For years, cryptocurrency owners have focused on coin security. Many of our clients protect their coins and accounts from online hackers through offline storage and complex passwords that are memorized but never written down. A recent Canadian bankruptcy filing reminds us how important it is to record and share passwords. By recording and sharing their passwords, our clients allow their loved ones and advisors to access their coins and online accounts when necessary.
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Estate planners and financial advisors can take several lessons from this case. Most importantly, we must advise our clients to record their usernames and passwords to allow access to their accounts if they die or lose capacity. Even a concussion or temporary memory loss could have devastating consequences for a client who relies entirely on memorized passwords to access valuables.
Just recording usernames and passwords may be enough when coins are located in cold wallets, offline. For online assets and accounts, our clients also should have durable powers of attorney and wills that give their trusted agents and representatives power over their digital accounts. Online accounts and emails can be essential to trace digital activity. Access to an online account is governed by the provider’s licensing agreement. For essential accounts, users may refer directly to their user license with a particular provider to ensure that their agents and representatives can access their account when necessary. As a general safeguard, express digital powers in wills and durable powers of attorney are important.
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