{Read in 5 Minutes} As a Trusts and Estates Attorney, I frequently work with people in crafting estate plans. This might include a Will, a Power of Attorney, a Health Care Proxy, and a Living Will. Every now and then, a client might own some assets that are slightly unusual. When this happens, I like to write a blog entry on it, to advise people and raise potential issues they might want to consider. In the past, we have written about intellectual property. We have written about pets and pet trusts. And we have also written about undesirable assets that beneficiaries don’t want. Because more and more people are investing in digital assets, I thought it would be important to discuss it a little here on this blog.
What is a digital asset? A digital asset is any sort of non-traditional asset that is not necessarily tied to an account number, a bank registration number, or even the owner’s Social Security number. And a common example of this would be a digital currency, such as Bitcoin. What are the issues here, and what should a person who owns these assets consider when crafting their estate plan?
1. Will their Executor be able to find the asset?
As I’ve mentioned in prior articles, being an Executor is not always an easy task, and one of the first, and often most daunting tasks an Executor might have would be to identify all of the assets of the deceased.
Sometimes this task is easier than others, particularly if you have a situation where the asset is a bank account that produces a monthly or quarterly statement, or even if it is something that is a paperless statement, the Executor can always look for a 1099 in the early part of the following year.
But what about Bitcoin? How are you holding your Bitcoin? Would your Executor know that it exists? Have you discussed this with your Executor? If your Executor knows about it, are they able to collect it? Do they have all the information on who to contact and how to initiate a transfer or liquidate the digital currency?
2. What tools does the Executor need to collect it?
The Executor may be aware of the Bitcoin holdings, however, if the Executor doesn’t have the tools necessary to collect it, this can be a real problem. Because of the anonymous nature of a lot of digital currency, it is often not tracked to people’s Social Security numbers, bank account numbers, or even mailing addresses. It is an asset that is simply easy to miss.
•If the Executor is aware of it, what are they going to do if they don’t know a password to log in to the digital currency account?
•What if this isn’t held in account form, it’s just held on a digital key?
A lot of times, the issue comes down to producing a thumb drive or a digital key to collect. If the Executor doesn’t know where it is or doesn’t have a password, they may be stymied almost immediately, and the asset might be difficult or impossible to collect.
3. Is the collection information stored in a safe place?
One of the big issues with digital currency, particularly when you’re dealing with a physical, digital key, such as a thumb drive, is what happens if the physical object disappears. Whether it is lost, or stolen by one of the family members or beneficiaries, the Executor may not have any ability to correct this, absent the paper trail that more traditional assets have.
•Has the client had a conversation with their Executor about where physical items necessary to collect assets are located?
•Has the client secured the key?
•Has the client made sure that if the key is in a safe, or safe deposit box, the Executor has the key or combination?
•Has the client told other beneficiaries of the Will that Bitcoin exists?
If the Executor doesn’t know about it, the beneficiaries can call it to the Executor’s attention. Security is very important when you have assets like this.
So, like anything else, having a well-thought-out estate plan is essential in making sure that one addresses everything in their Will and makes things go more smoothly on the back end. Regardless of whether you are working with an attorney to prepare an estate plan, or you are doing it yourself, this is an example of something where an ounce of prevention is far greater than the pound of cure.
For more information on this topic, please contact me.