When her friends and colleagues started talking about buying cryptocurrencies on the QuadrigaCX cryptocurrency exchange, Marianne Bulger wanted to get involved.
It was early January 2018, when the bitcoin price peaked after an unprecedented boom the previous year, and Bulger, who is currently a partner at Drive Capital, a venture capital firm and founder of Prospect, a job board for Canadian tech startups, bought $2,000 worth of digital currency.
“The advice I received was to buy bitcoin because it would be worth a lot one day.”
Bulger was also advised by those in the know not to touch his bitcoin, so he ditched his investment in Quadriga.an online platform used to buy and sell cryptocurrencies, trusting that everything would be fine if he just wrote down and kept track of his private key, a password needed to access and manage crypto funds.
The story of what happened to Quadriga, and the 115,000 clients, including Bulger, who lost their investments, has now made headlines around the world.
Its CEO and founder, Gerald Cotten, passed away in December 2018, taking the digital keys for up to 250 million dollars (Canadian) in investors cryptocurrency with it.
The Ontario Securities Commission later released a report on Quadriga, concluding that Cotton was engaging in fraudulent activity and a Ponzi scheme.
Despite Bulger's bitter experience losing her investment, it has not deterred her from investing in cryptocurrencies. She now holds her cryptocurrency investments with Coinsquare, which she says feels more trustworthy and transparent because the investors are reputable and the company puts a lot of effort into communicating with customers.
However, her experience with Quadriga prompted her to audit her assets, both digital and otherwise, and to begin thinking about implementing a plan to transfer her assets in the event of his death.
"Obviously Gerald Cotten's death and taking the passwords with him was quite strange, but I didn't realize I was the only one keeping my password for this information," she said.
“What would happen if I died or something happened to me? My family couldn't find these digital assets. They would essentially be stuck in the blockchain forever."
Cryptocurrency is a decentralized currency, meaning there is no central governing body, explained Erin Bury, CEO of Willful, a do-it-yourself online will platform that charges $99 for a legally valid basic will.
It's not the same to have money in a bank when you die, Bury said. In that case, her executor could call the financial institution and verify what accounts she has, and eventually gain access to those funds.
If you pass away with crypto in your wallet, on the other hand, "there is no customer service number to call and no way to get it back if an executor doesn't have the 16-digit private key."
The exception, Bury noted, is if the cryptocurrency is stored with a platform like Coinsquare, where the company will provide access if it can provide proof such as a valid will. Coinsquare did not respond to a request to confirm this.
Because third-party platforms can be vulnerable to hacking, some investors are hesitant to use them to store their investments. After all, the decentralized nature and lack of third-party involvement is precisely why people are attracted to cryptocurrencies in the first place, said Esther Abecassis, a wealth attorney at Devry Smith Frank LLP.
Beyond keeping passwords safe and stored somewhere, it's important that your loved ones or executor know what assets you have, with whom, and how much, so they aren't too quick to find out after you're dead, Abecassis added.
“If you were to think about your partner, your parents, or your best friend, you might know about their public accounts, like their social media accounts, but do you really know if they have cryptocurrencies? Do you know if they have NFTs? Do you know if they have investments with platforms like Coinsquare or Wealthsimple? Bury said.
A non-fungible token (NFT) is a digital asset with a unique code that verifies ownership of individual digital goods, such as images, videos, music, and more, that can be bought and sold.
“It's not like 20 years ago, when everyone had a bank that they banked with, and they had multiple different types of accounts with that bank, and maybe had one or two different financial institutions that they had their assets with. These days, it's so different."
That's a big reason why Willful released a feature called "Asset List" on March 18.
Voluntary users can now create a document that lists physical, financial, and insurance assets to keep with their will.
In particular, the Asset List will provide space to track digital assets of both financial and sentimental value, such as purchased digital media (such as movies, songs, and e-books), your own valuable digital media (such as digital art and photo collections), and cryptocurrencies. and NFTs.
A will isn't usually the best place to list your assets, Bury said, because assets change all the time and you don't want to have to update your will every year if you buy a new car or open a bank account. . With the new feature, there is no limit to how often you can update your list.
The idea is that a list of assets, or a separate letter to the executor, would provide your executor with breadcrumbs on how to find your assets and start managing them in the event of your death, he said.
Willful also encourages customers to store passwords with their partner, 1Password, a password management company, and to create a vault on the 1Password platform that they can share with others, or make sure to share password information along with their will. Here you can store passwords for bank and social media accounts, as well as your cryptocurrency. If you want your loved ones to be able to access accounts and digital assets after death, it's a good idea to make sure they know how to find those passwords.
Abecassis explained that passwords are not included in the will because that will could end up becoming a public document. However, he could say that he wants to inform his trustees that he has a USB located somewhere among his personal effects that contains his passwords, or whatever method he is using to store them.
The idea is to create a plan that makes access to crypto easy for your loved ones after you pass away, otherwise crypto wealth “may very well become obsolete,” Abecassis said.
“This is about striking a balance between the security of your cryptocurrency while you are still alive and the accessibility for your family members after you pass away. You have to really trust the people you're giving this information to."
Abecassis recommended exploring your wealth options for cryptocurrency assets with a professional. There are planning techniques that a professional could introduce, including creating a double will or trust primarily as a tax planning tool, which should be considered for assets such as cryptocurrencies, she said.
For example, if you have a second will that deals with assets that are not subject to probate, such as cryptocurrencies, you can save on estate management taxes on those assets in the secondary will.
As for Bulger, he has created a will since the Quadriga fiasco and is in the process of creating his list of assets.
“When we had our son last year, I realized that keeping track of these pieces was no longer about me.
“I wanted to be able to make sure I had the right system and the right pieces in place to protect my son for the long term, and make sure he benefited from all the hard work and fun I've had online. ”
