All Digital Assets Go to Heaven? Actually Purgatory, If You’re Not Careful


By Louis Lehot, JD

Over the next 30 years, 16 Trillion of high net worth wealth will be transferred to the next generation. Historically, wealth transfer consisted of tangible assets like cash, investments, cars, property, etc. Fast forward to today, and it can now include a variety of digital assets, often in the form of cryptocurrency or NFTs. 

This year, digital assets have dominated the news. For example, cryptocurrency, which has been around for a while, attracted much new attention over the last year because of its growing value, validation from public figures like Elon Musk, and bitcoin offerings from respected financial firms like Morgan Stanley. But, while transferring a physical asset is a straightforward process, digital assets are more complex because the only way to access cryptocurrency is through a 64-digit passcode.  

What do we need to know about the transfer of digital assets to make sure they don’t get lost in the ether? According to one study only one in four consumers have someone in their life who knows all their usernames and passwords, so are consumers even prepared to pass on these assets? Probably not. There have been stories about people who purchased bitcoin and would be millionaires if they hadn’t thrown out their hard drive or forgot their password. Gerald Cotten, whom people say is the founder of cryptocurrency exchange Quadriga, died in 2018 and left private keys to over $250 million in client assets in jeopardy.

When it comes to someone’s death, the person typically has a will that dictates how asset distribution, or if they die without a will, the government has a way to figure out how assets are divided. A will outlines who should receive what. However, it doesn’t always have an up-to-date asset or key list. Unfortunately, there are billions in unclaimed assets in banks right now due to no one knowing about accounts after death occurs. An executor can do due diligence by calling financial institutions to double-check whether the person held accounts and get access to them, which requires copies of the will and possibly the death certificate. With digital assets, there’s purposely no directory that governs NFTs or cryptocurrency to maintain privacy.

How can consumers protect their digital assets for the future?

  • First, use a password manager to keep all account information, logins, private keys, etc., and share the master access password with your executor or in your will.
  • Second, use a digital wallet or exchange to store digital assets because it may include access to private keys, or the exchange may even have a death-management process.
  • Third, create a list of all your physical and digital assets that your executor can access, which should be updated every year or whenever you make a change.
  • Finally, create a will that outlines detailed instructions on exactly how you want your digital assets to be distributed.

Louis Lehot is a corporate, securities and M&A lawyer at Foley & Lardner, LLP. He guides and represents clients—whether public or private companies, financial sponsors, venture capitalists, investors or investment banks—in forming, financing, governing, buying and selling companies.