Lambros Law Office LLC

Increasing Bitcoin Prices Driving Digital Currency Holders to Estate Planning

As even small holdings have grown in value, it is increasingly important for digital currency owners to have an estate plan. There are complexities and rules specific to digital currencies that require extra care. One of those is known as a “dead man’s switch,” and, according to The Coin Telegraph’s recent article, “Lawyer Says Dead Man’s Switch Not Best Option for Digital Asset Inheritance,” it comes with a significant risk.

A dead man’s switch, where cryptocurrencies are automatically transferred to the heir’s account upon death, has been a popular solution for estate issues involving digital currency. However, this strategy requires all the heirs to be able to manage their private key. A private key is a secret number that allows bitcoins to be spent.

It is not possible to generate their private keys and give that to them. Just like a single physical key that opened one locked box, if the key is lost, it’s game over. The owner of the assets can make a new key for her heirs every time assets are bought, sold, or moved. If your heirs are well-versed in cryptocurrency, there’d be no problem. However, most people who will be inheriting digital assets are not ready to manage them.

Because activating a dead man’s switch requires the owner not to access the network for a certain period, it creates incentives for people to keep the owner from accessing the network. This is still new technology, and there’s no back-up or “do over” with cryptocurrency: it’s all based on algorithms. If you don’t have all the right pieces—like the right private key—you have no access to those assets.

Cryptocurrency transactions are non-reversible, and those assets, unlike funds in a bank, are impossible to recover.

Smart contract technology that enables automatic transfer of funds should be tested more thoroughly to be trusted with assets in estate planning.

Bitcoin, the oldest Blockchain-based cryptocurrency, debuted in 2009 and, according to the media, has only started to be considered as “going mainstream” this year.

If you own cryptocurrency and want to pass it along to heirs, you’ll need to make sure that your heirs know exactly what you have, which usually includes an updated inventory of your digital assets, and an education in how to access and manage cryptocurrency. Don’t assume they’ll know just because they are under age 30!

Reference: The Coin Telegraph (October 28, 2017) “Lawyer Says Dead Man’s Switch Not Best Option for Digital Asset Inheritance”

∗ For more information about this and other similar topics, please visit: www.LambrosLawLLC.com or call us at: (401) 383-9899 .

The Newest Estate Planning Asset: Your Digital Life

Treat your digital assets as you do any other assets during estate planning, and your heirs will thank you for it. That includes creating a notebook or a secure file on your computer with a list of accounts, user names and passwords. Haven’t done it yet? According to Kiplinger in “Leaving Your Digital Legacy,” leaving this part out could cause a considerable delay in their ability to settle your estate.

Most of us live at least some of our lives online. We have email and social media accounts, and we make purchases of digital books and music. We also pay our bills and conduct our banking online.

Unfortunately, much of our virtual property can’t be left to our heirs through a will. That’s because we don’t actually own them—we just have licenses to use those services. Even online accounts like email and social media sites aren’t ours either. Those providers control what happens when our contracts end at death.

Here’s what you can do to prepare to leave your digital legacies: make a list all your online accounts, which might include email accounts, financial accounts and utilities, banking accounts, retirement accounts, mortgages and insurance. Don’t forget any music, photos, or books stored online; any websites, blogs, or licensed domain names, merchants like eBay or Amazon and online communities or listservs where you’ve been active.

Consider what you’d want to have happen to those accounts. Would you want a loved one to have access to your music library or to your photos? What about your emails? Do you want your emails saved or deleted? The same thing is true with your social media accounts. They can be deleted or turned into “memorial” accounts, in some cases. On some sites, you can also have someone post a final status update after your death. With that in mind, you should consider nominating a “digital executor.”

You can allow your digital executor to know where you keep your passwords. Discuss your accounts with your digital executor and leave him or her detailed directions on where and how to find passwords, user names and other essential information.

Depending on the platform, it may be possible for you to include virtual items to people in your will. Speak with your estate planning attorney, so that all of your information on accessing these items is available and can be downloaded.

Another option is to place your digital items in a virtual vault. There are a number of companies that will place all of your digital information, including user names and passwords, on one online platform. Be sure to share this access information with your estate planning attorney and at least one of your heirs.

Reference: Kiplinger (August 2017) “Leaving Your Digital Legacy”

∗ For more information about this and other similar topics, please visit: www.LambrosLawLLC.com or call us at: (401) 383-9899 .

Digital Assets and Estate Planning

In a digital world, it’s important that you are working with an estate planning attorney who understands how to handle digital assets. Estate planning has made great strides in this area, but there is still work to be done. Here’s a basic overlay of some of the issues at stake.

Digital assets fall in to three basic categories. First, there are social media accounts like Facebook, Twitter, and Instagram. Another category consists of personal accounts. This includes everything from email and financial accounts to subscription websites. The third category is digital assets that generate income. For example, this would include a website that earns advertising revenue.

Until quite recently, there was little to no certainty on how to treat digital assets in the context of estate planning. Very few states had relevant laws on the books, and in the private sector companies either had their own individual policies or no policy at all. However, a major step was taken with the 2015 passing of the Fiduciary Access to Digital Assets Act (FADA) by the National Conference of Commissioners on Uniform State Laws. Currently, the FADA has been enacted by 25 states, and introduced but not yet enacted by another 11.

FADA gives a fiduciary who is already managing a person’s tangible property the additional right to manage that person’s digital property. However, under FADA the fiduciary can automatically manage only computer files, web domains, and virtual currency. The fiduciary is granted only limited access to email, text messages, and social media accounts unless specifically authorized to manage them in a will, trust, power of attorney, or by way of another document. This means that, at least in a state where FADA has been enacted, you must explicitly authorize your fiduciary to manage your social media, texts, and emails.

For states that have not enacted FADA these issues are still unclear. Even for those that have, since each state can enact their own versions, your state’s specific version might differ from the model law. For this reason, it’s important to retain an estate planning attorney who is familiar with digital assets to assist you in this area.

At Lambros Law Office, we take great pride in serving Rhode Island by providing old school service while staying on the cutting edge of legal developments. Get our contact information or check out our Facebook page to learn more.

The Final Frontier: Naming a Data Executor for Digital Assets

When Karen Prangley’s father died after two severe strokes at age 62, the family was devastated, according to Fox 11 News in “Dealing with the loss of a loved one in the digital age.” The lack of a plan for his digital assets also led to the loss of the family business. The family business was tied to a Yahoo email account. In a month, the business fell apart.

It’s a word to the wise, and one the senior editor of CNET recommends: do more than just share your passwords. You need to create a plan for your digital inheritance.

Access each individual online service you use and look for the page on each one, where you can set up your legacy contact or your wishes for what should occur to your account and your information when you pass away.

Be sure to include your digital life expectations to your will, and as part of estate planning, name a Data Executor who has your permission to access your accounts. Give them the password information now or designate them as an authorized user on your online accounts. Here are the steps to take:

• Establish a Data Executor in your will;
• Designate your Data Executor as an authorized user on each of your social media and online accounts and/or give him or her access to your accounts now;
• Name a legacy contact on each of your social media and online accounts; and
• Provide directions in your will on how to handle your social media accounts, such as having the account removed or creating a memorial.

The major social media sites, like Facebook, Instagram, and Twitter, have information detailing how to do this on their sites.

When the Prangley family contacted Yahoo for help, the company held fast to its policy and refused to transfer any of the content in the account or provide access to the account. It’s a harsh lesson for a family and for a small business.

If you have any questions about how to plan for your digital assets, speak with an experienced estate planning attorney. Digital assets are now just as important as real property and need to be part of your estate plan.

Reference: Fox 11 News (West Palm Beach) (July 5, 2017) “Dealing with the loss of a loved one in the digital age”

∗ For more information about this and other similar topics, please visit: www.LambrosLawLLC.com or call us at: (401) 383-9899 .

Digital Assets as a Part of Estate Planning

We are accustomed to thinking of estate plans as a means of distributing assets like houses, bank accounts, investment accounts and other tangible assets after death, but today one has to add digital assets to any estate plan. A recent article from WFXL.com, “What happens to digital lives after death?”, examines the steps for ensuring that your digital assets are handled properly, as well as more traditional assets. Remember that this step is necessary so that your loved ones don’t have to struggle with figuring out passwords, battling with social media platforms or trying to unlock your desktop computer to gain access to a treasure trove of family photos.

Taking some time now to make a record of this information and storing it on an external hard drive, can save time and money in the future. Trying to recover locked digital data, like pictures, can be extremely expensive, not to mention frustrating.

First, evaluate what you need and how much you would like to store. If it’s just keeping passwords safe, you might use a journal or a notebook. If you want to back up pictures or videos, try a flash drive or an external hard drive. Store the backups off-site in a security deposit box, or keep the files hosted via a reputable cloud service.

Be sure to reference that information in your will, but don’t list your passwords. The will is a public document after your death and will be visible to everyone. Just make mention of where the information is stored.

Social media, like other accounts, would continue to exist online, unless you have a plan established for it. Most companies have pages or ways to help dictate how your accounts are handled after your passing. However, not all social media sites have plans publicly in place for dealing with the situation of a family member's death. If not, contact the company directly.

Taking the time to organize this information in a usable manner now, will save your loved ones from a lot of stress and possibly the added costs of trying to unwind your digital life. It will give you some sense of control of what will happen to your online persona after you are gone.

Reference: WFXL.com (May 10, 2017) “What happens to digital lives after death?”

∗ For more information about this and other similar topics, please visit: www.LambrosLawLLC.com or call us at: (401) 383-9899 .

When Bitcoin and Digital Assets are Part of the Estate

Whether you think bitcoins are the global currency of the future or a financial disaster, many Americans have bitcoins, and practically all Americans have digital assets of some kind. Estate planning today needs to address these assets, and an article in Coin Journal, “The 7 Steps of Estate Planning for Bitcoin and Other Digital Assets,” offers some useful tips.

1: Conduct an Inventory of What’s Already Owned. Make sure that you have a good idea of what you really have. People often forget about bitcoin in an old wallet, only to find it later. It is also important to list all of the digital assets currently owned and to write down how each specific asset can be accessed in the future.

2: Separate Your Assets into Tiers. Divide up your digital assets into three tiers: (i) easily spendable; (ii) mid-range storage; and (iii) long-term cold storage. Don’t lock up all of your bitcoin, because you might want to spend it.

3: Create a Plan for Each Tier. After you set up the tiers, create a plan for each of them. Think about balancing security, ease-of-use and accessibility. In addition to seeing what’s already working, a digital assets owner should also consider options that have stronger security protections. Some of these are hardware wallets, multi-factor authentication and multi-signature addresses.

4: Determine Who Gets What. Here’s the actual estate planning–deciding who gets what. Remember that you need both a tech plan and a legal plan for digital assets. Give a percentage of each tier to specific people, so they can avoid the unpredictable price fluctuations that would result from leaving specific amounts of specific digital assets for each person. Be certain that your heirs can access the digital tokens. Therefore, you must give them access to critical information. Such information includes passwords or the location of a hardware wallet. In addition, speak with an estate planning attorney about state laws on leaving digital money to heirs.

5: Test the Plan. It’s critical to test the estate plan from the viewpoint of the owner of the assets and the heirs. Start with a very small value for the tests to limit losses, if something goes wrong. You should test every possible scenario of the plan’s outcome, not just the most likely outcomes.

6: Execute Your Plans. Move ahead and implement the plans. In addition, set up regular audits to make sure the funds are always accessible.

7: Protect The Plans. This includes storing plans in a location that is access controlled, tamper-evident, fire and water proof and with some degree of redundancy. Don’t store these assets in the family safe, since if something happens, you—and your heirs—could lose everything.

Reference: Coin Journal (April 21, 2017) “The 7 Steps of Estate Planning for Bitcoin and Other Digital Assets”

∗ For more information about this and other similar topics, please visit: www.LambrosLawLLC.com or call us at: (401) 383-9899 .