Digital assets are becoming more and more common, which means when you are planning your estate, you must document your Digital Assets. It’s difficult to attempt to name a beneficiary for accounts, such as revocable or irrevocable trusts. Given the popularity of crypto, though, it is likely that things will start to change in the coming years. Of course, until then, you need to know what you should be doing with your crypto for estate planning purposes.
Often, the best current option is to choose a traditional will and revocable Trust containing a durable power of attorney that includes provisions for handling the distribution of digital assets.
This update is intended only to be informational and is not intended to provide legal, tax or investment advice. Laws and regulations are constantly changing and should be checked by each person’s own legal counsel for the most current version.
You will need to determine who will execute the will and who will be provided information on the location of your digital assets and how to access them. This would include all of the various wallets where you have crypto stored. You will also need to determine whether you want to entrust all of this information to just one person, or if you would prefer to spread it out amongst multiple parties.
Please keep detailed information with the locations for all of the cryptocurrencies you have, so it is as easy as possible for your executor to find and access what is needed. Be sure to list all of the passwords, seed phrases, and private keys that may be needed for email accounts, exchange accounts, and crypto wallets. If you have two-factor authentication on any of these accounts, you will need to provide that information, as well.
Have several copies of the information written on paper and stored in different locations. The redundancy of having several copies helps to ensure that if one or even two of those copies is lost or destroyed from fire, flood, etc., there are others your executor can still use.
Whether you are choosing a friend of the family to act as the executor, or you are choosing an attorney, make sure they know as much as possible about the crypto. Getting as much of the hard work as possible taken care of now and knowing how the distribution—and taxes—will work is essential. The more the executor knows and understands, the better.
Most people today have multiple online accounts that they manage. When they pass away, their executors need to have the capability to deal with all of those accounts. To ensure this is possible, RUFADAA was passed. It provides the executor or an attorney with access to a person’s online accounts after they have passed away or are incapacitated.
Those who are provided access under RUFADAA will have access to emails, chats, and DMs if the decedent has agreed and consented. There are various online tools that can provide automatic information transfer, as well as kill switches for certain accounts. Some of the online tools include Google’s Inactive Account Manager and Facebook’s Legacy Contact. Keep in mind that some of the kill switch mechanisms could trigger taxable events.
Additionally, the executors will often receive legal documents that provide authorization when dealing with various tech companies and financial firms. These can include or exclude access. Dealing with tech companies, who often loathe to give up information or control even in these cases, can be arduous.
It’s also important to note that some firms will terminate all access at death. This means that no one will have access. This is something for you to know and plan for well ahead of time, so check the details and policies of each company you are using.
While RUFADAA can help to provide the necessary access in many cases, and the decedent may have detailed instructions on what to do, there can still be some confusion. Below are some of the things the executors will need to do, as well as some of the common types of issues they might face.
Executors will need to gather the necessary keys and hard drives and will check to see what is titled and whether beneficiaries received their asset via a kill switch, which should have instead gone through probate.
When you are choosing someone to act as an executor, you will want to make sure they have the knowledge and know-how to access correctly. Executors need to know their client’s regulations and wishes, as well as how to handle the various types of accounts to be distributed after death. Can the executor handle tax issues? Is there a fiduciary accounting team in place that can file the estate tax returns around crypto assets?
Do you have Digital Assets and can make insure proper distribution according to your wishes? The best thing you can do is get in touch with an attorney as soon as possible to help with your estate planning. Make sure they know and understand the world of crypto. It’s not as simple as making sure that everyone in the family gets what they deserve.
Crypto opens up new potential issues, and whoever is handling this will need to have the right people in place with the knowledge of not just crypto, but also the courts and how they deal with these sorts of new assets. In time, as long as cryptocurrencies remain as popular as they are right now, this aspect of estate planning may become easier.