Fourth Quarter Financial Planning Series: ESTATE PLANNING

Smiling man and woman looking at computer tablet while a man in a suit explains something to them

So far, in this series, we’ve covered Investments, Taxes, and Insurance.  Now let’s look at estate planning with an emphasis on digital assets.

Most people understand the importance of having a basic estate plan in place.  Unfortunately, at least one-third of American adults don’t have one.  The reasons vary, but the most dominant is procrastination.  Are you one of these folks?  If you are, here’s what you need:

  • Last will and testament– A basic will saying where you want all of your assets to go whether to your spouse, children, friends, or charity. Without a will, the laws of your state of residence will dictate where and how your assets will be distributed…sometimes with disastrous results.
  • Power-of-Attorney (POA) for financial matters- If you become incompetent due to accident or illness, this document says who can act on your behalf for financial matters such as paying bills. Without this document, someone would have to hire an attorney, go to court, and get a limited POA…something that can be quite time consuming and expensive.
  • Advanced Directive for Healthcare– This document is usually in two parts; one section says who can make healthcare decisions for you if you are unable to do so; and the other allows you to indicate what level of care you wish such as feeding tubes, hydration, pain medications, etc. Without this document, healthcare professionals may be reluctant to provide information to family members or accept instructions for your benefit if you are incapacitated.
  • Double-check your beneficiaries– Many assets transfer at death outside your will. Examples include retirement plans, life insurance, and annuities.  Take a moment to review who the current beneficiaries are and who the contingent beneficiaries are.  Often, we find clients’ wishes have changed.
  • Consider preplanning your funeral– More and more people are taking the time to preplan their funeral, and in some cases prepaying funeral expenses as well. The reduced stress on the surviving family is a gift they will long remember.

A relative newcomer to the scene of estate planning is planning for digital assets.  Digital assets include many things: anything protected by a long-in/password; computer files; medical records; banking and financial accounts; cloud accounts; photos/videos; smartphone apps, etc.  For many people, there are so many digital assets; it’s hard to recall them all…and that’s the point.  If you are having trouble recalling them, think of the problem if you’re suddenly not here.  Here are the steps to consider:

  1. Develop an inventory of digital assets that are important to you and keep the inventory in a safe place with your other estate planning documents. You will want to revise the inventory at least annually to capture any new digital assets that you acquire.
  2. Review the options for transferring digital assets via an online tool. Some websites already incorporate online tools that allow for the disclosure of digital assets to a specified recipient. Facebook and Google already have online tools, and others will likely follow suit.
  3. Incorporate your digital assets instructions into your will.  On January 1, 2018, Alabama enacted the Revised Uniform Fiduciary Access to Digital Assets Act, which allows a fiduciary or personal representative acting under a will, an agent under a power-of-attorney; or trustee of a trust to access digital assets on your behalf.  Many other states have enacted similar legislation.

It is also important to note that not all digital assets are transferrable. For example, iTunes cannot be transferred according to the Terms of Service Agreement, which limits the user’s right to their lifetime.

Follow The Welch Group every Tuesday morning on WBRC Fox 6 for the Money Tuesday segment.


4th Quarter Planning (series): Estate Planning for Digital Assets

  • Start with the basics: Will, POA, Healthcare Directive, etc.
  • For Digital Assets, do these 3 things:
  1. Develop an Inventory
  2. Review online tool options on websites
  3. Update your will

Stewart H. Welch, III, CFP, AEP, is the founder of THE WELCH GROUP, LLC, which specializes in providing fee-only investment management and financial advice to families throughout the United States. He is the author or co-author of six books, including  J.K. Lasser’s New Rules for Estate, Retirement and Tax Planning- 6th Edition (John Wiley & Sons, Inc.); THINK Like a Self-Made Millionaire; and 100 Tips for Creating a Champagne Retirement on a Shoestring Budget. More information about The Welch Group and important Disclosures can be found on our website. Investing in securities involves the risk of loss. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment or investment strategy will be profitable or equal any historical performance level(s). Consult your financial advisor before acting on comments in this article.