Contributed by: Lewis J. Walker, CFP®
Before Al Gore invented the Internet, data was kept on paper, in notebooks and folders, and in file drawers. Now, increasingly, data is in digital form on a server or in the cloud. Remembering user names, passwords, and PIN numbers are the bane of the digital age.
The old expression, having one's "head in the clouds," is apropos to the digital challenge. The old English saying dating from the mid-1600s describes a person who is not grounded in reality and prone to flights of fancy, as opposed to someone who is practical and realistic, "down to earth." With so much password protected data moving to the cloud, you have a “to-do” task when it comes to orderly estate planning and management of data by a spouse, other loved one, whoever holds your Power of Attorney in the event of incapacity.
Many investment custodians no longer issue paper statements, or charge a fee to do so. Banking and investment transactions are now done via computer, all of which means access codes and passwords. If you do not log in to an account for some period of time, often passwords expire. As financial planners and advisors, we frequently assist clients in logging in to set up a new password as the old one expired.
If you work with advisers, including legal, tax, and investment advisers, much of your data is only available to you. Have you thought about your "digital estate"?
Who in your household handles on-line banking and bill paying? Does the person who may come in behind you know how the process works? Know the various passwords and access codes? With low interest paid by mainstream banks, many people have accounts at multiple institutions accessed via the Internet. Does your "step in person," spouse, adult child, son or daughter, know where things are and how to access data? Know the user name, password, answers to the security questions?
What about elderly parents? They did not grow up in a digital age. They may be reluctant to share and you may not feel comfortable asking. If they have long term care, insurance policies, or other insurance-related assets or accounts, are you notified if they fail to pay a premium? If you are getting older, have you added a trusted child or other person who can be notified if you miss a payment? We have had experiences where a child thought mom or dad had insurance only to find out it lapsed when funds were needed.
If copies of your will, powers of attorney for assets and health care, advance directive are in digital form, how are copies accessed and where are the originals? For veterans, where is your Form DD 214, which may be needed for veteran's benefits, including burial in a national cemetery?
Pay attention to how accounts are titled. If accounts are only in the name of the incapacitated person or the deceased, there can be delays in accessing funds during an emergency or following a death.
A financial advisor can help. As part of the planning process, "screen scraping technologies" can allow an advisor to aggregate data from multiple sources, even assets not under the direct supervision of the advisor. That could include current or old 401(k) accounts, bank accounts, self-managed accounts, etc. But the advisor does not know the passwords, so if you change passwords or let one expire, the data feed to the advisor stops. Keeping things orderly and identified is a value-added service but it requires a partnership with you and the advisor. The advisor should know both you and your spouse, and other trusted family members or loved ones who will step in in the event of incapacity or death.
What about social media? Many people, especially younger tech-savvy persons, keep much of their life on line. Are there photos or other memorabilia that you would want to access after the incapacity or loss of a loved one? Do you know how to sign in?
The cloud, data kept externally "who knows where," is a useful management tool. But it can be an expensive nightmare and emotional drain for a loved one who is not plugged in. And it gets worse! Many now require complex passwords, a capital letter, several numbers not in sequence, and a symbol. Used to be that Nuts2u!@#$% was a substitute for a curse word. Might still be!
Lewis Walker is a financial planning and investment strategist at Capital Insight Group; 770-441-2603. Securities and advisory services offered through The Strategic Financial Alliance, Inc. (SFA). Lewis Walker is a registered representative and investment adviser representative of SFA which is otherwise unaffiliated with Capital Insight Group.