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Although digital technology has made many aspects of our lives much easier and more convenient, it has also created some unique challenges when it comes to estate planning.
If you haven’t planned properly, for example, just locating and accessing all of your digital assets can be a major headache—or even impossible—for your loved ones following your death or incapacity.

And even if your loved ones can access your digital assets, in some cases, doing so may violate privacy laws and/or the terms of service governing your accounts. You may also have some online assets that you don’t want your loved ones to inherit, so you’ll need to take measures to restrict and/or limit access to such assets.

Given the unique nature of your online property, there are a number of special considerations you should be aware of when including online property in your plan. Here are a few of the steps you should take to help ensure your digital assets are properly accounted for, managed, and passed on.

Create a list of all your digital assets, along with their login and password information. Some of the most common digital assets include cryptocurrency, online financial accounts, online payment accounts like PayPal, websites, blogs, digital photos, email, and social media.

Store the list in a secure location, and provide your fiduciary (executor, trustee, or power of attorney agent) with detailed instructions about how to locate and access your accounts. To make them easier to manage, back up any cloud-based assets to a computer, flash drive, or other physical storage device. Review this list regularly to account for any new digital property you acquire.

Just like any other property you want to pass on, detail in your plan who you want to inherit each digital asset, along with your wishes for how the asset should be used or managed. If you have any assets you don’t want passed on, include instructions for how these accounts should be closed and/or deleted.

Do NOT include passwords or security keys in your planning documents, where they can be read by others. This is especially true for your will, which becomes public record upon your death. Instead, keep this information in a separate, secure location, and provide your fiduciary with instructions about how to access it. Consider using digital account-management services, such as Directive Communication Systems, to help streamline this process.

If you have particularly complex or highly encrypted digital assets like cryptocurrency, consider including provisions in your plan allowing your fiduciary to hire an IT consultant to deal with any technical challenges that might come up.

Include terms in your plan detailing the level of access you want your fiduciary to have to your digital accounts. For example, do you want your fiduciary to be allowed to view your emails, photos, and social media posts before passing them on or deleting them? If there are any assets you want to limit access to, we can help you include the necessary provisions in your plan to ensure your privacy is respected.

Don’t forget to include the physical devices—smartphones, computers, tablets—upon which your digital assets are stored in your plan. Having quick access to these devices will make it much easier for your fiduciary to manage your digital assets. And since the data can be transferred or deleted, you can even leave these devices to someone other than the individual who inherits the digital property stored on them.

Some service providers like Google, Facebook, and Instagram allow you to give specific individuals access to your accounts upon your death. Review the terms of service for your accounts, and if these functions are available, use them to document who you want to access your accounts.

Double check that the people you named to inherit your digital assets using these access-authorization tools match those you’ve named in your estate plan. If not, the provider will likely give priority to the person named with its tool, not your plan.

As technology evolves, you’ll need to adapt your estate plan to keep pace with the ever-changing nature of your assets. We know just how valuable your online property can be, and our planning strategies are specifically designed to ensure these assets are preserved and passed on seamlessly in the event of your death or incapacity.

Proper estate planning can keep your family out of conflict, out of court, and out of the public eye. If you’re ready to create a comprehensive estate plan, contact us to schedule your Family Wealth Planning Session. Even if you already have a plan in place, we will review it and help you bring it up to date to avoid heartache for your family. Schedule online today.

The web has revolutionized business operations in numerous ways: email, social-media marketing, and online job recruiting are just a few of the biggies. But another innovation is dramatically enhancing your ability to obtain business financing via online crowdfunding.

Whether it’s equity crowdfunding, rewards crowdfunding, donation crowdfunding, or lending crowdfunding, these methods allow you to solicit financing for your projects via the web from people all around the world.

The most common way to finance small-business operations is through rewards-based crowdfunding. Popular rewards crowdfunding platforms like GoFundMe, Indiegogo, and Kickstarter offer a quick and easy way to acquire financing for a fledgling venture, especially if you don’t qualify for traditional business loans.

Simply describe your project on a crowdfunding platform and set a fundraising goal needed to get the venture off the ground. People interested in supporting your idea can then contribute relatively small amounts of money via the platform.

In return, if your fundraising goal is met, you promise to provide contributors with a reward—typically a product, service, or incentive of some type. The value of the reward is usually based on the amount contributed, and most campaigns offer multiple reward tiers that increase in value depending on the amount pledged.

For example, let’s say you’re designing a new solar-powered smartphone charger. For those who pledge $100, you offer a coupon worth 50% off the price of the charger. For those who pledge $500, you offer to send them a free charger. And for those who pledge $1,000, you offer to send them three free chargers, with a lifetime service warranty.

However, the rewards don’t have to be that substantial. Some businesses simply offer a hand-written thank-you note in return for a small pledge. There’s no requirement on how much or how little your reward has to be.

One important caveat: if your fundraising goal is not met by the deadline, you must return all of the funds.

Rewards crowdfunding typically works best for client-facing businesses that produce tangible products. They’re particularly beneficial for startups that want to test the market and incentivize backers without incurring a major expense or giving up control by selling an ownership stake in the company.

Rewards crowdfunding often works well with relatively simple business ideas. If it’s difficult to quickly explain the value of your project in layman’s terms, you might want to pursue another financing option.

Most rewards campaigns seek less than $100,000 and generally last between 1-3 months.

In exchange for using their platform, crowdfunding sites usually keep around 5% of the funds raised. But with some platforms, those fees can be as high as 13%. The platform’s payment processor may also take an additional cut—generally around 3%—for processing the transactions.

As with all financing opportunities, crowdfunding comes with some potential risks. For example, if you promise a product, reach your goal, and fail to deliver, you could face a breach of contract claim.

We’ll devote a future article on the legal and tax issues involved with crowdfunding, but for now, if you’re interested in learning more about the risks and rewards involved, contact us today.

We offer a complete spectrum of legal services for businesses and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer a LIFT Start-Up Session™ or a LIFT Audit for an ongoing business, which includes a review of all the legal, financial, and tax systems you need for your business. Call us today to schedule. Or, schedule online.

Last week, we discussed three potential scenarios in which poor estate planning can cripple your business. However, the damage described in those three hypotheticals pales in comparison to what recently happened in real life to the owner of one of Canada’s hottest new startups.

Gerald Cotten launched the cryptocurrency exchange QuardigaCX a little more than five years ago while in his mid-20s. Since then, the business has grown into one of Canada’s most successful online hubs for trading and storing digital currency, valued at roughly $190 million.

But upon Cotten’s sudden death, more than $145 million of QuardigaCX’s digital currency effectively vanished into cyberspace. This massive sum, representing the vast majority of the company’s holdings, was lost after Cotten died without leaving the password to his encrypted laptop, where the crypto’s security keys are stored.

This tragic misstep demonstrates one of the most basic, yet often-overlooked, tenets of effective estate planning:

In the event of your incapacity or death if your heirs don’t know how to find or access your assets, those assets are as good as gone. Indeed, it’s as if those assets never existed at all.

According to an affidavit filed in a Canadian court, Cotten, age 30, died suddenly of complications related to Crohn’s disease while traveling in India during December 2018. In January 2019, QuardigaCX filed for bankruptcy to protect itself from creditors, including all of the customers with crypto stored in the company’s electronic vault.

Ironically, the digital assets were lost in part because Cotten followed a security practice designed to safeguard the funds. Most of the company’s cryptocurrency holdings were stored in a “cold wallet,” or one that isn’t connected to the Internet. The use of a cold wallet is a common practice, since “hot wallets,” or those connected to the internet, are a frequent target of hackers.

Such a practice typically would’ve been a prudent measure, but Cotten reportedly stored the cold wallet on an encrypted laptop that only he knew how to get into.

According to Cotten’s widow, Jennifer Roberston, after multiple searches, she’s been unable to find the passwords that will open the laptop and provide access to the company’s cold wallet. QuadrigaCX even brought in computer security experts to get into Cotten’s laptop, but so far all of their attempts have been unsuccessful.

Canadian financial authorities and independent auditors are currently investigating the case, with some even speculating that Cotten’s death was faked as part of a nefarious scheme connected to QuadrigaCX. Whether it ultimately turns out to be a simple case of carelessness or something more malicious, the lesson remains the same:

From cryptocurrency to safety deposit boxes and everything in between, your family must know how to find and access every asset you own, otherwise it could be lost forever.

In fact, there’s a total of more than $58 billion of unclaimed assets from across the country held by the State Department of Unclaimed Property. Much of that massive sum got there because someone died and their family didn’t know they owned the asset.

In another bizarre twist, Cotten was actually quite diligent in his estate planning. He named Roberston as his estate’s executor and left her instructions for the complete distribution of his assets, including a private jet and multiple properties in Canada.

He even left behind $100,000 for the care of his two dogs—yet he managed to forget to include the passcodes that would unlock his company’s vast crypto assets. We believe that most people holding crypto assets haven’t taken the proper steps to ensure their family would know how to access those assets upon their incapacity or death.

Given this, if you own any digital currency like Bitcoin, be sure to call us to make certain these assets have been correctly included in your estate plan. Indeed, if you have any assets that might potentially be overlooked in the event of your incapacity or death, contact us now.

What makes this loss so tragic is that it could have been so easily avoided. Whether your estate is worth millions or far less, it’s absolutely vital that your plan include a comprehensive inventory of your assets. And as Cotten’s case shows, this inventory must also include a detailed instructions for how your heirs can find and access all of those assets.

These components are a standard part of every estate plan we create. We’ll build a detailed inventory of your wealth and property—including your business—that includes the exact location of every asset. And whether it’s cryptocurrency, social media accounts, or an online payment platform like PayPal, we’ll also include detailed instructions for locating and accessing all of your company’s digital assets and their passcodes.

We offer a complete spectrum of legal services for business owners and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer you a LIFT Your Life And Business Planning Session, which includes a review of all the legal, insurance, financial, and tax systems you need for your business. Schedule online today.