How To Include Digital Assets In Your Emergency Plan

Investing in digital assets has become much more popular among Canadians, whether it’s cryptocurrency or NFTs like digital art, music, or trading cards.

Yet a large number of Canadians don’t know what would happen to their digital assets in an emergency.

A recent AngusReid study commissioned by Willful found that 44% of Canadians don’t know what happens to someone’s cryptocurrency when they pass away and only 11% have an emergency plan for their digital assets.

As Canadians’ digital asset collections grow, it is more important than ever to make them a part of end-of-life planning.

In this post, you’ll learn how to get started with protecting your digital assets.

How to Protect your Digital Assets

Whether you own digital assets now or plan to add them to your portfolio in the future, here are the steps you can take to protect them.

1. Create a Will to outline who can access your assets and who they are left to

The first step to an emergency plan is making a Will.

Unfortunately, the majority of Canadian adults (57%) don’t have a will – which is a simple legal document that sets out your wishes for your estate.

It outlines who your assets will go to when you pass away, and names people to take on key roles like a guardian for minor children and executor (the person who will close up your estate).

2. Create Power of Attorney documents to name someone to manage your assets

A power of attorney document is different from a Will but equally as important. A power of attorney comes into effect while you’re alive but only if you become incapacitated due to illness or injury.

While we all hope that never happens, a power of attorney allows you to name someone you trust to look after your finances on your behalf.

This ensures your digital assets will be protected if you ever become unable to manage them yourself.

Without a Will or power of attorney (POA), it can be difficult for your loved ones to access your digital assets.

Many crypto exchanges and digital asset platforms require a copy of a Will or POA document before confirming whether the assets exist and allowing them to be transferred.

Without these legal documents, the courts have to appoint people to take on the executor and/or power of attorney roles, which is a lengthy process.

In addition, without a Will, a government formula dictates how your assets (both digital and traditional) are distributed to your heirs.

How your estate is distributed may be very different from what you would have wanted. The good news is, it’s an easy scenario to avoid by having a Will in place.

You can create a will online in 20 minutes for $99 with Willful or you can visit a lawyer to get it done.

3. Create an up-to-date asset list that includes digital assets

While your will outlines who gets your assets and who acts on your behalf when you pass away, it doesn’t usually include a detailed list of your assets.

Most people use several different financial institutions and companies, so this often leaves family members scrambling to find your assets and figuring out how to access them.

If you own cryptocurrency or other digital assets, there’s no central body your family can call to ask about your holdings (the very purpose of cryptocurrency is to be decentralized).

Take some time now to create a list of your assets and how they can be accessed, and store it with your will.

It’s the easiest way to ensure your family can find your holdings if something were to happen. Be sure to check in every year to make sure it’s up-to-date.

4. Make a plan for your passwords and granting access to your accounts

Willful’s customer survey found that only 50% of people have someone in their life who knows all their passwords.

While an asset list ensures your loved know your digital assets exist, it can be difficult for your loved ones to actually gain access to them without a plan for sharing your passwords.

Using a crypto exchange like Coinsquare is a popular way to manage crypto assets.

If you use a crypto exchange and pass away, your executor can reach out to the provider with a copy of your will to begin the process of transferring your crypto.

While this can be a slow process, the crypto can luckily still be accessed without the investor’s account password.

If you don’t use a crypto exchange and forget to share your password, it’s not as easy.

Your executor needs your 42-digit private key to access your crypto – without that key, there is no way for them to recover the funds.

A simple way to share account information with your executor (from social media logins to investment account details) is through a password manager like 1Password.

This is an easy way to ensure that someone you trust can gain access to your accounts in an emergency.

While most platforms prohibit another person impersonating you to access your accounts, many don’t have death policies around transferring assets after someone passes away.

For now, a shared password manager can help you gain peace of mind knowing your loved ones won’t be locked out.

Final Thoughts

The bottom line: take a few minutes now to protect the assets you’ve worked hard for

In our survey, 39% of Willful customers said they hadn’t created an emergency plan for their digital assets because they hadn’t thought about it.

As more Canadians begin collecting digital assets, it’s more important than ever to protect them by creating a plan for the unexpected.

Follow these tips to ensure you’re in the driver’s seat and your digital assets will be handled exactly how you want them to.

This post was contributed by WIllful Wills.

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Simon is a CPA by day and a Personal Finance Blogger by night. With over a decade experience in financial services, he's passionate about personal finance, investing and helping people take control of their financial life.

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