Showing posts with label cryptocurrency. Show all posts
Showing posts with label cryptocurrency. Show all posts

Wednesday, April 23, 2025

Why Digital Assets Are a Must in Your Estate Plan: A Guide to Proper Treatment


As an estate planning lawyer, I’ve seen firsthand how our lives are increasingly intertwined with the digital world. From online banking to cherished family photos stored in the cloud, digital assets are a significant part of our personal and financial lives. Yet, many people overlook these assets when creating their estate plans, potentially leaving loved ones locked out of valuable accounts or sentimental treasures, sometimes with tragic consequences.  

The law governing digital assets, such as the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA), is complex due to its three-tier hierarchy for access—online tools, legal documents, and terms-of-service agreements—and custodians’ discretion to limit disclosure or require court orders. This complexity often makes it difficult for fiduciaries, your trustees and agents, to access accounts without proper planning, which is why professional guidance is essential.  I've written two specific articles regarding the law governing  digital assets in estate planning, one applicable to Ohio, the other to Missouri.  The law is not simple to understand or easy for a layperson to follow in order to protect digital assets.  

I’ll explain in this article why digital assets deserve a central place in your estate plan, provide practical, actionable steps you should take to protect them.  I have prepared Digital Assets Inventory Worksheets and an explanatory Cover Sheet, and  in the article immediately following this article, I offer detailed instructions to help you get started protecting your digital world.

Why Digital Assets Matter in Estate Planning

Digital assets encompass a wide range of items, including email accounts, social media profiles,  cryptocurrency, loyalty program rewards, online businesses, and digitally stored photos or documents. According to NordPass, the average person manages 168 online accounts, with an estimated average value of $191,516 for Americans’ digital assets, per a Bryn Mawr Trust survey

Despite their prevalence and value, 76% of Americans have little to no knowledge of digital estate planning, often leaving these assets unaddressed in their plans. This oversight can lead to significant challenges for your heirs, such as:
  • Financial Loss: Valuable assets like cryptocurrency or online business accounts may become inaccessible without proper access instructions.
  • Sentimental Loss: Family photos, videos, social media memories, or digital content, e.g., recipes, workout videos, and stories, may be lost if no one can access them.
  • Cybersecurity Risks: Unmanaged accounts could expose personal information, increasing the risk of identity theft, and expose vulnerable family members to exploitation.
  • Aging in Place Planning: For clients focused on aging in place, digital assets like Smart Home and IoT Accounts (e.g., Vivent, ADT, Amazon Alexa, Ring) and Health & Fitness Accounts (e.g., Fitbit, Apple Watch) are critical, supporting independent living by managing home security (e.g., locking doors remotely), temperature, active and passive emergency notifications (e.g., triggered alerts or automatic fall detection), daily routines (e.g., medication reminders), and health monitoring. Ensuring your trustee can access and manage these accounts, as documented in your Digital Assets Inventory Worksheet, helps maintain your home environment during incapacity, aligning with your goal to remain in your home as long as possible, with legal authority under RUFADAA.
  • Time: Loved ones may spend countless hours  trying to gain access to accounts, adding stress during an already difficult time.
  • Cost:  Subscription services often auto-renew and drain estate funds if not canceled or managed after death. 
  • Legal Peril: The digital world is a world of information, and this information can be legally significant in real life. Consider the following example: A stepchild contested a stepmother’s will disinheriting them, alleging incompetence and undue influence, ten years after the will was drafted. The executor, a daughter, preserved her mother’s digital footprint, which included text messages discussing the decision, GPS data showing independent activities, game logs (e.g., solitaire, sudoku) demonstrating cognitive ability, and videos sent to a grandchild. This evidence of a grandmother—vibrant, capable, independent, and resolute—proved the deceased’s competence, leading to a nuisance settlement. Without this digital evidence, the outcome might have been different.
  • Health Information: Digital health data may be vital in legal contexts, such as wrongful death claims or guardianship disputes over competency.
  • Financial Information: Evidence of gambling, scams, or financial support may be exculpatory in civil or criminal cases involving allegations of elder exploitation, or necessary to prove such exploitation.
Imagine a family unable to access a $50,000 Bitcoin wallet because the private key was not documented, or a widow losing access to a Google Photos account containing decades of family memories because no one was designated to manage it. These scenarios highlight the real consequences of neglecting digital assets in your estate plan.
         
As a trusted advisor, I recognize that managing your digital footprint is non-negotiable for a comprehensive estate plan. Ignoring digital assets risks your legacy and exposes your family to risk or loss. By proactively including digital assets in your estate plan, you can ensure your wishes are honored and your loved ones are spared unnecessary complications.  Your digital assets may also help protect you, financially and legally from exploitation or abuse.

If you have an estate plan drafted by my office within the past ten years, your estate planning documents already address digital assets:
  • General Durable Power of Attorney:  Your power of attorney confers authority to your agent to manage digital assets owned by you during your life.
  • Revocable Trust:  Your trust document confers to your trustee the authority to manage digital access owned by your trust while you are alive.  Additionally, your trust confers authority to your trustee to manage digital assets after your death. 
Regardless, this is a rapidly evolving area of the law.  Consider simple, inexpensive revisions to your planning document relating to digital assets every three to five years.    
 
Action Items for Including Digital Assets in Your Estate Plan

To bring order to your digital assets and secure your legacy, here are key steps you should take, along with how our firm can assist:
  • Create an Inventory of Your Digital Assets: Start by compiling a comprehensive list of your digital assets. This includes accounts, devices, and any digital property with financial or sentimental value. Use the inventory sheet provided below to organize this information. Keep this list in a secure location, such as your LegalVault®, a password manager, or a safe deposit box, and inform your executor or a trusted person where to find it.
  • Appoint a Digital Fiduciary:  Designate a tech-savvy individual as your digital trustee/executor to manage your digital assets after your passing. This person should be named in your will or trust, with clear authority to access and distribute your digital property. We can help draft specific provisions to ensure compliance with laws like the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA).  If your successor trustee is not tech-savvy, you can select a specific person to handle only the the tech or digital role.  
  • Include Digital Assets in Legal Documents:  Incorporate clear instructions for your digital assets in your will, trust, or power of attorney (POA). For example, a POA can grant an agent authority to manage your online accounts if you become incapacitated. Our firm will work with you to include language that aligns with your wishes and legal requirements.
  • Use Online Tools for Account Management:  Take advantage of platform-specific tools like Google’s Inactive Account Manager or Facebook’s Legacy Contact to designate who can access or memorialize your accounts. We can guide you through setting up these tools to complement your estate plan.
  • Regularly Update Your Digital Asset Inventory:  Digital assets evolve rapidly, so review and update your inventory annually or when significant changes occur (e.g., new accounts, inactive accounts, sold cryptocurrencies). During our estate plan reviews, we’ll prompt you to provide updates on your digital assets to keep your plan current.
  • Secure Access Information:  Store login credentials and two-factor authentication (2FA) details securely, using a password manager or encrypted digital vault. Avoid including passwords directly in your will; it becomes a public document during probate. Our firm can recommend secure storage solutions like LegalVault® and ensure your trustee/executor knows how to access this information legally.
  • Check Transferability of Assets:  Not all digital assets are transferable due to terms of service agreements. For example, some loyalty points, memberships, or digital media may not be passed to heirs. We can help you verify which assets can be passed on and structure your plan to maximize their value for your beneficiaries.
Special Considerations

Often, a person is asked to manage digital assets he or she may have little familiarity with, and little appreciation of their significance or worth. The following are special considerations about which you should be aware.

  • Messaging Apps: These often contain important communications (e.g., family messages, business discussions) that may be merely sentimental or legally relevant. Separating them from email accounts highlights their distinct nature and ensures fiduciaries address them. Fiduciaries should be aware that these apps may contain legally relevant communications, such as evidence of intent or agreements, which could be critical in disputes over estate administration.
  • Blockchain Accounts: Cryptocurrencies and non-fungible tokens (NFTs) are increasingly common digital assets with significant financial value. They often require private keys or seed phrases for access, which fiduciaries need to manage. Attention to this category ensures these high-value assets are not overlooked.
  • Music Streaming Accounts: These accounts may contain purchased music, playlists, or subscriptions that the grantor wishes to preserve or transfer. These are distinct from broader entertainment accounts like Amazon Prime.
  • Gaming Accounts: These accounts may contain purchased games, in-game assets, or subscriptions.
  • Intellectual Property and Creative Accounts: Accounts hosting creative works (e.g., writing, music, photography) may have monetary value (e.g., royalties) or sentimental value (e.g., unpublished works). This category ensures these assets are captured beyond blogs in “Publication Accounts.
  • Health and Fitness Accounts: Health and fitness accounts may contain valuable data (e.g., genetic information, fitness history) that the grantor wishes to share with family or delete for privacy reasons. Genetic accounts like 23andMe also have privacy implications that fiduciaries should address. This information may also be legally relevant, for example, if there is a wrongful death claim, or a claim of incompetency or incapacity (guardianship or conservatorship). Additionally, Health & Fitness Accounts can monitor vital health metrics and share data with caregivers, further supporting your independence.
  • Smart Home and IoT Accounts: Smart home devices often have associated accounts that control access to data (e.g., Ring camera footage) or settings (e.g., thermostat schedules). These may need to be managed or transferred to ensure home security or functionality.
  • Wearable Device Accounts: Wearable devices, while related to “Electronic Devices,” often have separate accounts for data storage (e.g., fitness tracking) that may not be captured under the device itself. These accounts may contain health data relevant to the grantor’s estate plan. These have privacy implications that fiduciaries should address. This information may also be legally relevant in the same way as health and fitness accounts. 
  • IoT- Internet of Things: IoT stands for Internet of Things. It refers to a network of physical devices, vehicles, appliances, and other objects embedded with sensors, software, and connectivity, allowing them to collect, exchange, and act on data over the internet. In the context of the Digital Assets Inventory Worksheet, IoT accounts (e.g., Amazon Alexa, Google Nest, Ring) are included as an asset type because these devices often have associated online accounts that store data (e.g., camera footage, voice recordings) or control settings (e.g., thermostat schedules), which fiduciaries may need to manage. Immediate access may be necessary to maintain home security (e.g., Ring camera footage) or functionality (e.g., thermostat settings), especially for aging-in-place clients who rely on these devices for independent living. Examples of IoT devices include smart home systems, wearable tech like smartwatches, and connected vehicles.
  • Password Manager Accounts: While the worksheet includes a “Password Manager” column, treating password managers as a distinct asset type ensures they are inventoried as a critical access point for other accounts. These accounts often centralize credentials, making them a priority for fiduciaries. These accounts centralize access to other assets, but their credentials must be stored securely to prevent unauthorized access, as they can unlock your entire digital estate.

How Our Firm Protects Your Digital Asset Wishes

At Monty L. Donohew, LPA, we take a proactive, client-centered approach to digital estate planning. Here’s how we ensure your digital assets are protected:

Customized Legal Documents: We draft trusts, wills, and Powers of Attorney with specific provisions for digital assets, ensuring compliance with RUFADAA and platform terms of service.

Final Instructions and Forms: We provide every trust client with a set of Final Instructions and Forms, empowering your trustees and agents with the knowledge, tools, and forms, to administer or settle your trust with confidence, significantly minimizing future legal expenses. 

Education and Guidance: We educate you on the importance of digital assets and guide you through creating and maintaining your inventory.

Secure Planning: We recommend secure methods for storing access information and work with you to appoint a capable digital fiduciary.

Secured Planning Documents: We encourage and work with you to set up secure storage of your estate planning documents, introducing, employing, and deploying for you such third party services as LegalVault®.

Ongoing Support: During periodic estate plan reviews, we’ll revisit your digital asset inventory to help keep it up to date and aligned with your goals.

Collaboration with Experts: If your digital assets include complex items like cryptocurrency or online businesses, we collaborate with financial and tech experts necessary to ensure proper management.

Take the Next Step Today

Your digital assets are a vital part of your legacy, and neglecting them could leave your loved ones grappling with chaos. By taking the steps outlined above, you can bring order to your digital life and provide peace of mind for yourself and your family. Start by completing the digital asset inventory sheet and scheduling a consultation. We’ll work together to integrate your digital assets into a comprehensive estate plan tailored to your aging-in-place goals.

I understand you might be concerned about the time, cost, or privacy implications of managing your digital assets. Rest assured, updating your estate plan to include digital assets is a straightforward process that typically takes just a few hours and offers significant long-term value by avoiding costly legal disputes. Our firm prioritizes your privacy, recommending secure storage solutions like LegalVault® to protect sensitive information while ensuring your fiduciaries can access what they need.

Ready to secure your digital legacy? Contact us to book an appointment. Let’s ensure your digital assets are as protected as your physical ones.


Monday, February 24, 2025

Crypto and Estate Planning: One Man's effort to Recover $800 million in Bitcoin




You can play the video in the embedded viewer by clicking on it, or
you can play the full size video in its own window by clicking below (RECOMMENDED):

In this article we return to the saga of James Howells, the subject of a previous article on this blog, as he continues his years-long battle to get back a hard drive that contains a discarded bitcoin key currently worth somewhere around $800 million by offering to purchase a landfill in Great Britain in an effort to find the wallet before it closes down. James Howells had repeatedly requested that the Newport City Council, in South Wales, grant him access to the mountains of waste to find the hard drive that was accidentally discarded in 2013.  
When his repeated requests were denied, he offered to fully fund the excavation process and share 25% of the recovered Bitcoin with the Newport City Council.  When that offer was rejected, he filed a lawsuit to compel the Council to accept his offer.  The lawsuit seems to be in the vein of 'taxpayer" suits common in the U.S. where a taxpayer contests some official act or denial as wasteful of taxpayer dollars. That case, however, ended with a judge dismissing his claim holding that Howells had “no reasonable grounds” for bringing the claim and that there was “no realistic prospect” of success if the case were to proceed to a full trial."
Now, the city is planning to close the landfill for good.  
Whether this is a welcome or ominous development for Mr. Howells remains to be seen.  Mr. Howells has not given up, though, as he is now proposing to purchase the landfill. His plan involves either reclaiming and remediating the landfill and turning it into a park, or re-launching it as a landfill.  
Mr. Howell's predicament underscores the risks and challenges of cryptocurrency investing beyond just the risk of investment.  Digital currencies have digital or virtual 'keys" that must be protected.  For more information, please consider the following:

Friday, February 26, 2021

One Man's Effort to Recover $280 Million in Bitcoin He Accidentally Threw Away

Another object lesson regarding the risks of crypto-currency investing comes by way of James Howells, a 35-year-old IT engineer from Wales.  Howells accidentally threw out a hard drive on which he had stored 7,500 bitcoins.  Although reports did not indicate his initial investment, assuming he purchased the bitcoin in April, of 2011, his initial investment was $7500.00.  The bitcoins are worth about $280 million at today's prices (in April of 2011, the price of a bitcoin skyrocketed to $32 a coin).  

Howells said he had two identical laptop hard drives and he accidentally threw the drive with the cryptographic "private key" that he needed to access his coins in the trash. 

Howells is reportedly confident that he would be able to retrieve the key and recover the bitcoin. If the platter inside the hard drove is still intact, data recovery experts could rebuild the drive and read the data from the platter. The drive, which he threw away eight years ago, is the only way to regain access to the coins. 

Unfortunately, retrieving the hard drive would not be an easy task. Howells will first need to gain permission from local council to search the garbage dump since the landfill is not open to the public. After that, Howells would have to dig through eight years worth of garbage. 

Howells has offered to donate 25% (around $70.8 million) of the bitcoin to a Covid Relief Fund for his city if he is able to find the drive. Unfortunately, city council has rejected his requests so far and they are showing no signs of letting up any time soon. 

For more information, including information on how you might avoid these risks, see the following prior blog posts:

The Strange Case of Crypto Exchange QuadrigaCX: Death and a Missing $200 Million

LegalVault® Offers Solution to Estate Planning Challenges of Bitcoin and Cryptocurrencies 

Source: Man makes last-ditch effort to recover $280 million in bitcoin he accidentally threw out, CNBC News, January 15, 2021.

Friday, April 19, 2019

The Strange Case of Crypto Exchange QuadrigaCX: Death and a Missing $200 million

 A major Canadian cryptocurrency exchange is in the spotlight following the sudden death of its founder, Gerald Cotten, which has left customers unable to access $190 million in funds.

The 30-year-old founder of QuadrigaCX died in India on Dec. 9, 2018 due to complications from Crohn’s disease, according to a sworn affidavit by his wife, Jennifer Robertson. At the time of his death, Cotten was the only person with the password to access the customers' funds.

“For the past weeks, we have worked extensively to address our liquidity issues, which include attempting to locate and secure our very significant cryptocurrency reserves held in cold wallets, and that are required to satisfy customer cryptocurrency balances on deposit, as well as sourcing a financial institution to accept the bank drafts that are to be transferred to us,” QuadrigaCX said, in a statement posted on its website. “Unfortunately, these efforts have not been successful.”

Referring to Court filings, the Chronicle Herald notes that “cold wallets” harness technologies such as USB drives and electronic devices that are not connected to the Internet.

I noted in my Facebook post on the subject that:
This would NOT have happened had the owner set up a LegalVault® account with my firm. I warned that this would happen in an article I published last November. I also described how my clients who use LegalVault avoid this risk. See my article here: http://bit.ly/2GrallA. 'A man who does not plan long ahead will find trouble at his door.' ― Confucius, Chinese philosopher."
You can read more in the Fox News article that first alerted us about the fiasco. Apparently the owner was concerned more for the welfare of his pet chihuahuas, than for his family or investors.  

More:  

LegalVault® Offers Solution to Estate Planning Challenges of Bitcoin and Cryptocurrencies;

Most Procrastinating on Planning; Those That Plan Don't Protect Their Plans;

Considerations in Crafting Health Care Proxies or Durable Powers of Attorney for Health Care;

Where Are Our Family Photos?!? Planning for a Digital Legacy;

The Trouble With Advance Directives;




Saturday, November 10, 2018

LegalVault® Offers Solution to Estate Planning Challenges of Bitcoin and Cryptocurrencies

Cryptocurrency and blockchain technology are approaching mainstream, with more people appreciating the unique investment attributes of Bitcoin and other cryptocurrencies. Advisers  and owners, however, should be aware of the potential pitfalls these assets present in estate planning. 

Typically, an owner will want to ensure that these assets transfer appropriately upon death, but this desire must be balanced with the desire or need to retain control of the asset as long as is possible.  Like cash in hand, availability and access to cryptocurrency keys and passwords means the power to direct, spend, liquidate, or transfer the asset. Therefore, the challenge is in ensuring that one does not prematurely relinquish the keys to the  cryptocurrency.

When a person buys bitcoin, it’s associated with crypto-graphic public and private keys. The public key identifies that specific bitcoin and all of its transactions on the blockchain—a public ledger that records transactions on a network of decentralized computers across the world. The private key is the owner’s secret.  The private key proves ownership and authorizes transfers. The private key typically remains secret until the owner passes away, otherwise anyone could steal the cryptocurrency.  

Cryptocurrency can be held in online exchanges, software wallets or hardware wallets, each requiring a slightly different planning perspective. Hardware wallets are similar to USBs and an estate plan needs to spell out where the device is located and the necessary seed phrase. Cryptocurrencies other than bitcoin are becoming common and securing significant capitalization:

Each form and brand of cryptocurrency has unique features that require specific communication to and deployment by an owner's fiduciaries or family.

The challenge with most planning methods, such as software or hardware wallets is that the physical or virtual location must be provided to counsel and/or fiduciaries, otherwise the asset is inaccessible and may lost. The owner may not desire to provide this information to either, since access means the ability to direct funds. Physical wallets are also subject to risks such as loss, damage, or destruction, even if they are known and identifiable. If they are not known or identifiable by fiduciaries or counsel, even if working, they are useless to discover and direct assets.

LegalVault® is a great tool which allows you to safely and securely store your cryptocurrency's key, along with your health care and advance directives, and your estate planning documents.  The brilliance of the LegalVault® program is that each type of document or information is treated specifically for the discreet needs of the owner: health care directives are available to third party health care professionals during the owner's life; estate planning documents are available to the owner's fiduciary and legal counsel during the owner's life; but keys and passwords are inaccessible to everyone but the owner, and only become available upon the owner's death or permanent incompetency or incapacity. 

Even if an owner does not have a complete or comprehensive estate plan, LegalVault® provides a cryptocurrency owner the ability to safely and securely keep, store, and maintain passwords and keys, while providing an elegant solution to prior notification to the fiduciaries and counsel of the existence and location of, and access to, passwords and keys.    

Here’s how LegalVault® works when used by a cryptocurrency owner who has a comprehensive estate plan:
  • Each  owner is given a secured LegalVault® account created specifically for the owner;
  • Our firm, or your lawyer, uploads the image of the owner's health care and advanced directives to the owner's LegalVault® account;
  • We immediately print a temporary Emergency Access Card, and LegalVault® shortly thereafter sends out a durable Emergency Access Wallet Card which contains instructions for healthcare providers on accessing healthcare-related documents online or via a 24/7 fax back service;
  • Once an account has been created, the LegalVault® physician notification system sends a notice to the primary care provider informing him or her of this invaluable service and the storage of advance directives, ensuring that these important planning documents never fall to the back of a medical chart where they go unnoticed for weeks; 
  • The owner controls what information is available to health care providers, and can quickly update the account with up-to-date documents or information (such as medications or allergies) from their home computer or smart phone;
  • With the owner's permission, images of other estate planning and legal documents (Wills, Trusts, Powers of Attorney, Competency Directives, Rights of Sepulcher, Deeds, Contracts, etc.) are uploaded to the owner's LegalVault® account; 
  • Owners can log in to their accounts to share other non-healthcare-related documents with our firm, or even upload copies of family keepsakes (photos, home videos, letters to children, family trees) to ensure these are safely secured and passed down to younger generations;
  • Owners can keep or maintain important legal and financial records such as insurance policies, annuities, savings bonds, stock certificates, leases, contracts, and other instruments, potentially lost, stolen, discarded, or destroyed by third parties at a time of death or disability;
  •  Owners can alert authorities of significant needs or concerns, such as "disabled child at home," "pets at home," or the like;
  • A separate vault, inaccessible to legal counsel, inaccessible to other professional advisers, and inaccessible to family and friends, and accessible only to the owner, and an owner's executor, successor trustee, or personal representative upon the owner's death or incompetency, can store passwords, keys, and/or seed phrases to bitcoin or other cryptocurrencies, as well as other online investment and bank accounts, along with combinations and instructions for physical storage devices such as safes, lockers; storage units, and the like;
  • Upon renewal of the LegalVault® account (every 3,5, or 7 years) updated documents are executed, ensuring that the documents and information are never out-of-date.
There is no limit to the storage space available for estate planning documents, pictures, letters, financial documents, and the like.  The cost of such a service is probably less than you might imagine. Contact us if you want to add this valuable service to your estate and/or financial plan. 

For more information regarding estate planning needs for bitcoin and cryptocurrencies, please consider the following excellent article: Angela Morris,  "With the Rise of Cryptocurrency, Estate Lawyers Caution that it Shouldn’t be Treated like any Other Asset," ABA Journal, November 2018.

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