A growing share of family wealth now exists in digital form, and estate plans need to keep pace. Cryptocurrency, online businesses, loyalty points and cloud-stored libraries can all hold real value. These assets often don’t appear on a traditional account statement. If a family doesn’t know they exist or can’t access them, that value can be lost.
Think of the familiar story of the Bitcoin saved on an old hard drive that ended up in a landfill, taking a fortune with it. The good news is that a well-designed digital asset plan makes sure your successors know what you own, have the legal authority to manage it and have a practical way to access it. This article explains what counts as a digital asset, why ownership and access are not the same thing, why cryptocurrency needs special care and what steps to consider next.
What Counts as a Digital Asset?
A digital asset is any asset that exists primarily in electronic form, and the category is broader than most people expect. Common examples include the following:
- Cryptocurrency (such as Bitcoin and Ethereum)
- Domain names
- Online businesses and e-commerce stores or accounts
- Monetized social media accounts
- Airline miles and loyalty points
- Photos, document libraries and other intellectual property stored in the cloud
- Email accounts
- Subscriptions and software accounts
Your digital assets deserve the same care as your real estate, financial accounts and business interests. A careful inventory does two things: (1) it points your successor (your trustee or personal representative) to where the assets are; and (2) it helps make sure your estate plan accounts for those assets so they pass according to your wishes.
Does Owning a Digital Asset Mean Your Heirs Can Access It?
Not necessarily. With traditional assets, ownership and access usually go together. When your successor steps in after your death or incapacity, they hold both legal ownership and the legal right to access and manage the asset.
Digital assets work differently. For example, a person may own a profitable online business, but its website, payment accounts and customer records may be controlled through separate platforms. Even if a trustee has legal authority to manage the business, the trustee may be unable to access critical accounts, recover credentials or satisfy a platform’s verification requirements. Even when the trustee has legal authority to take control, practical barriers to accessing the necessary accounts can disrupt business operations.
The reverse can also happen. You probably don’t “own” e-books, music and movie libraries or cloud storage in the traditional sense. You may hold only a license to use them, and that license may not be transferable. Even if your successor can access the account, the right to continue using the service may not pass to them.
A sound plan covers both legal ownership and practical access. Legal ownership should be covered by a well-prepared set of estate plan documents. However, practical access also requires providing detailed information about the assets and how to access them that your successors will be able to find and use.
Is Cryptocurrency Hard to Pass On?
Cryptocurrency is designed with security in mind, and in some cases, it can be the modern version of buried treasure. Without clear access instructions, significant wealth can be lost for good. Because cryptocurrency can move directly between parties without a bank in the middle, many owners keep their holdings private and store access information apart from their devices. Some cryptocurrency holding methods require several security steps before a transfer can go through. While these precautions protect against theft, they also make it harder for your successor to get in. In general, the more secure the method, the harder access can become.
The ability to access the assets depends on how you hold your cryptocurrency:
- Online exchange accounts or third-party custodians (such as Coinbase or Kraken). A company holds the cryptocurrency for you, and access usually requires a username, a password and an extra verification step. Most platforms have a process for deceased or incapacitated account holders. Your successor shouldn’t assume that login credentials alone will be enough to access or transfer the assets.
- Digital wallets and hardware devices. Some owners use an app or a physical device (such as Ledger or Trezor), which often looks like a USB drive, to store the keys that control the assets. Access may require the device, a PIN or password, and recovery information. If the device is lost, the assets may still be recoverable if the backup information can be found.
- Separately stored recovery phrases or private keys. Some owners keep recovery information in physical places such as a safe or a safe deposit box. Others get creative: we’ve heard of keys carved into a rock under a house or written microscopically on a grain of rice. These approaches add security. They can also leave your successor stuck if they don’t know where the information is, can’t find a required key or don’t know the assets exist at all.
Because sharing your recovery information gives your successor immediate and complete access, many people may understandably worry that even a trusted successor could misuse that access. By not sharing it, however, you risk losing significant wealth if you die or become incapacitated. The goal is a plan that lets your successor find the assets, understand how to access them and obtain the credentials without weakening your security during your lifetime. Cryptocurrency planning is not just an investment question – it calls for a balance of legal, security and succession planning needs.
Does Your Fiduciary Have the Authority to Act?
When it comes to digital assets, your fiduciary may not have the authority to act, even if your documents give broad powers over your property. General language may not be enough in a digital setting, and a platform may refuse access without the right permissions. Each platform typically sets its own rules for access and transfer after death or incapacity, and legal standards for digital asset access are still developing.
If your digital assets are worth a lot or matter to you for sentimental reasons, it helps to understand the rules of the platforms you rely on. For example, if an account needs both a password and a code sent to your cell phone (multifactor authentication), your successor will need both your current password and your phone. Leaving that information with someone can feel uncomfortable – though without it, your assets may be lost for good or recovered only after great expense and delay.
Next Steps
- Create a digital asset inventory. List what you own, the custodians and platforms that hold it, any hardware devices and the recovery steps for each.
- Review fiduciary authority in your documents. Talk with your estate planning attorney about whether your will, trust and powers of attorney include modern provisions on digital asset access.
- Coordinate ownership and transfer structure. Look at whether each digital asset can be held in a trust or business entity, and coordinate with your financial and tax advisors so your digital holdings fit your broader plan.
- Balance security and access. Consider how your successor will reach passwords, devices and recovery information without weakening your security today.
- Review regularly. Digital holdings change quickly, and an inventory from two years ago may now be incomplete or out of date. Periodically check whether each platform has a transfer-on-death or access policy.
For questions about planning for your digital assets, please contact any of the authors or one of our Private Client Services attorneys.