Name a durable power of attorney
Just as you name an executor or trustee to handle your affairs after death, a durable power of attorney is an important estate-planning decision. It provides a trusted person with the power to handle your financial life if you become incapacitated. Corcoran says that person will need your financial passwords for banking as well as your email passwords, so he or she can go online to pay bills, clear out your mailbox, keep track of any online promotions, unsubscribe from junk mail and more.
The durable power of attorney is only for a limited time and only while the incapacitated person is alive, says Hamill.
Create a 'paper trail'
A durable power of attorney will need to manage your checking account to pay bills. If you bank online, make sure you've given that person access to and knowledge of your accounts. Ditto if you use a program such as Quicken to manage your budget.
Record monthly bills that come in the mail as well as those that are automatically deducted from your accounts. Don't forget about automatic bill pay for services and products such as gym memberships or fruit-of-the-month clubs.
After death, financial institutions will not allow access until an executor is named and a death certificate is presented. Then the accounts will be transferred to the executor or set up in a new account in the name of the estate. So, in this instance, it's not as important for the person you name executor to have your passwords. But he or she should know of the existence of the accounts so the institution can be notified and the probate process simplified, according to Hamill.
Make a note of everything you have online including tax returns, trust documents, wills, life insurance, real estate deeds, bank accounts, and investment and retirement documents. You may have more online accounts and documents than you think. About 90 percent of Corcoran's clients receive tax returns, conduct banking and investment transactions, and pay bills online. Once you have a list, make sure a trusted person or executor knows what exists and how to find your online accounts.
Make a digital inventory
Corcoran recommends clients develop a "financial emergency kit" in the form of a notebook that contains estate-planning information and all the passwords associated with online accounts. Make sure a trusted person or your durable power of attorney knows where the notebook is. That way, everything is in one place.
"Be judicious," says Hamill. Make sure you're giving access where you want and not necessarily to everything or everyone. "Do they really need to read all your emails or see your private information on Facebook?"
Consider online safety deposit boxes
An alternative to the notebook is an online safety deposit box that stores passwords and information about online accounts or assets, with instructions regarding who should be notified in the event of death or incapacitation.
Legacy Locker, one such service, lets you create an account, enter all your online assets and name a beneficiary for each asset. Once Legacy Locker verifies proof of your death, it will send an email to the beneficiaries and allow access.
Jeremy Toeman, founder of Legacy Locker, says he wanted the site to work like a Swiss bank account, in a way. "Once a person opens an account, it's private. I don't know what they're putting in there."
Security is obviously an issue, but Toeman says they have bank-level protection. "I'm not naive enough to think we can build something totally safe. I mean, we've all seen 'Ocean's Eleven,'" he says. "But it's at least as secure as a bank."
Another data storage site, EstateLogic, works much the same way as Legacy Locker. It allows users to store and organize important documents, such as wills and tax returns, and allow access to beneficiaries as needed.
With a little foresight, estate planning in the digital age doesn't have to be complicated. "The big thing is communication," Corcoran says. "You've got to talk to your family ahead of time and say, 'Here's all my personal information. Here's my online life.'"