New York Estate Planning & Elder Law Blog
The amount of attention as well as the volume of digital currencies like Bitcoin is at an all time high.
Digital currency is just one of several trends away from traditional assets and towards digital elements. While digital currency has made business in some senses much easier, digital currency also present some challenges.
For one, when the owners of digital currency die or become incapacitated, digital currencies can make the transfer of assets much more complex. This is because traditional estate planning documents were not designed to address the numerous challenges that can arise with digital currency.
The Revised Uniform Fiduciary Access to Digital Assets Act
The Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA) is the federal act responsible for creating rules and regulations addressing digital asset ownership.
For anyone who owns digital currency, it is a wise idea to understand the content of this act. For one, the Internal Revenue Services have taken the perspective that digital currencies are not currency and instead closer resemble goods.
Under the terms of RUFADAA, online management tools preside over any other instructions about how assets should be transferred.
One of the challenges presented by RUFADAA is that service providers or managers of digital accounts are not required to provide account access to fiduciaries.
Instead fiduciaries have three rights under RUAFADAA: the right to full access to online accounts, partial access to digital accounts, and data dumps of requested information.
Terms of service agreements also control how assets are assets are transferred and in the case of many digital currency purchases, a transaction is conditioned on agreement of these terms.
Complex Issues Associated with Digital Currency
The owners of digital currency own these assets in the same way that a person would owe a tangible physical item. Following death, these individuals still have a right to the digital asset.
The exact way in which an account is controlled can be influenced by the terms of estate planning documents or terms of service agreements.
One of the unique challenges involved with planning around these assets is that there is a substantial risk of losing these assets or misplacing them. Similarly, there is also a risk that the private key required to access digital currency might be lost.
Ways to Make Digital Asset Management Easier
Even though digital assets can make estate planning much more complex, there are some helpful strategies that can make management of these assets much easier. Some of these steps include:
- Consider transferring digital currency to a hard wallet.
- Make sure that any estate planning documents involving the digital currency is written in respect of RUFADAA as well as other regulations.
- Even though they are not digital currency, make sure to perform adequate estate planning strategies when digital social media accounts are involved.
Speak with an Experienced Estate Planning Lawyer
Digital assets are just one of the many factors that people should take into consideration when estate planning.
If you need the assistance of a knowledgeable estate planning lawyer, do not hesitate to contact Ettinger Estate Planning today to schedule a free initial consultation.