Video Transcript
Over the last few years, the prevalence of the internet and its integration into everyday life has, quite simply, exploded.
So what are digital assets? Quite simply, they’re a class of assets which are intangible – you cannot hold them. They range from digital accounts, such as social media accounts like Facebook, Instagram or Youtube, to websites and domain names, to cryptocurrencies such as Bitcoin. And with only 2 certainties in life – death and taxes – it is important that you properly address your digital assets in your estate planning.
There would be many people who would have limited digital assets, and these are not likely to require an in-depth consideration as part of your estate planning. However with the explosion of Bitcoin since 2017, and other digital cryptocurrencies, this can mean that there are cryptocurrency holders who are incredibly wealthy, although not in the traditional sense. Well crafted estate planning involves the consideration of all of your assets and ensuring that these are passed onto your intended beneficiaries – and that it is possible to do so.
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To give a few examples:
Social Media Accounts in Estate Planning
For our first example, what happens with social media accounts when you die? Does your executor gain access to them, to be able to edit and utilise them? This issue actually varies based on the provider, in the manner set out in their terms and conditions – and as agreed to by the user when they set up their account.
The policies can be changed from time to time, but for popular social media sites such as Facebook or Instagram, currently, they allow the option for the account to be memorialised, or deleted. If memorialised, then a ‘legacy contact’ can be nominated to manage the account after death. However these settings need to be updated by the user prior to their death, and a legacy contact cannot be added after death. This might become particularly important if the account is a popular account, whether for a personal user or for a group or business account.
Crypto Estate Planning
Perhaps more substantially at present is the issue of cryptocurrency holders. Let’s say I had purchased 10 Bitcoin in 2010 as a bit of speculation. That cost me about $1,000 (USD). If I held those 10 Bitcoin, that investment is now worth approximately $450,000. What happens to them if I die though? Well this will depend on how you store the access details for your account, and whether it is:
- Firstly, in ‘hot storage’ – where your account details are saved online, such as in a password management app; or
- Secondly, if it is in ‘cold storage’ – where your account details are stored offline, such as on a USB or hard drive.
This simple distinction, of whether your account details are stored on-or-offline, can have massive implications. For example, if your will gifts your personal belongings to a specific person, then they become the owner of your ‘cold-storage’ cryptocurrency access details, and are entitled to access your cryptocurrency through the storage details on the USB or hard drive. On the other hand, if you gift your digital assets to a specific person, then they could access any ‘hot storage’ cryptocurrencies.
If you have a valuable cryptocurrency account, it is important that you have incorporated details of this into your estate planning, which might entail selecting an executor who is familiar with cryptocurrency.
A frank discussion is required around how your personal representative might be granted access to your cryptocurrency wallet in the event of your death. If not, then whilst your executor might know you have a valuable crypto portfolio, it will mean nothing if they cannot access it – and crypto accounts don’t have a password recovery system which means that the asset is effectively lost forever.
Importance of Digital Assets Estate Planning
It is important for estate planning to encompass the whole of your assets and ownership, including through newer technologies. O’Connor Ruddy & Garrett has a more than 80-year history of helping with estate planning and enduring powers of attorney, so contact us to arrange a free initial consultation and let our experience assist and guide you in getting the correct tailored solution to your circumstances.