The metaverse represents the next iteration of the internet. As more people engage in this next phase of the digital economy, buying and selling digital assets like cryptocurrency and non-fungible tokens (NFTs), experts are saying the metaverse may be a $10 trillion to $30 trillion opportunity in the next 10 to 15 years.
While much of the discussion remains focused on how to get involved and surprising success stories – one artist made six figures in less than a year by selling NFTs – the pandemic has made all of us aware of the need to have a plan. What happens to my digital assets when I die? It’s an important question to ask yourself if you own NFTs or cryptocurrency.
Related Article: How the COVID-19 Pandemic Has Impacted Estate Planning
If you have a Will when you pass away, it’s relatively easy to transfer physical assets to your heirs. But that’s not the case with digital assets, because of the decentralized nature of this new industry.
Why is it hard to transfer digital assets after someone dies?
There are two distinct factors at play here: the novelty of the industry and the way its economy is structured.
Cryptocurrency is very young. Although some wallet providers like Coinbase clearly outline what an executor or family member can do to retrieve digital assets in case of the death of the account holder, these kinds of policies are nowhere near industry standard. Companies like Apple and Facebook have digital legacy planning features for transferring some social media and digital assets upon the death of an account holder, but what about all of your other accounts?
Related Article: Make Your Digital Legacy Plan in 5 Easy Steps
Cryptocurrency is decentralized. There’s no directory or central body that governs NFTs or cryptocurrency – it’s purposely decentralized, which is great for privacy but can result in a lot of headache for family members who are trying to determine if their deceased loved one held valuable digital assets. The only way to access your crypto is with a private key – typically a 64-digit passcode. If your executor or personal representative doesn’t have the private key or know how to access it when you pass away, they can’t access the virtual currency to transfer it to your beneficiaries.
For now, it’s up to you to make sure your chosen executor (also known as a personal representative) has all of the information they need to inventory your digital assets so they can distribute them to your beneficiaries along with your physical estate.
5 Step Digital Asset Estate Planning Checklist
Our team of estate planning attorneys and experts collaborated to create this checklist, so you can prepare everything your executor and heirs need.
Mention Digital Assets in Your Will
If you haven’t already created a Will, you need one. Without a Will, the courts decide what happens to your assets, and because cryptocurrency is so new, the likelihood is that digital assets like NFTs would be left unclaimed if you passed away without making a legal mention of them. There are an estimated tens of billions in unclaimed assets sitting in banks today as a result of a family or executor not knowing about those accounts following an individual’s death. To include digital assets like cryptocurrency and NFTs in your Will, just list them generally (i.e. “NFTs” versus “$20,000 in Bitcoin). You should never list sensitive information like account numbers or private keys in your Will; after you pass away, the Will must go through the probate process, which makes the document a matter of public record.
Related Article: A Comprehensive Guide of the Probate Process
Create a List of Assets & Access Information
You will need to create a list of your physical assets as well as your digital assets. This list will act as a supplement to your Will, and you should update it whenever you buy or sell assets of any kind so that it’s always current. With cryptocurrency and NFTs, there’s additional layers of security, with the private key and any 2FA (two-factor authentication) measures, and you should note these on your digital asset list. Again, if your executor doesn’t have the private key or know how to access it when you pass away, they can’t access the virtual currency to transfer it to your beneficiaries. You shouldn’t give your private key to anyone while you’re alive, because the holder of that key is technically the owner of that asset.
Create a Digital Asset Plan
Cryptocurrency and NFTs are certainly increasing in popularity, but the industry is still very new and many of us have barely gotten our toes wet, so how can you set things up so your heirs don’t inadvertently sell a rare NFT for far less than it is worth? Take steps to ensure your beneficiaries are equipped to handle these assets to maximize their value. The plan should outline instructions for how to manage these assets and how to convert them into a form that is usable to the recipient (i.e. sell them for cash). Instructions should be written in plain language, and provide enough detail to be able to be followed, while not providing so much that a third party could steal it.
Suggest a Trusted Professional
Consider including a trusted contact in your digital asset plan; someone your executor and/or heirs can trust who is technically capable to help them navigate the world of NFTs and crypto and assist in pricing these assets properly when your heirs are ready to sell them.
Store, Update, and Share Your Digital Asset Information
From the beginning, Gentreo users have been able to store and share documents and information using the Digital Family Vault. Using this tool, you can securely store your estate planning documents (Will, Power of Attorney, etc.) and supplemental information like your Asset List and Digital Asset Plan. You should update these documents whenever you buy or sell digital assets so that your plan is always current. While you can share documents and information with your executor, attorney, and loved ones anytime, digital asset documentation like private keys should not be shared until you pass away. Gentreo helps our users provide for their digital assets in their Will, so that when they pass away, their chosen executor can access their Digital Vault to aid in settling the estate.
As you prepare your estate plan to accommodate your digital assets, you should also consider updating your Power of Attorney, and ensuring the agent you have chosen is comfortable managing your crypto and NFT assets if something prohibited you from doing it yourself. Like with any other asset, consideration should also be given to how your digital assets would be accessed in the event of mental incapacity.
Gentreo is here for all of life’s events, with the tools and support to help you protect your wealth and build a legacy for your loved ones’ futures.
