As reality TV takes over the world (or is that just me projecting?), we find ourselves discussing a South Korean reality television show that focuses on crypto investors, bitcoin (BTC) enthusiasts and miners.
So, this begs the question; what can we learn from crypto TV?
Despite its name, cryptocurrency is not treated like bank accounts, insurance benefits, or investment assets. Both Florida and federal law consider these digital assets as personal property (like a desk or shoes) rather than currency. This distinction affects the way digital assets are treated and taxed after death. Additionally, these assets don’t have a beneficiary designation so they will go through the probate process and the last will decides their fate.
There are a few unique items to take into consideration when creating an asset plan that includes these digital assets.
Passwords: The first hurdle is recalling and transferring the password. One of the biggest challenges to using and trading cryptocurrency is remembering the password. Unlike email or social media accounts, the password (private key) to the cryptocurrency account can’t be recovered if lost. According to the New York Times, approximately 20% of the 18.5 million Bitcoin (worth around $140 billion as of January 2021) were in lost or stranded wallets (it’s mean to laugh). An entire industry has emerged to help Bitcoin billionaires remember or recover their lost keys before the digital wallets seize up and encrypt the contents FOR EVER AND EVER. We can imagine what happens to those passwords when they pass through a personal representative and on to a beneficiary less familiar with cryptocurrency.
Familiarity: Another issue is familiarity with this cryptocurrency world. It’s essential to select a fiduciary who understands the value and takes appropriate care to maintain and maximize the digital assets. Cryptocurrencies are extremely volatile and unless the personal representative is paying close attention to the crypto markets, they could easily short-change the beneficiaries.
Powers to Act: The personal representative needs access to the private key in a way that doesn’t violate cybersecurity laws. Accessing another person’s digital assets without their consent may be illegal. Crypto estate planning documents need to give the personal representative specific authority to log in and manage the digital assets.
Timing: As soon as a fiduciary has access to the private key, he or she will also have access to the account. A process for the transfer of the private key is important to ensure privacy.
These items are relevant to a power of attorney as well where we have our agents managing our assets in the event of incapacity.
As to the reality show, a member of the production team was quoted as stating, “We wanted to explore changing lifestyle trends and provide some information on safe and beneficial crypto investments. We hope it will be a good opportunity for investors and prospective investors across the country to learn a lot about cryptocurrency.”
Oh yeah, we’re learning…. It’s important to ensure that estate plans, including Wills and trusts, account for digital assets, so that they can be well-managed after death. Let me know if you have any questions!