At February’s PGCBA Probate, Estates, Trusts and Elder Law (P.E.T.E.) Committee’s annual seminar, Matthew Costa, Partner/Senior Advisor with Bestgate Wealth Advisors, presented on “Estate Planning and Taxation Issues Related to Cryptocurrency.” Mr. Costa’s informative presentation highlighted the need to consider a variety of “digital assets” when formulating an estate plan.
Between social media, cryptocurrency and online banking, an increasing number of Americans have accounts on various digital platforms. This brings to mind the broader question of how to incorporate digital assets into your estate plan. While digital platforms have the ability to make our day-to-day lives easier, they can complicate matters after the owner of the digital assets passes away. Fortunately, there are steps that can be taken to avoid these complications.
If I can provide one piece of advice as it relates to estate planning for digital assets, it would be to ensure you find a way, should anything happen to you, to let your personal representative, trustee and/or family know what digital assets you own, where to find them and how to gain access to them. Of course, the reality of this quickly evolving arena is a bit more complicated.
For many people, the COVID-19 epidemic expedited their entry into the digital world. From working virtually to banking online, the reality of the past two years resulted in many people being more comfortable on the computer. Therefore, ownership of “digital assets” are not limited to tech savvy millennials. Anyone who uses an online bank, owns cryptocurrency, or has a social media account owns a digital asset and must consider what happens to those assets after they pass away.
As I mentioned above, there are many things that fall under the umbrella of “digital assets”. Those include but are not limited to cryptocurrency (the most well-known being Bitcoin), online bank accounts without physical branches (i.e., Ally, Capital One 360, Axos, etc.), mobile payment services (i.e., Venmo, Square, Zelle, etc.), websites, online content, blog posts, credit card points, frequent flyer miles email, cloud-based accounts and social media. Traditional assets – i.e., a house, vehicle or even a traditional account at a bank – are tangible items. As opposed to traditional assets, digital assets can include anything stored, accessed or owned electronically online or in a digital format.
Cryptocurrency is a form of digital asset based on a network that is distributed across many computers. This decentralized structure allows them to exist outside the control of governments and central authorities. The most well-known cryptocurrency is, of course, Bitcoin. All cryptocurrencies are held and stored digitally and anonymously. This makes estate planning for cryptocurrency particularly tricky. If the owner passes away, it is difficult to prove ownership without access. As such, if you own cryptocurrency, it is vital to ensure that your personal representative, trustee and/or family would have access if needed. Because there is nothing tangible, these digital assets are easier to lose.
Houses have deeds. Cars have titles. Traditional bank accounts have statements. However, digital assets often have no paper trail of ownership. There is nothing physical nor can they be easily withdrawn. Therefore, if not previously told by the deceased owner of the existence of the digital asset, a fiduciary will not know the digital asset exists nor where to find it. For instance, even if a fiduciary suspects a decedent owned cryptocurrency, she will likely need to gain access to the decedent’s email account which, as another digital asset, may prove difficult to do if the decedent did not provide the fiduciary with the password.
Regardless of which digital asset you may own, the best practice comes down to this: if you own digital assets, it is best to maintain records on your own. The better you fulfill this responsibility, the easier it will be for your family in the future. There is no Bitcoin customer support, so spend the time storing all relevant information where your family can gain access.
Surely, as with all technology related topics, this is a moving target. Estate planning for digital assets was much less complicated 20, 10 and even 5 years ago. It’s a quickly evolving field that will be very different in the not-too-distant future. If you read this article even just a few years from now, it certainly will be outdated.
All owners of digital assets can currently do is to remain informed about future developments. The first line of defense is to develop an estate plan that complies with the current (yet ever-changing) laws governing digital assets. For instance, verify that your power of attorney allows your designated agent to access online accounts and digital assets, if needed. This can be something as simple as permitting the agent to pay your mortgage payment and other bills online. Make sure you give your agent the ability to access these accounts.
It is also worth noting that some platforms permit a so-called “digital executor.” In other words, they allow the owner to designate someone to manage and access the account after the owner passes away. Other preemptive steps an owner can do is designate beneficiaries on online banking and investing accounts, and even frequent flyer miles or credit card points.
If you do nothing else as a digital asset owner, you might want to take a lesson from the book “In Case You Get Hit by a Bus: How to Organize Your Life Now for When You’re Not Around Later” and get your digital life in order by compiling an index of usernames, passwords and accounts. Your digital inventory should not only allow access to your accounts, but also lay out where to find them. If you own a Bitcoin wallet or Venmo account, make sure to let your family know where to look. Without this inventory or other evidence, they could be lost forever. This is, of course, not foolproof (passwords change) and you must be careful about security to ensure only the right person can gain access. However, the best estate planning step you can take regarding digital assets is to guarantee the assets can be accessed if something were to happen to you.
Zachary W. Worshtil is a Partner at the Law Office of Ralph W. Powers, Jr., P.C. He is also a member of the PGCBA Board of Directors and co-chair of the Probate, Estates, Trusts & Elder Law Section. He concentrates his practice primarily in estate administration, probate litigation and estate planning.