Recently I gave a presentation to a large group, over 300 in attendance. I asked the group, “How many of you own a digital currency?” Only about three or four hands went up. I was shocked.
You might be thinking: that sounds about right, and I don’t own any either. But in reality, if you are reading this blog online or were in my presentation that day, you likely own a digital currency. I know, again, shocking!
Do you have a credit card? Do you have a Home Depot account? Starbucks Rewards Card? Stay at hotels or fly on an airline?
You Are a Digital Currency Owner – Surprised?
Well, all of the aforementioned services have rewards points. And guess what? Rewards points are really just a form of digital currency. They are offered by one service provider, not federally insured or backed.
They can typically only be redeemed with that one service provider, meaning I can’t usually use my Marriott hotel points at Starbucks. But, they all have some amount of value, and the value is not consistent. One point at Marriot is not equal to one point at Starbucks or even equal to one U.S. dollar.
These digital currencies were really the first iteration of what evolved into the thing most people think of when they hear the term digital currencies: Bitcoin, or more generally “cryptocurrencies.” It is important to note that not all digital currencies are cryptocurrencies, but that all cryptocurrencies (at least today) are digital currencies.
Digital currencies are really just online or digital representations of something of value. Cryptocurrencies are similar but there is a notion that they are built on a blockchain or other more advanced technology platform.
So even if you don’t own Bitcoin or another popular cryptocurrency, you likely own a digital currency. And really, digital currencies are just the tip of the iceberg to your treasure trove of digital assets.
Digital Assets – Part of Your Estate Planning Big Picture
The reason I start the conversation about digital assets with digital currencies is because they more clearly have some amount of intrinsic value. But other digital assets like your emails, social media pages, and other online websites might not jump out to you as valuable assets. However, these digital assets can be extremely valuable and need to be incorporated into any comprehensive financial plan.
Incorporating digital assets into a financial plan is harder than it seems. First, most people don’t think about them as true assets, don’t realize their value, and therefore, don’t think they need a plan. But, failure to plan for digital assets can create a slew of issues.
Digital assets are mostly controlled by the terms and service agreements (TOSAs) of the online service provider. These contracts direct the ownership rights, access rights, and transferability rights you have to the account. Most online accounts have a restriction on your ability to give anyone else access to the account and restrict you from transferring the account upon your death. So, when you die, your online accounts can get stuck in a sort of eternal digital limbo where no one shuts them down but no one really has access either.
Also, digital assets can represent a big post-mortem theft risk for surviving spouses and family members. Many online accounts contain bank account information, Social Security numbers, addresses, credit cards and all sorts of other personal information.
If the accounts are left unattended and a security breach occurs, the information could be stolen. All of a sudden, a few months after a spouse passes away, the surviving spouse starts getting bills because one of the deceased spouse’s online accounts was hacked. Maybe they can beat back the charges as fraudulent, but this isn’t what a widow or widower wants to be dealing with after a recent loss of a loved one.
Protecting Your Digital Assets
Over the past two years, a new law has been passed in most states providing fiduciaries access to digital assets if proper planning is done. The law requires that you grant your fiduciary power to manage digital assets or give authority to them through express language in a will, trust, power of attorney or other legal document. But it is crucial that this is expressly done. No mention of digital assets likely means no access to digital assets. This leaves many wills, powers of attorney and trusts out of date.
So get your estate up to date. Sit down with your planner and attorney to figure out what digital assets you have and what documents you need to bring up to speed.
If you want to talk over your estate plan, you can set up a complimentary consultation with one of our advisors today.