Please get your digital affairs in order

Please get your digital affairs in order

Please get your digital affairs in order

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I really wish I hadn’t had cause to write this piece, but it recently came to my attention, in an especially unfortunate way, that death in the modern era can have a complex and difficult technical aftermath. You should make a will, of course. Of course you should make a will. But many wills only dictate the disposal of your assets. What will happen to the other digital aspects of your life, when you’re gone?

There are several good guides to “digital wills” and one’s “digital legacy” out there, including e.g. handling your Facebook and Google accounts, and I encourage you to both go to those links and research the subject further. A few things seem particularly worth noting, though.

One is that this is yet another reason to use a password manager such as LastPass or 1Password . That in turn becomes an itemized list of your online accounts, and comes with a built-in recovery mechanism which can be used to pass them on to your survivors and/or heirs. LastPass (my password manager of choice) actually has a detailed guide to “preparing a digital will for your passwords,” and third-party guides to using 1Password for this purpose exist as well.

Another is the problem of two-factor authentication. What happens in case of an accident which also destroys your phone or Yubikey? Or if your heirs can’t get past your phone password? Do yourself and them a favor: create 2FA backup codes, and add them to your password-manager emergency-recovery kit.

The more technical you are, the more complex your digital affairs are. For most people we’re just talking about email, social media and photos. But for technical people, and in particular developers, things get more complicated. Do you own domains? Do your heirs even know you own domains, and who the registrar is? Are they technical? If not, by the time they figure that out, the domains may well have expired. Do you have services running on AWS or GCP or Digital Ocean? Do you have private GitHub repos, or public ones with a nontrivial number of stars / forks / issues / wiki pages? Do you administer a Slack workspace?

If you find yourself nodding along to the above, you may want to identify a separate “technical executor” and give them some guidance regarding what you want done with all of the above. Even if they have access, nontechnical people may not really understand that guidance. A little advance work can make it substantially easier for those tasked with taking care of your affairs.

Finally, what about any cryptocurrency you might personally hold? Generally, cryptocurrency wallets come with some sort of recovery seed. Is yours in a safety deposit box somewhere? Do your heirs know it’s in a safety deposit box somewhere? If you want to pass your bitcoins on to them, you’re probably going to have to let them know. (Obviously there is a security trade-off here; depending on how much we’re talking about, you may wish to be more or less cautious about this.)

So, to summarize: Do further research on digital wills, and construct one. Use a password manager, which acts as an itemization of your online accounts and ensure your heirs can access its emergency recovery key. Provide them 2FA backup codes as well, and recovery seeds for your cryptocurrency wallets if any. Identify a technical executor as and if appropriate. Also — and this is pretty key — make sure that a few trusted people know you’ve done all this. Won’t do them much good otherwise.

You may well even have occasion to thank yourself for it, in case of some hardware loss or disaster. Regardless, your heirs will definitely thank you. None of us think that we’ll meet our demise randomly, without warning — but I’m here to tell you, from grim recent experience, it does happen. Be prepared.

Millennials, It is Time to Educate and Protect Your Digital Relatives

Digital assets and estate planning

Digital assets and estate planning

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Depending on who you believe, as many as three million bitcoins are currently “irretrievable” (approximately £20 billion worth at today’s prices). The most common reasons cited for this are lost retrieval codes (known as “private keys”), and owners passing away without leaving private keys to their next of kin.

This is just one issue that the digital age has introduced to estate planning. An individual’s digital “estate” can be comprised of a variety of digital assets, with differing degrees of financial and sentimental value.

Following on from our blog post earlier this year on the position in the US, here we consider how digital estates are dealt with on death in England and Wales, from a tax and practical perspective, and set out some important steps that should be considered as part of the estate planning process.

What are digital assets?

While there is no statutory definition, digital assets can be described as any “personal property or records in digital form”. The number of such assets has grown exponentially in recent decades, and now includes cryptocurrencies, software licences, and photos stored in the cloud.

It is important to distinguish between:

(a) digital “property”, such as online-only bank accounts, cryptocurrency holdings, crowd-funding investments or electronic currency;
(b) digital “records”, such as text, images and videos that are stored electronically; and
(c) digital “accounts”, such as Facebook, Amazon Kindle and iTunes.

The distinctions between digital property, records and accounts are not always clear, and in many cases overlap. For example, the manuscript of a book may be a digital record, but the intellectual property rights in it are a form of property.

How are digital assets taxed?

Digital assets are generally taxed in the same manner as other intangible assets. Accordingly, any value attributed to digital assets forms part of an individual’s estate for inheritance tax (IHT) purposes, and any acquisitions and disposals are within the scope of capital gains tax (CGT).

Given the increasing prevalence of digital assets (and in particular cryptocurrencies), HMRC issued specific guidance on the tax position of “cryptoassets”, first in March 2014, and again in December 2018.

In this guidance, HMRC confirms that all cryptoassets will be treated as forming part of an individual’s estate for IHT purposes.

In addition, individuals who invest in and dispose of cryptoassets will generally be subject to CGT in the normal way in respect of acquisitions and disposals of such assets. HMRC does not accept that investments in cryptocurrencies are equivalent to gambling (such that profits are not taxable, and losses are not allowable). While HMRC expects that buying and selling cryptocurrencies will normally amount to an investment activity within the scope of CGT, HMRC does consider that individuals carrying out a trade (such as “mining” bitcoin or trading in cryptocurrencies) would be subject to income tax on their profits.

There are two other important points that HMRC makes in respect of the CGT treatment of cryptocurrencies:

  • first, HMRC considers that the “pooling” rules, which apply to shares and securities in companies, also apply to cryptocurrency holdings. As a result, for CGT purposes, instead of calculating the gain or loss for each individual cryptocurrency transaction, cryptocurrencies of the same type will be “pooled”. This means a person’s allowable costs on the disposal of a cryptocurrency holding will be the average acquisition cost of the holdings in the “pool”, rather than the cost of any specific acquisition; and
  • HMRC acknowledges that losses on cryptocurrencies are allowable for CGT purposes, but that they must be reported to HMRC first in the normal way. In the case of a lost “private key”, HMRC acknowledges that negligible value claims can be made, and that on the approval of such claims by HMRC the individual will be treated as crystallising a loss of the value of their lost cryptocurrency holding.

How do digital assets pass on death?

Digital property:

Digital property will generally vest in the deceased’s personal representatives. There are, however, a number of practical issues that personal representatives/executors may encounter when dealing with digital property, the most significant of which is likely to be access.

Without appropriate access to digital property, personal representatives will struggle to adequately administer an estate. For example, many cryptocurrencies (including bitcoin) are accessed via virtual wallets which can only be “opened” with a private key. Without this private key, there is no proof of ownership and the currency will be unusable.

Access to digital property may also be dependent on access to other digital accounts (e.g. email accounts). The overlap between digital property and digital accounts is an area that is likely to become increasingly important, given the continual expansion of digital giants into new sectors (for example, Facebook’s proposed launch of the new cryptocurrency Libra).

Digital records:

For English law purposes, digital records such as photographs and documents are part of the computing device on which they are recorded, and therefore generally do not have a separate proprietary existence or monetary value.

As a result, digital records will pass physically with the device on which they are stored, and the terms on which the record in question was bought or licensed will determine whether and how it can be transferred to a beneficiary under a Will or on intestacy.

It is worth noting that any intellectual property rights (IP rights) that an individual holds in digital records may have significant value (e.g. copyright in photographs or written works), and such IP rights are assets that can be passed (separately) on death or during lifetime.

Digital accounts:

Digital accounts are not assets in the normal sense because they hold no intrinsic value and cannot usually be transferred (they are simply contractual relationships between individuals and service providers).

While digital accounts may not have monetary value, access to them is likely to be important for a deceased’s family. As a result, individuals should be encouraged to consider who should be given access to their email and other accounts after they have died, and perhaps set this out in a side letter to their Will.

However, the terms and conditions of service providers vary, and in some cases prohibit the sharing of passwords in this way (e.g. Facebook). In addition, the Computer Misuse Act 1990 provides that a person is guilty of an offence if he knowingly accesses material on a computer without the appropriate authorisation to do so. Personal representatives may therefore in principle commit an offence if they do use passwords left to them, where authority has not been given by the relevant service provider.

Forthcoming developments:

In 2017, the Law Commission of England and Wales launched a public consultation on reforming the law of Wills, partly in response to the fact that around 40% of the adult population do not have a Will. Amongst the Commission’s proposals is a suggestion to make electronic Wills legal.

The debate remains live as to how the law should adapt for the digital age, and it will be interesting to see whether the Commission’s final policy addresses how digital assets should best be dealt with on death.

Points to consider when estate planning with digital assets

Individuals and their advisers should consider the following when estate planning with digital assets:

  • consider the tax treatment of lifetime planning in the same way as with other intangible assets. In respect of cryptocurrencies, this will include taking into account the “pooling” rules when calculating any liability to CGT;
  • as part of the estate planning process, individuals should draw up a list of all digital assets to assist their personal representatives in the administration of their estate. This is particularly important for digital assets that otherwise have no physical existence (e.g. cryptocurrency holdings);
  • in so far as it does not breach any applicable terms of service, individuals should consider maintaining a list of access information for their important online accounts (e.g. usernames and passwords) and keep this in a secure location; and
  • in the event that private keys for cryptocurrencies have been lost, consider making a negligible value claim to HMRC in order to crystallise a loss for CGT purposes (which could be offset against future gains
Digital assets: protecting your online life, after death

Digital assets: protecting your online life, after death

  • ected against unauthorised access.
  • List your wishes with regards to passing on your digital valuables in your will. Make it clear to whom you want to pass on certain digital assets. For example, you can specify that you want to pass on your online music collection to your daughter. If you want your heirs to take specific actions such as deleting certain online accounts after you pass away, make sure to make your wishes clear.
  • Alternatively, use an online digital inheritance service to securely organise your digital life after death. For example, our SecureSafe cloud service provides a data inheritance feature for documents and passwords. The basic offer is free of charge. This function enables you to identify beneficiaries and securely pass on selected digital documents and login data to them when you pass away.

How do social media platforms deal with inherited digital assets?

Even though the topic is fairly new, digital inheritance policies do exist with a couple of large online service providers. Below, we give you an overview of your options to plan ahead if you are the user of one or more of these services.


If you are a Facebook user, you can decide what should happen to your account when you pass away. Facebook gives you two options: you can either have your account deleted or you can memorialise it. If you choose the second, your loved ones have the option to post one last post on your page and to update your profile and cover pictures. Speak with the people close to you about what they would prefer as a part of your planning.

Twitter does allow for your account to be deleted after you pass away. Only an immediate family member or a person authorised to act on behalf of the estate can request the deletion. Your relative must send the following documents to Twitter: information about the deceased, an ID copy and a copy of the deceased’s death certificate. It is only possible to request a deletion of the account and not to get access to it.


LinkedIn can also delete an account of a deceased person if a person that knew the deceased sends in a predefined form providing the following information:

  • The member’s name;
  • The URL to their LinkedIn profile;
  • Your relationship to them;
  • Member’s email address;
  • Date they passed away;
  • Link to obituary; and
  • Their most recent employer.

Google accounts

Google accounts such as Gmail and YouTube accounts offer a couple of possibilities for post-mortem planning:

  • If you are the owner of an account, you can set up an inactive account feature. With this feature activated, Google will take action as instructed by you should your account go inactive for a longer period of time. You can instruct Google to delete your account or to share your login credentials with pre-chosen individuals close to you.
  • If you choose not to set up the inactivity feature, your loved ones must contact Google to request an account deletion or transfer of your digital assets. However, no matter your relation to the deceased, Google ultimately decides whether data will be passed on or not.

Microsoft accounts

If you are the owner of a Hotmail or Outlook account, you can submit a ‘Next of Kin request’. Through this request you can define your wishes for your Microsoft accounts post-mortem. It is up to you whether you want to delete the account(s) or keep them active.

Your close relatives or other defined relations will not be granted access to your digital assets, but if you wish, Microsoft can send them a DVD with the contents of the account. It is important to be aware that not all Microsoft products are included in this policy (OneDrive and Skype have no official policies).

Devices such as laptops or tablets

Regardless of whether you are the owner of Microsoft or Apple devices, the general rule of thumb is the same. If you want your loved ones to be able to access your desktop, laptop, tablet or smartphone should you pass away, you need to pass on your device-specific password.

Some companies will offer to reset a device to factory settings to allow you access to the digital assets of a deceased relative. However, it is by far the easiest for your loved ones to access devices with a password passed on to them by you.

A far-reaching solution

If you do not want to go through the process of setting up a separate ‘afterlife plan’ for each of your online accounts, you can gather all of your relevant digital heritance in one place and assign it to the relevant beneficiaries from here.

We are a Zurich-based company that stands behind the cloud-based storage solution SecureSafe, which enables users to plan ahead and secure digital assets for the long-term. A SecureSafe account always includes a highly secure, personal file safe and a password manager.

Furthermore, we are the inventors of data inheritance, which enables every SecureSafe account owner to define beneficiaries such as loved ones or business partners and to pass on important files or passwords to them post mortem. The transfer of data happens automatically and safely when an account owner passes away.

Find more information about data inheritance here:

DSwiss AG



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This Hackathon Winner Can Help Pass On Your Bitcoins After You Die

This Hackathon Winner Can Help Pass On Your Bitcoins After You Die

— Robert Schwentker (@schwentker) February 27, 2017

“I’ve been learning about blockchain [technology] for the past three months, and I wanted to learn more by doing,” said Nguyen. The self-taught blockchain developer also said that his inspiration for the project came from the realization that there are many reasons why it is beneficial for people to have some kind of plan — or, in this case, a protocol — to help deal with unexpected and tragic events.

Nguyen admitted that, at the beginning of the hackathon, he quickly discovered one of his project’s biggest obstacles would be determining how to encrypt so much sensitive data and ensure that it remains private.

The Hackathon

Organized by BTC Media, the Distributed: Markets 24-Hour Hackathon took place at Switchyards Downtown Club in Atlanta, Georgia, from February 24–25. The challenge was to build a blockchain application using the APIs, SDKs and other developer tools “to power the financial infrastructure of the future.”

While the hackathon showcased the talent of students, developers and aspiring entrepreneurs from across the United States, all shared a unique passion for exploring how blockchains can solve technological problems.

“Blockchain [technology] has always been a hobby,” said Chris Magistrado, a malware researcher at the Georgia Institute of Technology with background in information security. “I started with [a] Princeton Coursera course on Bitcoin and Blockchain. I’m looking for new job opportunities and the hackathon gives me the chance to show my marketability and my talent.”

Working with Josh Vorick and Milind Lingineni, Magistrado’s team took second place for their project, Bazaar Loans. The team used the decentralized marketplace, OpenBazaar, to establish a crowdfunding-type “Get a loan” feature to the system, giving users the option to support their preferred merchants. The key to Bazaar Loans is that it is intended to improve the economic and social system of OpenBazaar. That being said, the most difficult part of the project for the team was determining how to deal with merchants who might not pay back their loans.

Second Place: LoanBazaar: P2P loans for @openbazaar w/ @ShapeShift_io @ethereumproject @cmagistrado— Robert Schwentker (@schwentker) February 27, 2017

“A blockchain hackathon has multiple benefits,” explained master of ceremony and chief #hackathon Twitterer Robert Schwentker (@schwentker) just before the judges announced the winners. Schwentker is the co-founder of Blockchain University, as well as an educator, organizer, speaker and overall expert on blockchain technology.

He made it clear that hackathons give developers a chance to learn about and experiment with new technology. They are also great networking opportunities. Schwentker also explained that hackathons are essentially résumé builders. “Besides potential prize money, the competition gives winners recognition for their talent. They can leverage that recognition as a badge of success to show investors.” Schwentker’s role in both helping devise the judging criteria and aiding participants in articulating the value of their ideas was critical to the hackathon’s success.

“I’ve invested in a few startups that have come out of blockchain hackathons,” said Jeremy Gardner, hackathon judge, venture capitalist and founder of the Blockchain Education Network.

“I liked Coffee Chain,” said hackathon judge and TSYS Director of Innovation Russell Moore, speaking of the third-place winner. “I want to track my coffee and know where it comes from — immutability could prove organics.”

Moore attends hackathons to keep track of disruptive technology, but he also loves witnessing competitors present solutions to technology problems. In his opinion, immutability is one of the central problems that blockchain technology solves. “If you don’t have a trust issue then you don’t need a blockchain.”

The other two judges were Chris Kleeschulte, Senior Software Engineer at BitPay, and Dmitry Prudnikov, CTO, at Bitsane.

— Robert Schwentker (@schwentker) February 27, 2017

Robert Schwentker summarized a good hackathon project best when talking with the Bazaar Loans team: “Why only create the doorknob to a 100-story building when in the same amount of time, you can create an awesome tent: The goal is a functional mockup, not a blueprint.”

An honorable mention went to the Bitscript team, who developed a web-based Bitcoin script editor.

Here’s a list of some of the other notable projects from the Distributed: Markets hackathon:

SpotMe: a P2P crowdfunded loans feature for urban payday loan users

BitFunnel: anchors IoT data to the Bitcoin blockchain for the oil industry

StockYard: a decentralized commodities market for high-value unique items

FreightChain: a decentralized shipping insurance platform for consumers to insure delivery of parcels

Substrate: a blockchain-powered mesh network for IoT devices

CryptoPOS: a Poynt POS for digital currency checkout

The two-day event preceded the Distributed: Markets conference held on Monday at the Ritz-Carlton hotel in downtown Atlanta.

How to Maximize Bitcoin’s Value in a Digital US Inheritance

How to Maximize Bitcoin’s Value in a Digital US Inheritance

How to Maximize Bitcoin’s Value in a Digital US Inheritance

Click here to view original web page at How to Maximize Bitcoin’s Value in a Digital US Inheritance

Coinsbank Blockchain Cruise bitcoin conference
Coinsbank Blockchain Cruise bitcoin conference

When bitcoins are passed to an heir in a US inheritance, they are subject to a different tax rule than usual. The cost basis is no longer the purchase price of the bitcoins, which can lead to an heir paying less or more capital gains tax depending on whether the bitcoins had appreciated or depreciated. A little planning can help an heir maximize the value of bitcoins in an estate and pay less in taxes.

Also read: Death & Bitcoin: How I Prepared My Family’s Digital Inheritance

The Usual Capital Gains & Losses

The U.S. Internal Revenue Service (IRS) treats bitcoin as property. For bitcoins held as a capital asset, as opposed to income or mined, any gain or loss from selling or exchanging


them would be taxed as a capital gain or loss. The amount of tax owed depends on the cost basis of the bitcoins, which is usually the purchase price paid.

If bitcoins are sold for more than the cost basis, a capital gains tax is owed to the IRS. However, if they are sold for less than the cost basis, there is a capital loss which can be deducted against taxable income.

Bitcoins in an Estate

“Like any other asset, Bitcoin becomes part of your estate when you die; it’s not something you voluntarily “put into” your estate,” Jeff Vandrew Jr, an attorney who specializes in estate planning told Vandrew explained:

When a bitcoin holder dies, the beneficiaries of his will or living trust receive his bitcoin with tax basis at the fair market value on the date of death.

Unlike the usual case of the purchase price being the cost basis, the fair market value on the day of the bitcoin holder’s death is the new cost basis for inherited bitcoin. This tax


rule is sometimes called the ‘tax basis step-up’ or ‘tax basis step-down’ depending on whether the market value is lower or higher than the purchase price. No matter when the heir spends the bitcoins later, the cost basis for the inherited bitcoins is still their fair market value on the day of the holder’s death.

Talking about the tax-basis step-up, Vandrew noted that “For highly appreciated bitcoin, this may be great. For bitcoin that has depreciated since purchase, this could be bad.”

Appreciated Bitcoins

If a bitcoin owner dies owning bitcoins that have appreciated in value, the ‘tax basis step-

price increase

up’ rule will help the heir lower any capital gains tax owed.

For example, if the deceased bought a bitcoin in 2013 at $100 and died in 2016 when the price was $700, the cost basis for the inherited bitcoin is $700, not $100.

The heir spending the bitcoin later on when the price is $1000, say, would only incur a taxable gain of $300 ($1000-$700). In instead, the price has tanked to less than $700, a capital loss can be deducted up to a certain limit and the excess carried over to be deducted in future years. Vandrew noted:

If you’re older and have appreciated bitcoin, it makes sense to hold onto it as long as you can so that your heirs can take advantage of the basis step-up.

Depreciated Bitcoins

In the rare case the bitcoin holder dies owning bitcoin that has declined in value since

price decrease

purchase, the cost basis for the heir is lowered at the date of death. When the heir cashes out the bitcoins, more tax will be owed since the cost basis is lower.

For example, if the deceased bought a bitcoin at the end of 2013 when the price was $1000 and died when the price fell to $700 in 2016, the cost basis for the heir is still $700. If he then spends the bitcoin when the price is $1000, his taxable gain would be $300. Vandrew said:

If you’re older and have depreciated bitcoin, it may make sense to spend it as quickly as possible and preserve your cash. Upon spending, you’ll recognize taxable losses and you’ll avoid your tax basis being stepped down at death.

Since the heir cannot take the tax deduction on the deceased’s price depreciation, one solution is for the bitcoin holder to cash out the bitcoin before his death, taking the tax deduction at that time. Bitcoin can then be re-purchased at a lower price.

Disclaimer: This article is for informational purpose only and should not be used as a replacement for professional tax advice.

Have you given any thought to estate planning for your bitcoin? Let us know in the comments section below.

Images courtesy of Shutterstock, IRS, The Telegraph, Thinglink

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