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Related topics: estate planning, financial privacy, family, financial planning, Liz Weston

When my father had a stroke while on vacation, my stepmother was flummoxed. She needed access to their joint checking account, but he had always handled their money, and she didn't know the PIN needed to get cash from an ATM.

The best my dad could do, in his brain-damaged state, was recite various numbers over and over -- none of which was the elusive PIN.

Bank officials eventually gave my stepmother access to the money, but the incident illustrates how dangerous it can be to have essential financial details, including online IDs and passwords, locked in one person's head.

If you die or become incapacitated without sharing the keys to your digital life, your family could face a huge ordeal trying to manage your affairs. They could be cut off from money to pay your bills, and they might not even know which bills need to be paid. They might not discover some accounts exist if you've gone paperless. They would likely have to go to court to win access to your financial accounts, then face skeptical customer-service representatives who may not accept their authority.

Any delays could cause serious financial repercussions for you, should you recover. Unpaid bills could devastate your credit scores and wind up in collections. Insurance coverage could lapse. Bounced checks could result in your bank accounts being closed. Neglected investment accounts could suffer losses.

If you die, your family could be left with a traumatizing mess. They may have to scramble for cash to pay for your funeral and their own living expenses, if they're your dependents. If they can't track down all of your accounts, some of the money you intended for them might wind up in some state's unclaimed-property fund.

Liz Weston

Liz Weston

And that's just on the financial end. Your family could be cut off from other important digital files, including:

  • Photo and music collections stored online.
  • Calendars and address books.
  • E-mail and social-networking accounts, including Facebook, Twitter and LinkedIn.
  • Security and wireless-networking software.

The better you are about security -- creating strong passwords and changing them frequently, as you ought to -- the worse the situation for your family, since they won't be able to easily guess your online keys.

Digital solutions

Since this is a digital problem, you may not be surprised to learn that there are websites offering digital solutions. Legacy Locker and InformationSafe are two sites that promise to serve as online safe-deposit boxes for your critical information and to release it only to people you designate.

Password-management software, including KeePass and LastPass, which allow you to access all your password-protected sites with a single master password, is another digital option. As long as you provided the master password to the person or people you trust to handle your affairs, they could get access to your online accounts.

I'm not comfortable with 100% digital solutions, though. For one thing, you're relying on these companies to still be around when you or your heirs will need them most -- and nothing is guaranteed in life, let alone online. For another, they may not be as comprehensive a solution as you may need.

A more comprehensive approach

So I advise a belt-and-suspenders approach that would cover you no matter what. Consider using the online solutions for convenience, but also create a physical document you can store with your attorney, in a safe-deposit box or with a trusted person who lives outside your immediate area, in case a widespread catastrophe such as a hurricane, earthquake or flood compromises those first two options.

Update your critical information at least once a year and include answers to common security questions, including your mother's maiden name, the street where you were raised and the name of your first pet, said Martin Kuritz, the author of the estate-planning organizer "The Beneficiary Book" -- which, not coincidentally, can make this chore easier.

Both the print and online versions of Kuritz's book include fill-in-the-blank forms to organize this information. Another option is Melanie Cullen's "Get It Together: Organize Your Records So Your Family Won't Have To," from legal self-help publisher Nolo Press.

You also can create a simple spreadsheet that lists accounts, account numbers, contact phone numbers, online IDs and passwords. (I've included on my list due dates for any bills, as well as how those bills are received, online or by mail, and how they're paid, by automatic debit or online bill pay.)

Then you need to tell your trusted someone(s) where to find the documents you've created and stored.

What to include

To get you started on your list, consider including passwords to:

  • Your computers and laptops.
  • Bank accounts.
  • Online bill-payment systems.
  • ATM cards.
  • Credit cards.
  • Brokerage accounts.
  • Retail or seller accounts (eBay, Amazon.com, etc.).
  • Voice-mail accounts.

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  • E-mail accounts.
  • Home-security systems.
  • Computer-security systems.
  • Entry gate at gated communities or storage facilities.
  • Keyless-entry locks.
  • Cell-phone locks.

If you use a safe, be sure to also include the combination or the location of the keys on your list.

Will this be a hassle? Yes, it will. But your effort now could pay huge dividends later in guiding your family through a traumatic time. Show them your love, and get it done.

Liz Weston is the Web's most-read personal-finance writer. She is the author of several books, most recently "The 10 Commandments of Money: Survive and Thrive in the New Economy" (find it on Bing). Weston's award-winning columns appear every Monday and Thursday, exclusively on MSN Money. Join the conversation and send in your financial questions on Liz Weston's Facebook fan page.