. Another simple option is to write down and place all passwords in a safe deposit box.

Your executor or guardian/attorney-in-fact through a power of attorney (in the case of incapacitation) can access the box and your passwords to access your computer, email and financial platforms.

This is a bit safer than simply writing down and providing passwords to a trusted friend or spouse. However, it requires diligence to keep the password list updated.

Finally, the most secure way to safely and securely store passwords is with a digital wallet. A digital wallet keeps track of all your passwords across all your devices and does so in an encrypted file in the cloud.

There’s only one obstacle for an executor or surviving spouse to overcome—the password for your digital wallet.

See how you can incorporate your passwords and other digital assets in your estate planning.

Reference: Kiplinger (April 19, 2019) “Your Estate Plan Isn’t Complete Without Fixing the Password Problem”

What a Durable Power of Attorney Can Do

Helping aging parents with daily tasks can become a challenge, if the parent has limited mobility. A trip to the bank, for example, will require coordinating the adult child’s responsibilities with the aging parent’s limitations. If the parent has more energy in the morning, for instance, but the adult child is working, this can become a bigger challenge than if the adult child can go to the bank on behalf of the parent, when it’s convenient for them — at a lunch break, for instance.

In this situation, as noted in The Daily Sentinel’s article “Tools to help your aging parent,” having a durable power of attorney will help. This type of power of attorney is a legal document that permits a child or other named individual to handle certain responsibilities, like banking. Granting a power of attorney to a child doesn’t mean giving up total control, which is often a concern of aging parents. It simply means that the child is now legally allowed to handle these tasks.

The durable power of attorney is different than the “general medical power of attorney.” As implied by its name, this is limited to making decisions about the parent’s health care and is usually used only when the parent is not able to make these decisions on their own.

There are more serious situations, where neither of these types of power of attorney is enough, such as when the parent lacks capacity because of dementia or a medical decision. It is necessary to protect the parent from themselves or anyone who might try to take advantage of their lack of clear mental capacity. This may require that an adult child needs to be appointed as a guardian for their parent.

Being appointed a guardian can be a very emotional event, since the parent and child are not just switching emotional roles, but legal roles. The parent no longer has the capacity to make significant decisions, because a court has found that they no longer have that ability.

You may have heard the term “conservatorship” used. It is similar to guardianship, except that the conservatorship only allows for control over the parent’s financial affairs.

Guardianship is taken very seriously, as it should be. This removes an adult’s right to make any kind of decision on their own. In some states, including Colorado, the court must first be convinced that the parent is unable to effectively receive or evaluate information or to make or communicate decisions. They must be deemed incapacitated, before guardianship can be established. Once that standard has been met, then guardianship is established. If there is a doubt about incapacity, then no guardianship will be established, and the family is faced with finding other ways to help the aging parent.

Aging parents and their children face many issues that are best addressed before incapacity becomes an issue. If the family does not have a plan for the aging parent’s care, it is recommended that the family make an appointment with an estate planning attorney to discuss the various options.

Reference: The Daily Sentinel (March 24, 2019) “Tools to help your aging parent”

When Do I Need a Revocable Trust?

A will is a legal document that states how your property should be distributed when you die.  It also names guardians for any minor children. Whatever the size of your estate, without a will, there’s no guarantee that your assets will be distributed, according to your wishes. For those with substantial assets, more complicated situations, or concerns of diminished capacity in later years, a revocable trust might also be considered, in addition to a will.

Forbes’ recent article, “Revocable Trusts And Why Should You Consider One,” explains that a revocable trust, also called a “living trust” or an inter vivos trust, is created during your lifetime. On the other hand, a “testamentary trust” is created at death through a will. A revocable trust, like a will, details dispositive provisions upon death, successor and co-trustees, and other instructions. Upon the grantor’s passing, the revocable trust functions in a similar manner to a will.

A revocable trust is a flexible vehicle with few restrictions during your lifetime.  you usually designate yourself as the trustee and maintain control over the trust’s assets. You can move assets into or out of the trust, by retitling them. This movement has no income or estate tax consequences, nor is it a problem to distribute income or assets from the trust to fund your current lifestyle.

A living trust has some advantages over having your entire estate flow through probate. The primary advantages of having the majority of your assets avoid probate, is the ease of asset transfer and the lower costs. Another advantage of a trust is privacy, because a probated will is a public document that anyone can view.

Even with a revocable trust, you still need a will. A “pour over will” controls the decedent’s assets that haven’t been titled to the revocable trust, intentionally or by oversight. These assets may include personal property. This pour-over will generally names the revocable trust—which at death becomes irrevocable—as the beneficiary.

Another reason for creating a revocable trust is the possibility of future diminished legal capacity, when it may be better for another person, like a spouse or child, to help with your financial affairs. A co-trustee can pay bills and otherwise control the trust’s assets. This can also give you financial protection, by obviating the need for a court-ordered guardianship.

Talk to an experienced estate planning attorney about the best options for your situation to protect your estate and provide the peace of mind that your family will receive what you intended for them to inherit, with the least possible costs and stress.

Reference: Forbes (March 11, 2019) “Revocable Trusts And Why Should You Consider One”