The rise of digital assets as a significant component of personal wealth has created a new and rapidly evolving category of unfunded trust problem in California estate administration. Cryptocurrency holdings, digital brokerage accounts, online banking accounts, and other digital financial assets present trust funding challenges that did not exist in earlier generations of estate planning, and the estate plans created for settlors who accumulated significant digital wealth before the development of specific planning tools for digital assets are often unfunded with respect to those assets in ways that require complex post-death legal proceedings to address. Understanding how California law approaches digital assets in the trust funding context, what legal tools are available to address unfunded digital assets after the settlor’s death, and what the specific technical and legal challenges these assets present gives trustees and beneficiaries the framework for navigating this new and complicated area.
The Technical Barriers to Digital Asset Trust Funding
Digital assets present trust funding challenges that are fundamentally different from those presented by real property or financial accounts. A financial account can be retitled to the trust by completing a form with the financial institution. A cryptocurrency holding cannot be retitled in the same way because cryptocurrency does not have a custodian to retitle it: it exists on a blockchain that is accessible only through private keys that the holder controls. A trust cannot hold cryptocurrency through a title retitling process; it can only hold it through the trustee having possession and control of the private keys. When a settlor dies holding significant cryptocurrency without having transferred the private keys or access credentials to the trust or a designated trustee, the cryptocurrency may be effectively inaccessible to anyone, creating a complete loss rather than an unfunded trust problem that can be addressed through a Heggstad petition.
The Revised Uniform Fiduciary Access to Digital Assets Act
California enacted the Revised Uniform Fiduciary Access to Digital Assets Act, codified at California Probate Code Sections 870 through 884, to provide trustees, personal representatives, and other fiduciaries with legal access rights to the digital assets of deceased or incapacitated persons. The Act authorizes fiduciaries to access and manage digital assets and electronic communications of the person they represent, subject to the terms of service agreements and the specific categories of digital content at issue. For trustees seeking access to digital financial accounts that were not formally funded into the trust during the settlor’s lifetime, the Act provides a legal basis for demanding access from the online service provider, which may allow the fiduciary to transfer the accounts to the trust without requiring a court proceeding.
Heggstad Petitions for Digital Financial Assets
For digital financial assets that are held through custodians subject to California law, including domestic cryptocurrency exchanges, online brokerage accounts, and digital banking accounts, the Heggstad petition procedure may be available to confirm the trust’s right to those assets based on the trust document’s general assignment language, just as it is for traditional financial accounts. The analysis requires establishing that the trust document expressed an intent to hold the specific account or category of account in trust, and that the digital asset custodian will respond to a court order confirming the trust’s ownership. The California Legislature’s Probate Code Section 875 governs fiduciary access to digital assets. Working with experienced attorneys who understand the problems unfunded trusts create in estate litigation in the digital asset context gives trustees and beneficiaries the specialized guidance these emerging asset categories require.