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IS IT IMPORTANT TO ADD DIGITAL ASSETS LIKE CRYPTOCURRENCY TO MY ESTATE PLAN?

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Even though digital technology has made several areas of life much simpler and more efficient, when it comes to estate planning, it has also created some additional problems. For instance, if you have not prepared correctly, finding and accessing all of your digital assets can be a significant or even impossible problem for your loved ones after your death or disability.

And in some situations, even though your loved ones can access your digital assets, doing so can breach privacy laws and/or the terms of service that regulate your accounts. You may also have some digital assets that you don’t want to inherit from your loved ones, so you’ll need to take action to limit and/or restrict access to those assets. There are a variety of special considerations you should be mindful of when including digital assets in your plan, considering the specific nature of your digital assets.

What Are Digital Assets?

As per Michigan’s Fiduciary Access to Digital Assets Act (FADAA), a digital asset is “an electronic record in which the user has a right or interest,” although it “does not include an underlying asset or liability unless the asset or liability is itself an electronic record.”

  • Under this broad description, personal emails, investment accounts, a Facebook profile, or files stored on a cloud platform or digital dropbox may be part of digital assets. Employment-related digital assets, such as work-related business accounts, emails, or similar electronic documents, are exempt. You’ve probably got more digital tools than you’re aware of. This may include:
  • Online accounts: Any online profile that needs a username and password, such as Facebook, Twitter, email, LinkedIn, eBay, online bank accounts, and services for travel rewards. This also includes online accounts for accessing cryptocurrencies like Bitcoin and Ethereum.
  • Digital files: Digital files that you have made, like scanned images or personal records, as well as any digital files that you have bought, such as music, movies, and e-books. You can find these digital files on your personal computer, mobile phone, cloud, DVD, or CD-ROM, or on an online storage site.
  • Digital asset IP rights: These rights protect any form of digital property and include copyrights, patents, trademarks, and trade secrets.
  • Blogs or other e-commerce websites: Whether you become incapacitated or die, your online company will need to be preserved. We may help set up the appropriate tools to make these changes smoother.

How are Digital Assets handled after death?

Digital assets are considered part of your estate, just as with tangible assets. Ultimately, your family may face needless probate after your death without specific instructions as to your desires for your digital assets, and conflicts may occur between your loved ones. Michigan, however, has unique legislation regulating digital assets as discussed above.

Who Can Access Digital Assets?  

Both Florida and Michigan passed the Digital Assets laws regarding Fiduciary Access. These laws were required to explain the legal rights of fiduciaries to access the online accounts and assets of deceased or disabled persons (including personal representatives or executors of estates, trustees, power of attorney holders, and guardians; the Michigan law also requires conservators). Four forms of fiduciaries who can get the digital assets of a deceased are identified by Michigan law:

A fiduciary working under the will or power of attorney;

  • A personal representative who acts for the estate of the probate;
  • A trustee operating under a trust; or
  • A court-appointed conservator

When a fiduciary is properly appointed in a will or court order, the law of Michigan allows the fiduciary to provide the following documents to the digital custodian:

  • A written request for disclosure;
  • A certificate of death; and
  • A copy of the letters of authority, power of attorney, or certificate of trust from a personal representative that gives the assets to the fiduciary authority.

While these documents are normally adequate, it is not unusual for a digital custodian to also require:

  • A unique account identifier assigned by the custodian for digital account identification;
  • Proof that the digital asset was owned by the deceased;
  • To manage the estate, an affidavit stating the disclosure of the digital assets is required; or;
  • A court’s finding that disclosure is required to control the estate.

What are the concerns?

The principal issues are privacy and access. For their financial accounts and correspondence, most individuals maintain online accounts. Account owners can now appoint an individual on their behalf to manage those assets. That person will be an agent under the power of attorney, executor, or trustee concerning digital assets. However, unless an individual is expressly allowed to obtain such records, access to the content of electronic communications is limited.

Many individuals have several digital assets and identities these days and may have difficulty maintaining their accounts and different passwords themselves. Imagine how difficult it would be for someone else to locate, access, and maintain or close such accounts if anything happens to the owner of the account and the account details are not well organized and open to family and fiduciaries. In certain situations, these assets and accounts have evolved to have a considerable monetary or emotional value that the account holder may not fully realize during their lifetime. It is necessary to take a careful inventory of all of your assets to complete a thoughtful and detailed estate plan, and digital assets are no exception.

The Fiduciary Access to Digital Assets Act deals with access to digital assets and not ownership of them.

Why digital assets are important?

To help fiduciaries and family members find useful and important online accounts and digital assets, we suggest compiling a full list of passwords, online user accounts, and other digital assets. This planning will keep the costs of administration down and will ensure that no digital property is neglected. Individuals may choose to keep this list in the same place as other essential records, or they may choose to keep the cloud up to date. If the above choice is selected, the cloud username and password must be included in a letter of instruction or with other relevant documents.

Consult with an Estate Planning Attorney

If you have digital assets that will require management by loved ones after your passing, it is best to consult our experienced estate planning attorney at the Leydorf Law Firm located in Lansing, Michigan.