California is one of the states that has adopted the Revised Uniform Fiduciary Access to Digital Assets Act. Under this law, if a website has a digital tool that allows a person to specify what happens to the account in case of the person’s death, this is the course the courts will follow. However, if there are no tools and nothing in a will or a trust regarding digital assets, the state may distribute them like any other assets.
This still fails to address several problems that can arise regarding digital assets. One of the main problems is what happens to cryptocurrency after a person dies. A family could lose out on a significant inheritance if no one has access. There are a few possible solutions for dealing with cryptocurrency and other digital assets. One is a so-called dead man’s switch. This might involve setting up a monthly email that triggers distribution of assets if it is not responded to. However, this could leave cryptocurrency vulnerable to hackers.
An M-N transfer requires a certain number of people to sign before accessing a cryptocurrency wallet, but they must all be trustworthy. Another option is to keep the access keys in a safe deposit box. Unfortunately, the legal system has not yet fully caught up with cryptocurrency, but additional solutions may be on the horizon.
People should also consider that as may be the case with physical assets, digital assets that have sentimental value may be more likely to spark conflict than those with monetary value. For example, family members may argue over who gets photographs or access to emails. It may be best to discuss this with family in addition to addressing it in the estate plan itself along with other elements of the will or trust. Loved ones may be less likely to challenge the estate plan if they understand its provisions.