Digital Asset Protection Planning

Several years ago, I assisted a client who was going through a contentious divorce.  Of particular concern to my client was that he had entrusted his then wife with passwords for many of his online accounts, and she was not ready to hand them over.  Her phone number had also been used for two-factor authentication on several of these same accounts, and she was certainly not going to give up her phone number in the divorce.

Fortunately, reason prevailed and the ex-wife cooperated with the return of digital assets to my client.  Yet, this experience taught me the value of putting in place a digital asset protection plan that can anticipate major life events such as death, disability, divorce, or even an adverse creditor event.

What is a digital asset?

A digital asset is virtually any digital record that you may have.  E-mail accounts, an online bank account, your Amazon shopper identity, a Netflix subscription, photos stored on your iPhone, your workplace computer files…  These are all examples of digital assets.  Moreover, a digital asset does not need to reside in your iPhone or on a physical hard drive; it could be stored in the cloud, i.e., on a remote server hosted by someone else. 

A digital asset should be distinguished from an asset that can be accessed online, such as a bank account.  While your online bank account username and password are digital assets, along with any bank statements that you download, the money itself in your bank account is not a digital asset.

These days, most people have a significant investment of time and effort tied up in digital assets.  In addition, many people have invested substantial money into digital assets including cryptocurrencies, non-fungible tokens (NFTs), and other forms of electronic currencies and collectibles. 

What can be done to protect digital assets? 

Most people think of protecting digital assets from physical loss, such as by backing up your iPhone to the cloud or conducting a remote backup of your workplace laptop computer.  However, it is also the case that you should take steps to protect digital assets from other types of loss: divorce, unanticipated creditor claims, death, and disability.

Most people are also surprised to learn that conventional estate planning documents do not provide for effective governance of digital assets in the event of death or disability, much less to shield digital assets from unintended loss. The same goes for more sophisticated trust instruments that were drafted for an analog world of paper and pen. 

If you have ever lost a password to an online account, then you undoubtedly appreciate how difficult it is to work with a large service provider to validate who you are and what entitles you to reclaim a lost password.  Just imagine the scope of complexity when requesting this same information on behalf of a deceased family member.  In fact, one of the founders of Bitcoin died without having a plan in place for his Bitcoin wallet, and it is believed that billions of dollars in value was lost when his family could not retrieve his wallet credentials.

What is digital asset protection planning?

At the Speiser Law Firm, we seek to protect digital assets and ensure that the fruits of your life’s work are responsibly handled should certain events arise.  In particular, we design our trust agreements, business entity governance documents, and estate planning instruments to address digital assets.  This includes special mechanisms to enable you and your representatives to handle a change in ownership of digital assets, or to protect that ownership from loss.

The Speiser Law Firm is the only firm of its kind to have a digital asset protection planning practice.  Our unique level of industry insight has enabled us to work with trust companies and internet-based service providers to ensure that your digital assets are protected just as effectively as cash, investment securities, and other intangible assets.  

In addition to shielding your digital assets from the claims of unanticipated creditors, we work with computer technicians to ensure that your digital assets are preserved from theft and other forms of loss. In the event of death or profound disability, our recommended service providers are prepared to step in and seamlessly manage your digital assets for the benefit of you and your designated family members. 

Speak with a Speiser Law Firm representative about setting up a digital asset protection plan.

To learn more about how to you protect your digital assets, schedule a free consultation.