Views & Visions: The New Economy - Preparing for the Future with Digital Assets Continued
Posted in Tax Law
Views & Visions: The New Economy - Preparing for the Future with Digital Assets Continued

In the Spring/Summer 2023 edition of our firm’s award-winning Views & Visions magazine, Bowles Rice attorneys and tax team members Hannah French and Kathryn Gioia co-authored the article Preparing for the Future with Digital Assets. The article ends with a link to this blog.

What follows in this companion blog post are the real-world examples, considerations, and hypotheticals that Hannah and Kathryn alluded to at the end of their article (i.e., the legitimate issues and considerations that can have a major impact on an account holder and their beneficiaries, and the complicated nature of such digital assets).

Consider Tim who died with:

  • cryptocurrency in his Robinhood account with monthly statements emailed to his personal Gmail account;
  • smart contracts with residual earnings accessed directly via the blockchain;
  • virtual savings account with Morgan Stanley with bank statements emailed to his personal Yahoo account; and
  • paperless utility bills emailed to his personal Gmail account.

How will Tim’s court appointed fiduciary, Mary, access these digital assets to learn of the existence of the accounts, liquate the accounts, and ultimately distribute the assets to Tim’s beneficiaries? 

Mary’s first obstacle is that Tim has never mentioned his Morgan Stanley savings or his Robinhood accounts to her. Because the Service Providers are not mailing statements to the house, Mary will only learn of those accounts if she obtains access to Tim’s Google and Yahoo accounts to check his emails for statements. Otherwise, these accounts will be missed entirely in the administration of Tim’s estate. Again, the traditional court appointment of a fiduciary during the estate administration process does not grant the fiduciary authority to access the digital accounts of a User. So, Mary must look to Google’s Terms of Service ("TOS"), which do not authorize a fiduciary’s automatic access, meaning Mary must contact Google to see if Tim also set up Mary as Tim’s Inactive Account Manager. If yes, then Mary will have access to however much of Tim’s Google account as he preselected. Let’s assume here that she was given full access.  

Mary then reads Tim’s email and learns of Tim’s (1) utility bills that need paid by the estate until Tim’s house can be sold or transferred, and (2) Robinhood account. She presents Robinhood with her Letters of Appointment with the court giving her authority to handle Tim’s estate, similar to any bank or investment account. Mary will now have the authority to sell the cryptocurrency in Tim’s Robinhood account and transfer those funds into the estate account.

However, Mary was unable to determine if Tim set up a legacy contact in his Yahoo settings. Tim’s will thankfully has the appropriate Revised Uniform Fiduciary Access to Digital Accounts Act ("RUFADAA") language authorizing his fiduciary to access his digital accounts, and even specifically names Yahoo. Mary follows RUFADAA procedures and Yahoo accepts the authority and grants Mary access to Tim’s Yahoo account. Mary reads Tim’s Yahoo emails and learns of the Morgan Stanley virtual savings account. Mary then presents Morgan Stanley with her Letters of Appointment and is able to liquidate Tim’s Morgan Stanley savings account and transfer those funds into the estate account.

The last issue is the smart contracts that Tim owned and accessed directly via the blockchain. Mary looks to Tim’s will again and thankfully it contains language above and beyond RUFADAA, specifically authorizing his fiduciary to access and control digital assets stored directly on the blockchain. However, even though the language is present granting Mary such authority, she now has to figure out Tim’s blockchain key. The blockchain does not have a forgot password option and Tim may have stored his key either in hot storage (internet connected, such as MyEtherWallet) or cold storage (off-line, such as a USB). Assuming Tim used a cold storage USB for his key and Mary is able to locate it because Tim left a note with his important documents as to the location of the USB, then Mary will have both the authority in the will and ability to access Tim’s smart contracts on the blockchain and transfer the ownership to Tim’s beneficiaries, ensuring that they continue to benefit from the contracts' residual earnings.

As you can see, life continues to get more complicated as technology advances. If you would like a review of your current documents and digital accounts, please contact a Bowles Rice attorney for your complimentary consultation today!

Tags: Tax Law