When couples find time to discuss estate planning, they often think of how they can equally divide their properties to ensure their children are well taken care of in case one or both pass on. They decide who can best benefit from the house, the car, or who will take over the family business and serve as guardians if they leave young children behind.
But, times have changed, and assets are no longer just tangible. They can be intangible as well. There are now what we call digital assets. Such online assets include anything you have on your smartphone, computer, the Internet, and in the cloud. A digital estate is anything that requires a username or password.
Sound estate planning requires that all assets are accounted for and properly allocated. While digital assets are new to estate planning, it’s now a must to include them in your estate plan as they’re among the possessions your loved ones will inherit when you pass on. They may even contain crucial information that can ensure proper management of all your other assets. Not including these in one’s living or last will can have severe consequences for those you leave behind. This is true even for unmarried couples.
Organizing Your Digital Estate
Here are some considerations you need to make when including your digital assets into your estate plan:
1) Perform An Inventory
Conducting an inventory of all your assets is the foundation of sound estate planning. An online record requires log-in security. This includes emails, online bank accounts and transactions, rewards programs and subscriptions, any webpage or domain you use, social media accounts, healthcare records, and digital collections (photo albums, videos, or music files). You can likewise include computer files stored in your hardware or on the cloud, as well as files and apps in your smartphone.
All these form part of your digital estate, and knowing its breadth allows you to manage them along with other assets in your estate plan. A detailed list provides you the opportunity to assess the value of each online asset, be it monetary, sentimental, or both.
You also need to include hybrid assets such as Individual Retirement Accounts (IRAs) or any account that allows online access to your digital estate. On the other hand, digital liabilities, such as automatic payments deducted from your bank account or credit cards, may be included ensuring that your heirs have a complete understanding of your digital estate.
2) Identify Heirs and Beneficiaries
Once all digital assets are listed, you can now decide who can access them if you pass on. The designation of intended beneficiaries is particularly important for financial accounts that have become digitized over time. Allowing your heirs and beneficiaries access gives them control over your bank accounts and responsibility for financial obligations tied with a credit card or bills.
Assigning heirs goes beyond granting access to other assets such as investment portfolios and digital currencies. It can also help protect your online presence from identity theft and fraudulent transactions.
3) Establish Trusts
Appointing heirs needs to be done in black and white in the form of a living or last will. These documents ensure beneficiaries can claim their inheritance without the intervention of a probate court. Trusts also ensure that heirs are protected from unnecessary tax burdens.
Aside from securing digital assets, trusts can also ensure that taxes on tangible properties are minimal. Spouses often use trusts to ensure that their children can enjoy their inheritance without paying so much that little is left on the estate. In the case of residential properties, a qualified personal residence trust allows for the exemption of a primary or secondary home from your taxable estate. Passing on the residence to an heir reduces its gift tax value and its impact on your holdings.
4) Hire an Estate Attorney Or Estate Planning Professional
Drafting a will and establishing a trust require an estate attorney’s services to be legally binding. An attorney can evaluate your will and trust to ensure that these conform with applicable state laws.
On the other hand, an estate planning professional’s advice can help you determine how you can manage your estate when certain family circumstances may complicate matters. This is true for unmarried couples or those whose family members require ongoing medical treatment or other similar arrangements.
5) Review and Update Beneficiaries
Wills and trusts need to reflect your current status and assets. Reviewing and updating your tangible and intangible possessions and ensuring your digital assets are active ensure that assets are appropriately managed. Ensuring that beneficiaries are also up-to-date gives you the peace of mind that your properties are distributed evenly to intended heirs.
Estate planning is evolving. It’s no longer confined to traditional assets such as homes, cars, or businesses, as it now includes digital assets that range from personal blogs to online financial accounts. Whether married or not, couples can include them in their wills and trusts to ensure that their assets, whether monetary or sentimental, benefit the ones they leave behind.