The recent events surrounding the Quadriga cryptocurrency exchange has left a massive impact, whether it’s on investors who have lost their life savings or on the reputation of the broader crypto industry. At the heart of it all is an unthinkable oversight: the passwords to accounts holding around $190 million in digital tokens were lost when the founder of the exchange passed away without revealing them to anyone else, according to his widow.
Whatever one’s feelings may be about cryptocurrency investment, the story clearly shows why people must have their digital affairs in order in case of an emergency or death. And this is the same point made by Marika Cherkawsky of McLennan Ross LLP in a recent commentary.
“A report by Deloitte estimates that by 2020, the average Canadian will have accumulated over $10,000 in digital assets,” Cherkawsky said. “Yet, BMO Wealth Institute finds over 57% of Canadians have failed to plan for their digital assets in their estate plans.”
Citing Kimberly Whaley of Whaley Estate Litigation, she clarified that there is a distinction between digital assets and digital accounts. Digital assets include any digital file a person owns: photos, Word and Excel documents, blogs, tweets, music files, Bitcoin, and even Airmiles points. Similar to physical and financial assets that are conventionally provided for in wills, digital assets have both sentimental and monetary value.
Digital accounts, meanwhile, are the ways for people to access their digital files. Whaley separated digital accounts into three categories:
- Accounts with virtual currency that could be transferred to one’s heirs, such as PayPal accounts and accounts with crypto exchanges;
- Accounts with virtual property such as iTunes and Kobo accounts, which represent a license to use digital files and not actually own them; and
- Accounts that contain information of personal or commercial interest, such as social media accounts or personal email accounts
“[I]t is important to always take note of your digital accounts since without access to the digital accounts your digital assets may be subject to its provider's terms of service,” Cherkawsky said.
She noted that most account providers err on the conservative side when they are asked to grant access to non-account holders. Without explicit instruction in a will, for instance, the bereaved may have to engage in a legal battle against big businesses just to gain access to a deceased loved one’s Facebook, email, or blog.
As a rough guide in estate planning for digital assets, she advised people to:
- Identify all of their digital assets and accounts, including the location of all mobile devices, computers, and flash drives;
- Give exact instructions, to be performed by the chosen executor or a separate trustee, on each digital asset and account;
- Provide access to a chosen appointed person, possibly through a password-protected list of digital assets and accounts; and
- Update digital assets and accounts as often as possible.
She also stressed that passwords to digital assets and accounts must not be listed within the actual will, as estates that go through probate face the possibility of the will becoming public record.
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