When discussing estate planning, the focus most often lies on wills, trusts, and beneficiaries. However, there is another aspect of estate planning that can be easily overlooked, even though it can be just as important as, or crucial to, directing the transfer of physical and financial assets: digital estate planning. Most of us conduct or store significant portions of our lives online. Photos, passwords, social media accounts, bank logins, andcredit cardor other reward points all exist primarily or solely in digital form.
Whereas 50 years ago all you had to do was tell your heirs where you kept the family photo album, now accessing those memories is contingent upon knowing one or more passwords and being able to get into the email or phone that receives the 2FA codes.Or, say you’reincapacitated and your financial power of attorney needs to pay hospital bills or your rent, out of your checking account. Do they have the PIN to your debit card or know how to access your banking app?
Even if your heirs know your wishes to the letter, it can be difficult or impossible to carry them out without access to the digital infrastructure that runs most of our lives. By being intentional about your digital estate planning now, you can prevent a great deal of stress for your loved ones during incapacity or after your passing.
Digital Estate Planning in Less Than a Minute
What happens to your digital accounts, passwords, photos, and other online assets when you can no longer manage them yourself? Here’s a quick look at why digital estate planning deserves a place in your broader financial plan.
What Is Digital Estate Planning?
Digital estate planning is the process of identifying your important digital assets and accounts, documenting what you want to happen to them, and establishing a secure way for the appropriate people to find and manage them if you become incapacitated or pass away.
It does not replace your traditional estate plan. Instead, it complements your will, trust, powers of attorney, beneficiary designations, and other estate-planning documents.
Think about the difference between ownership and access.
Your estate documents may establish who has the legal authority to manage or inherit an asset. But that does not necessarily mean that person knows the asset exists, where it is held, or how to begin accessing it.
What Should Be Included in Your Digital Estate?
Here are some examples of what might constitute your digital estate:
Financial accounts
Email accounts
Cloud file storage
Family photos and videos
Rewards programs
Websites and domain names
Subscription services
Social media
Many of these assets represent direct financial value, such as brokerage or bank accounts, and rewards programs. Others, like email or cloud document storage, may store important information. Still others, like digital photos, represent sentimental value. In all cases, steps should be taken to make sure that your heirs know about all of these assets and how to access them.When building a digital estate plan, the issue is more often the ability to access assets than the legal right to do so. A password manager is a tool that can serve this function with a little preparation.
Password Managers: The Keys to Your Digital Estate
One of the most important components of your digital estate is your password manager. Most people use one or more password managers which automatically save and fill passwords for their various digital services. Examples include:
iCloud Keychain and the Apple Passwords app (automatically enabled on iPhones)
Google Password Manager (built into most Android phones and Google Chrome)
Microsoft Password Manager (tied to Microsoft Edge and Authenticator)
Third party services such as LastPass, 1Password, Bitwarden, ProtonPass, or Dashlane
Ensuring your heirs have access to your password manager(s) can provide them with access to many or all of your other accounts without having to manage hundreds of individual passwords.
Planning to Access Password Managers
Many password managers have emergency access features that allow trusted individuals to request access after a waiting period. Bitwarden and LastPass both have this feature, and Google has a version of it through their inactive account manager.
For services that don’t provide this, you can store the manager’s master password with your other estate planning documents and ensure your heirs know where it is and how to use it. And, in the case of married couples or families, you may be able to use family plans to share passwords between users.
Don’t Forget Two-factor Authentication
If your service includes two-factor authentication, you should also ensure that your digital estate plan includes a list of which device(s) receive the prompts, whether an authenticator app is used, and how to access these devices. Many services will also provide one-time use recovery codes that can be used if you cannot access other authentication methods. These should be stored securely with other estate documents. This also applies to other digital assets like banking apps and email accounts, which may require 2FA codes to access, even with a password.
Why Traditional Estate Planning May Not Be Enough
Traditional estate planning does an excellent job of transferring assets. Any brokerage will have a mechanism whereby heirs can provide proof of death and beneficiary status and receive the assets they are entitled to. Most major tech companies also have “Legacy” programs which allow designated people to access someone’s account when they pass. However, there are two major areas that traditional estate planning may overlook:
Discovery Problems
Your heirs are likely to know about your primary checking account, your current employer retirement plan, and other major financial assets. However, they may overlook:
Old employer retirement plans
Health Savings Accounts
Online savings accounts
Payment apps
Rewards programs
This can especially be the case when assets are passing on to adult children rather than a spouse, since these children are likely to have less visibility into their parents’ financial lives.For example, say that a recent retiree receives all of his statements digitally and deletes them after reviewing them. Even if his children gain access to his email account, it may be weeks or months before they are able to piece everything together. He left all of his assets to his children but did not include a list of where these assets are.
Furthermore, you yourself may forget things like:
A401(k) at a former employer
Accumulated airline miles
An old PayPal or Venmo balance
A domain name purchasedin college
Even if your will states that you “leave all assets not otherwise listed to my children”, those children cannot claim those assets if they do not know that they exist.
Administrative Burden
In many cases, a lack of a digital estate plan can create unnecessary delays for your heirs and executors when attempting to fulfil your wishes and close out your affairs in a time when they are already dealing with grief, major life changes, and other important decisions.
The processes of combing through emails for account statements, juggling password recovery processes, and creating an inventory of digital assets across dozens of services represent a burden that can be prevented with proper planning.
Section 3: Building a Digital Asset Inventory
Commonly Overlooked Digital Assets
Loyalty and Rewards Programs
If you maintain significant balances with any rewards points providers, including hotels, airlines, and credit cards, make sure your heirs are aware of these assets. Many companies will have ways for heirs to claim these assets, and you should include such instructions in your digital estate plan. This may not matter if the balances are nominal, but for frequent flyers who may have accumulated thousands of dollars’ worth of rewards, it can be significant.
Cloud Storage
Cloud backups of photos and files are usually tied to another service, such as an Apple or Google account. As long as your heirs have access to these accounts (as discussed in the password management section), they should be able to access these files and do with them as you wish.
If your digital estate plan is stored in the cloud, make sure that clear paper instructions on how to access it are available. You don’t want the key to your password manager to require your password manager to access.
Email Accounts
Email accounts are often the gateway to the rest of your digital life. Along with your password manager, they often contain details of your financial accounts, receive 2FA codes, and are central to password reset processes. Consider keeping details of your email accounts and logins, along with details on any legacy access features, near the top of your digital estate plan.
Social Media
Given their sentimental value, many people have specific wishes for how their social media account should be handled after they die, including notification of their friends and followers. Most major platforms provide options for limited access, deletion, or memorialization of an account after the user has passed.
Why an Inventory Matters
Having an inventory of all of your digital assets makes sure that nothing goes overlooked by your heirs. When building such an inventory, go through all of your accounts and other digital assets. For the most important, including any with monetary value, note down the following:
Account name
Institution
Purpose
Approximate value
Access method
Location of credentials
For example: “I have an unmanaged brokerage account at Charles Schwab. My financial advisor knows about it, and I used it for fun, personal investing on the side. It’s worth about $15,000 and can be accessed using the password saved in my password manager. The 2FA code goes to the authenticator app on my phone. Jane Doe is listed as the beneficiary.”
Many of your accounts that lack monetary value may not have to be named explicitly. You can tell your heirs that anything not specified in your plan can be deleted and it is all listed in your password manager.
Maintenance and Updates
Just like you maintain and update your regular estate plan, you should update your digital estate plan too. Since digital assets are more likely to change than physical ones, take a look at your digital estate plan every one to two years.Make sure changed passwords are updated, abandoned email addresses are deleted, and clear instructions are maintained. Make sure your plan is stored securely. You can keep most if it stored digitally (think the contents of your password manager, detailed letters of instruction, etc) while maintaining the most important components (master passwords, recovery phrases, primary instructions) somewhere that can be easily accessed by your heirs (such as a safe, safety deposit box, or a digital vault that can be accessed by a trusted family member or financial advisor)
Conclusion
We hope that this article has been helpful and has inspired you to implement a proper digital estate plan. Like all forms of estate planning, it serves as a way to reduce stress on your heirs and to ensure that they are able to carry out your wishes after your passing. At the same time, a digital estate plan should not be understood as a substitute for a proper estate plan consisting of a will, trust, or beneficiary designations. Even if you leave your passwords to your heirs, they are not legally allowed to access accounts that have not been left to them, or which they have not been given the legal authority to manage.
At AllGen Financial, estate planning is one part of the broader journey toward Financial Freedom and Generational Legacy. If it has been a while since you reviewed your estate plan—or if your digital assets have never been part of that conversation—our advisors can help you identify the financial planning considerations and coordinate with your other estate-planning professionals. Estate planning is about creating clarity for the people you care about. If you're ready to review how your estate plan fits into your broader financial plan, we're here to help.