Technology has given us greater control in many areas of our
lives, from managing our health to planning vacations on the fly. Yet some
industries, including that of financial services, have been slow to utilize
digital tools or encourage their clients to do so. This has exacerbated the
already significant challenges around estate planning, most notably the
generation gap among older principals and their millennial and GenX heirs. The
younger generations receive and process information differently; they also
prefer to communicate in different ways. If you are still relying on reports
from your financial advisor, know this: your children and grandchildren will
one day be using such tools to manage your estate, especially if it saves them
a phone call to said advisor. Meeting them where they stand now can help them
avoid pitfalls, and possibly financial ruin, in the future.
When it comes to managing and passing down wealth, going
digital solves a myriad of problems. For example, there are all-in-one
solutions that make it easier for you to monitor your portfolio in real time
(and possibly jump on investments even before your financial advisors) and
manage the maintenance of physical assets such as homes and collectibles from
anywhere in the world. You can also give loved ones and other trusted parties
access, forming a communications hub that facilitates the sharing of
information. As mentioned above, one of the biggest barriers to successful
estate planning is the lack of communication between principals and heirs,
which often leaves the latter in the dark about the size of their inheritance
and lacking the skills to manage it. This places them at risk for poor
decision-making, especially millennials who came of age during the Great
Recession and remain distrustful of financial institutions.
Digital tools allow you to give them insight into your
investment decisions and your process around them. More importantly, it
promotes transparency among the people who are most likely to contest your
estate or battle amongst themselves. For example, it would be very hard for a
spouse to prove that you intended to disinherit a child when that child had
access to your finances, or to argue in favor of selling your prized art
collection when a series of messages demonstrate your intention to keep it in
the family.
Finally, keeping track of your finances in real-time will
remind you to review your estate plan every few years – something that many
people, including HNWI, neglect to do. Covid-19 has been a real wakeup call in
that regard, given the rapidity with which it killed or incapacitated people
from all walks of life. There are also a number of factors – from changing tax
codes to major life events like divorce, remarriage, the loss of an heir
through estrangement or death, or the birth of a new one – that if not
addressed can impact the value of your estate.
There are some caveats to going digital with estate
planning. There will be less physical (paper) evidence of your wishes, and you
cannot assume that your family will be able to get into your devices and find
(or figure out) your passwords. Instead, make sure a neutral party has
knowledge of, and access to, all of your accounts. Another concern is identify
theft, so when choosing digital tools make sure that stellar security tops your
priority list.
Information may be the most valuable commodity of our time,
but only if it is accurate and shared in a timely fashion. Transitioning to a
digital platform is an imperative for anyone seeking to educate their heirs on
how to preserve and grow their wealth. It can also help strengthen your
relationships with your heirs, as well as their relationships with each other.
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