In human history, we’ve seen many periods of drastic change. Some of these changes were positive, others were vastly negative and tragic. But in every case, people inevitably said that they had not realized the magnitude of these profound changes. They realized that only in retrospect.
We see small incremental changes, but we struggle to build a holistic picture and grasp the true significance and impact of the change as it’s happening.
Are we living in such a period?
Let’s see some of the “small” incremental changes from the past few years:
- The tech ecosystem in the Middle East is booming.
Middle East and tech ecosystem in one sentence? Yes, this is happening right now in front of our eyes. For years, people associated that region of the world primarily with violence, instability, and poverty. These days, more and more tech unicorns and startups are emerging from that region.
- The number of expats globally has grown by 50% in the past 10 years.
According to official UN statistics. And 93% of these expats are not refugees. You can do the math. Currently, close to 4% of the global population is expats. If you extrapolate the data, with a 50% increase every 10 years, we’ll end up with 30% of the global population being expats after only 50 years.
- The number of assets owned by an average person is skyrocketing.
You don’t need official data for this. Think about what assets an average person had 100 years ago, even in developed countries, and what assets an average person has these days. Online trading platforms, company stocks, stock options, cryptocurrencies, real estate, bank accounts, insurance policies, credit cards … just to list a few. Not to mention that many people often have such assets in multiple countries – exactly the case with global citizens and expats, for example.
- Everything is technology.
This might sound obvious to you, but think about the world 20 years ago. In the 90s, most jobs were manual, and computers barely penetrated our personal and professional lives. These days, everything is powered by technology – airplanes, ticket purchases, credit cards, banks, ecommerce … actually it seems easier to list what is not yet powered by technology. Apart from my fireplace, I can’t easily come up with any items on the list.
Now you might ask, what’s the relationship between these seemingly unconnected events? While the global revolution in which we are living is a great topic for the next article, here I’ll focus primarily on its impact on estate planning.
Don’t be disappointed. At the end of the article, I’ll try to prove to you that the world of tomorrow will need a completely different estate planning system, and what we have in place now will be obsolete and irrelevant. I know it’s a bold statement. Let’s see the reasons for that prediction of mine.
Traditional estate planning
We won’t do a deep dive into traditional estate planning, but in short, we can say that it usually involves the creation of a trust (either a living revocable trust or an irrevocable one), as well as a will.
The primary goals of traditional estate planning are to protect personal assets, usually from creditor claims in case of insolvency and law suits, and to protect against tedious probation processes.
Usually traditional estate planning is conducted by specialized and highly skilled attorneys.
Doesn’t it sound great? Unfortunately, there are a number of shortcomings that might compromise the very goal of protecting the assets of the clients. Let’s have a look at these.
Shortcomings of traditional estate planning and wills
Now when we start listing the shortcomings of traditional estate planning, we’ll start to connect the dots between the seemingly unrelated events and trends that we listed at the beginning of the article.
Problem #1: Estate planning is focussed on one geography
Every state in the USA, every country in the European Union and every country globally has different legislation. Moreover, it’s not static but dynamically changing. Because of this, Trust and Will attorneys usually specialize in a specific geographic area, e.g., California, Germany, or Australia.
But we saw that one of the big trends is that the number of expats is growing exponentially. These are people who have assets in multiple countries, not only one geography. They have local bank accounts, pension funds, retirement plan schemes, and often local insurance policies.
For these people, estate planning that operates in one specific geography simply doesn’t work.
Problem #2: Estate planning assumes a static assets catalogue
You must include the assets that you want to protect in your estate plan. But think about what assets you possessed 5 years ago and what assets you have now. How about 10 years ago?
You get the point. People these days have dynamically changing portfolios of assets. People now own company stocks, ETFs and bonds, due to the democratization of online trading.
Employees in tech companies get stock options, which reside in different asset management repositories for each company. Expats move to new countries and open local bank accounts there.
You decide to buy a new real estate property. Increasing numbers of people are buying cryptocurrencies. Even more people are becoming angel investors, thus possessing shares in various startup companies.
Traditional estate planning simply cannot cope with such dynamically changing asset catalogues. It’s unrealistic to expect that people will undergo the lengthy and very expensive process of updating their estate plan every 6 months.
Problem #3: It doesn’t include the technical aspect of asset protection and inheritance
Imagine that you have the best-crafted estate plan. One sunny day, your heirs see the plan, containing, among other things, a carefully crafted assets catalogue. As we saw, this is quite impossible to achieve with traditional estate planning, but there is also another problem.
Do they know the access credentials of the online trading platform that holds that stock portfolio? Do they know the private keys of that digital wallet? Do they have the backup and emergency codes of the 2FA (two factor authentication) for that financial system?
Lack of information about these questions can turn even the best estate planning document into a nightmare for the family members. It can become impossible for them to identify and locate the assets and get access to them.
Problem #4: It’s slow and it’s expensive
We are living in a fast-paced world. You need a solution which will reflect the fast pace of the changes in your asset catalogue. Estate planning is a slow process which takes significant time and simply can’t match that fast-paced world. On top of this, it’s expensive.
Digital estate planning – still not quite there
You might say – but hey, doesn’t digital estate planning solve these problems? It tries, but actually it solves hardly any of them.
The primary benefit of digital estate planning is that it’s cheaper and supposedly easier to use, which for some services is really the case.
But how does it solve the problem of possessing assets in different counties, with different legislation, taxation and other frameworks? Not to mention the language barriers, of course.
Often digital estate planning services work together with attorneys, which is great. But it means that they are again focussed on a specific geography – a state in the US, a country in the European Union or some country on our planet. But they can’t protect assets spread across various complex repositories in multiple countries.
Digital estate planning is a very good “upgrade” of traditional estate planning, but it simply can’t meet the needs of the person with dynamically changing assets, residing in various geographies.
The estate planning of the future
So wait, we might have a future world in which many people will be expats, possessing complex and dynamically changing asset catalogues, requiring both a legal framework for protection, as well as technical protection, ensuring that their family members will be aware of these assets and will be able to identify and locate them and get access to them.
Sounds like mission impossible, right? Let’s try to blink into the future.
Digital Inheritance
There are two ways to try to build a solution. Fix what’s not working in the current solutions, or build a completely new solution.
Digital estate planning solutions use the first approach – they try to fix some of the shortcomings of the traditional estate planning industry. Digital inheritance aims to bring a completely new solution to the problem.
Let’s start with the technical aspect of asset protection. Digital inheritance services provide an easy way for people to catalog and update their digital and financial assets, and most importantly, they ensure that the family members designated as beneficiaries will be proactively notified about the assets in the case of a lethal event occurring to the owners.
This way, family members will be aware of the assets and will be able to identify and locate them. This sounds great, but what about the legal framework? If I’m informed about a certain asset, that doesn’t guarantee that I’ll inherit it?
To tackle this, it is reasonable to expect that digital inheritance services will start to evolve into global legaltech services, providing protection for the global citizens of the future.
They will simply leapfrog traditional local legislations and estate planning. I personally think it’s not a question of if, but when. It’s only a matter of time before we see that.
