DAVID REDDING, CTFA, AEP, CWS Austin, TX Market President, Argent Trust Company | (512) 478-3188
When I began my career as a young trust officer over three decades ago, estate administration was a much simpler affair. Estate planning techniques were straightforward, and the process of gathering information about a deceased individual’s assets was relatively uncomplicated.
The procedure then involved sending a change-of-address card to the post office, after which the decedent’s mail would start arriving at my office. I would patiently await the arrival of bank statements, brokerage statements, and other relevant notifications, such as property tax statements or insurance premium notices.
However, times have evolved significantly since then. Nowadays, many clients receive financial statements electronically rather than in print. The advent of online access to investments has undoubtedly streamlined our financial management, offering convenience in checking balances, executing trades, transferring funds, and accessing a myriad of other services that previously required human intervention. Yet, these advancements have also introduced complexities for surviving spouses or executors tasked with locating a deceased person’s assets.
Further complicating matters are the intricate passwords now commonplace for accessing computers and online financial accounts. The golden rule regarding passwords—never write them down—adds another layer of challenge for executors needing to access accounts to administer assets in accordance with the terms of the will.
A high-profile case involving the unexpected death of Gerry Cotten, the founder and CEO of QuadrigaCX, a Canadian cryptocurrency exchange, underscores the ramifications of inaccessible passwords. Cotten’s demise left $190 million in cryptocurrency held in the exchange’s cold storage beyond reach, potentially forever depriving investors of their funds. This scenario serves as a stark reminder of how stringent security measures, while crucial for safeguarding against cyber threats, can inadvertently thwart rightful access to assets.
In a more recent case, programmer Stefan Thomas used 8 of his 10 guesses to get into his Bitcoin wallet, which held 7,002 Bitcoins worth about $220 million. The password will let him unlock the small hard drive known as an IronKey, which contains the private keys to his digital wallet. If he enters 10 wrong guesses, the IronKey will be encrypted forever, and the data will be lost. While this article is not specifically about digital assets, these examples show how important passwords are in securing information and gaining access to that information by you or someone needed to administer your assets after you depart.
One approach is to share passwords with a trusted family member, although this method sacrifices security. Alternatively, maintaining a record of passwords in a safe deposit box provides a more secure option, albeit with the caveat of diligent upkeep to ensure accuracy. Yet, perhaps the most secure method involves utilizing a digital wallet, such as LastPass, to securely store passwords in an encrypted cloud-based file accessible via a single master password. Many password security applications are available in the market today, and we recommend that you invest in one that will allow for the safe storage of your passwords and for others to legitimately access that information when the time comes.
As technology continues to advance, the prospect of a more streamlined solution for password management appears promising. We may be able to use fingerprint identification to access that info, such as the iPhone and others are now using to unlock the phones. It may be beneficial to have someone else input their fingerprint into that device or devices in order to gain access if you are not around to do so. In the interim, it’s prudent for individuals to strategize and implement measures to ensure the seamless retrieval and distribution of assets in accordance with their wishes upon their passing. Don’t get caught in the password predicament when it comes to passing assets to your heirs or inhibiting your executors from carrying out their duties!
