Bitcoin. Ether. Ripple. Everyone knows about them, but do you know what they are?
They’re all a form of cryptocurrency which is a fancy way of saying a “digital or virtual” currency type. They’re just like the dollars and notes we have in our wallets, except we can touch that type of money; the virtual or digital kind, we cannot.
Which is exactly why it’s quite the “crypto-conundrum” for estate planners like me. It’s a form of assets in a person’s estate, but how do you protect this asset and make sure it gets to the beneficiaries of your estate.
Now, if you’re one of the many people that jumped on the bandwagon down the Crypto highway, this is going to be right up your alley. If you’re not, there are some excellent insights so keep reading anyway!
Chances are, digital and virtual currency is the way of our future; whether we like to admit that or not. At one time or another, you may have a digital currency in your asset portfolio; you might even receive some as a beneficiary of another estate.
What it is and how do you protect it?
To prepare for this, you will need to give some thought as to what it is and how to protect it when the time comes.
The biggest problem in dealing effectively with digital assets of any kind (including cryptocurrency) is that your executor needs to know they exist in the first place. This seems like common sense, however when you think about it, it’s easy to see why people might not know about an intangible asset that only exists in the digital world.
When we think of money, we think of wallets and banks. Subsequently, when someone passes away, an executor (who may not know much about the financial affairs about the deceased) will naturally go through papers and statements to work out what bank accounts are held where etc.
We now live in a technological age where we cannot assume there are paper statements for, well, anything, anymore.
The same principle applies to digital assets. There’s rarely a paper trail to follow.
Three things you should do:
- Leave a paper trail: Leave paperwork for your executor that sets out the details of your cryptocurrency and other digital assets. This helps your executor identify your assets, take steps to protect those assets, collect in those assets and then distribute them in accordance with your wishes.
- Give the key to your executor: Leave your executors the information needed to gain access to your digital assets after you’re gone. This might mean passwords, website address, login details, answers to security questions, digital keys, codes etc. Without these details, it may be impossible for your executor to gain access, which means they’re locked out until (and if) they can obtain access. There are ways to record and keep this information secure.
- Give careful consideration to who you appoint as executor: You should consider whether your intended executor has some knowledge of this technology and digital assets generally, or at the very least, an appreciation for them and the importance of seeking expert advice (and the willingness to obtain that advice). Having an executor that doesn’t fulfil this brief can cause risk to your estate, along with delay and distress to your beneficiaries.
The nature of technology and the rapid rate of development means that you need to take ownership of your succession planning and make sure your arm your executors with the information they need to manage your estate effectively. What this means in practice will differ depending on your circumstances and the nature of the interests you hold. This also depends on your wishes.
Your executor is your avatar in the afterlife. Dress them for success.