How much time do you spend on the Internet? Chances are that you make some of your most important decisions online – or at least in front of a computer – and that your “digital life” should be reflected in your estate plan.
It’s likely that you bank, invest, or shop electronically. You may have an e-commerce website or a blog. Then consider LinkedIn, Facebook, YouTube, and online storage of family photos. Not to mention all those email accounts. In this age of increasingly paperless offices, do your heirs and business associates know where your important commercial documents are stored?
If your estate plan fails to consider your digital footprint, beneficiaries could face threats to their privacy and economic security, not to mention the loss of the material with sentimental value.
How big a problem?
Calculate the number of places that you digitally store valuable information and the various passwords you use to protect it. Don’t forget your smart phone and flash drive. Even if your heirs know where to look, they may not be able to gain access to your accounts. Many online companies lack policies for handling digital assets after someone’s death. And it’s even more complex if the owner becomes mentally incapacitated.
The estate planning community hasn’t kept pace with social changes. Legal precedents concerning paper documentation and real property do not apply to online activity and the subject has yet to capture the attention of many bar associations. In the meantime, what should responsible individuals do to ensure that their loved ones aren’t faced with total confusion in the midst of their mourning?
How to prepare
Your changing lifestyle should be reflected in your will and you should name a “Digital executor” who is comfortable with technology. That may mean he or she is not the same person authorized to manage the rest of your estate. Then you should store a printout or flash drive containing your key information with your attorney or in another secure location. The information, which should be updated regularly, should include: online accounts, including number, user id and password, names and locations of important digital files, instructions about handling files.
Should a website, social networking profile, or blog be closed down? Should some emails be saved? Directions for notifying online contacts (LinkedIn, Twitter, blog audience) of your death. The dilemma is that all this organization conflicts with security. We’re advised to change passwords often and never to write them down. Yet documenting them is necessary to ease the burden on your heirs. This could become a serious issue for the state planning community. Questions are likely to arise about where to store sensitive information, who has access, and client willingness to pay for the service.
Enter the online entrepreneurs
Sensing a business opportunity, a number of “digital afterlife” ventures have cropped up on the Web. Their services include storage of passwords, assigning of beneficiaries and instructions to heirs. Some of these startups position themselves as partners to estate planners, providing a secure repository for confidential information and advice on the intricacies of the online world. But the legal basis for naming beneficiaries online is questionable. If you’ve gone to the trouble and expense of inventorying your digital assets, you certainly want to ensure that your wishes will hold up in court – and that the service you’ve used is still in business.
Other big questions
I recently read about a fan who copied the entire contents of a deceased individual’s blog with the intention of ensuring its preservation. Family members were moved by the sentiment, but what if the intent had been less benign? What legal rights would the heirs have? Who actually “owns” the blog?
This and many other fundamental questions await consideration by both legislatures and courts, and some of the answers may vary by state. In the meantime, the safest course is to keep your beneficiaries informed and to watch for developments in this evolving body of law.
Retirement has changed radically over the last several decades in America. Years ago, you expected to work most of your life for a single, large employer and you then count on a pension. “Retirement planning” meant figuring out how to use your free time. Today, in all likelihood you will be living in retirement on money you, yourself, saved. “Planning” means calculating rates of return and deciphering tax rules.
This change from institution-funded to self-funded retirement constitutes a dramatic shift of responsibility.
The section begins with an explanation of the stages along that continuum — the five phases of retirement planning and the key aspects of good planning to be carried out during each phase. Below is a summary.
PHASE I: Accumulation
This period begins when you enter the workforce and begin setting aside funds for later in your life, and ends when you actually retire. If your employer offers 401(k), 403(b), or 457(b) plans, have you signed up and are you contributing the maximum allowed? Did you know that the “new normal” requires retirement savings rates for most Americans to exceed 10 percent? If self-employed, are you shortchanging yourself on Social Security in order to reap tax deductions?
PHASE II: Pre-Retirement
This phase occurs during the final years of the accumulation phase and should begin when you reach 50 years old or are 15 years away from retiring, whichever happens first. Now is the time to get your plan in place, making sure your finances are lined up correctly for retirement day so nothing will be left to chance. If you work for a company with a benefits specialist, arrange an appointment to become informed about the various ways you can convert your employer retirement savings into a stream of income or an IRA. Consider using a tool known as “scenario planning.” Start learning about Social Security and your options for beginning to receive retirement benefits. Familiarize yourself with the basics of Medicare.
PHASE III: Early-Retirement
This phase lasts from the day you retire until you are 70 years old. (For those who do not plan to retire until well into their 70s, some tasks in this phase may occur later.) A key purpose of this phase is to create a clear communication channel with your family so information can be shared, questions asked and answered, and decisions made in a calm, supportive way. It’s also the time to assess how well your finances are working now that you are using your retirement savings. Fine-tune your income and expense projections, taking into consideration how you will meet minimum distribution requirements from your tax-deferred accounts.
PHASE IV: Mid-Retirement
This phase begins at age 70 and lasts as long as you are able-bodied and high-functioning. Despite your good health, begin looking at what steps you would like your family to take should your condition decline significantly. In most cases your ability to make all your own decisions, care for yourself, engage with the world on your terms, and manage your affairs does not vanish in a split second. It takes courage to dive into a conversation about giving up and transferring control.
PHASE V: Late-Retirement
This phase begins when your health has taken a turn for the worse and there is little likelihood of it being fully restored. You require significant help to function day to day. The hope is that by this point all the planning done in prior years makes this transition as manageable and life-affirming as possible.