In today’s interconnected world, our personal and professional lives increasingly depend on digital platforms. From financial transactions to client communications, many small business operations occur online. Despite this, not all small business owners know how to properly manage their digital assets.
Password management: The keys to your digital kingdom
Passwords are essential for accessing digital accounts, but they often go undocumented, creating challenges for estate administration. Some business owners use one password for all their accounts to make things easy. However, doing so can expose them to hacking risks. To help safeguard accounts, it’s crucial to create a unique and strong password for each account.
To prevent complications, it’s important to compile a comprehensive inventory of your accounts – including email, banking, social media, and business management platforms – along with their login credentials. A password manager can securely store this sensitive information.
A detailed map of your digital assets helps ensure your loved ones or business partners can locate and access important accounts in the event of your incapacity or death. Without this guidance, even the most valuable accounts can become inaccessible.
Empower fiduciaries
It’s crucial to grant fiduciaries access to digital accounts, providing them with the necessary usernames, passwords, and authentication methods. Regularly update this information and clearly outline your wishes regarding preserving, transferring, or deleting your digital assets.
Digital access also plays a vital role in emergencies, especially for health care and financial powers of attorney. Virtual access to key documents helps ensure representatives can act swiftly when needed.
With so much business being conducted on smartphones, small business owners should consider setting up a legacy contact. A legacy contact is a trusted individual who can access the owner’s phone in case of incapacity or death. This ensures critical information – such as business emails, client contracts, and operational apps – remains accessible. By granting a legacy contact access, small business owners can help safeguard business continuity and prevent disruptions during unexpected events.
Recent legislative efforts, such as the revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA), have provided clearer guidance on managing digital assets posthumously. These laws allow fiduciaries to access digital accounts of explicitly granted permission in estate documents like wills, trusts, or powers of attorney. Make sure your documents address these provisions and designate trusted individuals to manage your digital assets.
The importance of proper account titling
Ensuring that all digital accounts are correctly titled in your business’s name is vital for legal compliance and smooth succession planning. Small business owners often merge personal and business accounts, but it’s important to keep the separate. Combining the two can create confusion, complicate tax filings, and expose personal assets to business liabilities. By maintaining clear distinctions, you help protect both your business and personal interests.
Review your accounts regularly to confirm they reflect the appropriate ownership structure.
Avoid single points of failure
Relying on a single individual to manage critical digital accounts can create vulnerabilities. Instead, designate multiple trusted individuals to access these accounts. For instance, ensure more than one person has access to your website, financial accounts, and other essential platforms to maintain continuity.
Review terms of service
Digital service agreements often include provisions about account management during incapacity or after death. Review these agreements carefully and take any necessary steps to align with their requirements. Some providers even offer tools to designate legacy contracts or transfer account ownership.
By addressing key elements like password management, RUFADAA compliance, fiduciary access, and account ownership, you can help secure your digital legacy and protect your business’s future. Read a Business Owner’s Estate Planning Guide for more information on navigating estate-planning hurdles.
Contact your advisor for more information on aligning business planning with your personal or family’s financial plans. If you’re not a client, let’s talk.
