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Katya Sverdlov Blog

Monday, November 26, 2018

5 Things to Do Immediately to Protect Your Digital Assets, Including Crypto-Currency

 

Once you stop to think about it, you might will realize you have more digital assets than physical ones. These include online banking and brokerage accounts (banking and brokerage), photo storage sites, social media accounts, and cryptocurrency. If you were to die tomorrow, does anyone have the right to possess these accounts? Will they know the necessary steps to access them?

Online providers handle the accounts of deceased users differently. Some, (like Facebook,) have created a legacy contract, which enables one to designate a person to manage one’s account after death. Others do not have such a clear policy, and there are federal laws (such as The Computer Fraud and Abuse Act and The Stored Communications Act) that severely limits provider’s’ ability to share personal account information with others.

The following are five essential estate planning techniques that are necessary to protect your digital assets:

1.      Make a list of all your Electronic Accounts and Assets

Who will ever find out about that Bitcoin that you purchased or the photo storage site that you have for your wedding pictures? If you want your heirs to have that information, then you should make a list of all your electronic accounts and assets, including user names and passwords, and physically print it out, then attach it to your estate planning documents and update it regularly.

2.      Share Information about Private Keys and Passwords

Most crypto currencies have a private / public key system to ensure that each transaction is valid. Private keys are essential to verify ownership of your crypto-currency. You should physically record the information about your private key to crypto currency, and let your heirs know where this information is kept. You also need to record your user names, passwords, and security questions to digital accounts. Some companies, including many crypto-currency exchanges, use two- factor authentication, – using such as your phone or email, to verify accounts. You need to plan for your heirs to access these accounts. You also need to provide for someone to have access to this information – either through a safe deposit box or another methods of storage.

3.      Share Custody of the Hardware Wallet

Once you purchase crypto currency on an exchange, the information is stored in the on exchange’s default wallet. In order to protect themselves from being hacked, some investors store the information on a hardware wallet (an encrypted flash drive that requires a password to be accessed). If the hardware wallet is lost or damaged, digital assets may be lost. To prevent this, make sure to give heirs the wallet information and password.

4.      Provide for Access to Electronic Assets in Documents

The law is still developing on privacy and access to electronic accounts: as a result,  without explicit authorization, lots of companies may not allow your fiduciary to access the accounts without explicit authorization. You must make sure that both your Power of Attorney and your Will have language that allows your fiduciaries to access your electronic documents and assets.

5.      Consider owning your crypto-currency through a Trust.

Unlike other financial institutions, such as banks and insurance companies, crypto-currency exchanges do not ask owners to name beneficiaries on their accounts. As a result, even if you provide someone with access to your account, upon your passing, the heir will have to go through probate court to receive the money. To avoid the costs, delays, and complications of court, consider transferring your crypto-currency to a Revocable or Irrevocable Trust. Upon your passing, as long as they have the private keys and passwords, the Trustees will be able to access the accounts without any court involvement.

Contact us to discuss your estate planning options regarding your digital assets.


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