CEA Digital Asset Management 4 — Questions and Answers
Question 1: A client has a Shopify e-commerce store generating $80,000/year. For estate planning, this business is best characterized as:
- A non-transferable digital service subscription
- A business asset with goodwill and transferable revenue streams (Correct answer)
- A cryptocurrency equivalent subject to FinCEN reporting
- A digital asset excluded from probate under RUFADAA
Correct answer: A business asset with goodwill and transferable revenue streams
An online business like a Shopify store is a transferable business asset with goodwill, inventory, and cash flow that must be valued and included in the estate.
Question 2: Under the Computer Fraud and Abuse Act (CFAA), what risk does a fiduciary face when accessing a decedent's accounts without proper authorization?
- They may owe platform licensing fees
- They could face federal criminal liability for unauthorized access (Correct answer)
- They forfeit their right to compensation as executor
- Their letters testamentary become void
Correct answer: They could face federal criminal liability for unauthorized access
The CFAA criminalizes unauthorized computer access, and fiduciaries who access accounts without legal authority (e.g., via RUFADAA) risk federal liability.
Question 3: A client's NFT collection is worth $200,000 at death. Which factor most complicates its estate valuation?
- NFTs are always treated as foreign property
- NFT market prices are highly volatile and lack standardized appraisal methods (Correct answer)
- NFTs automatically become public domain upon the owner's death
- The IRS excludes NFTs from gross estate calculations
Correct answer: NFT market prices are highly volatile and lack standardized appraisal methods
NFT valuation is challenging due to extreme price volatility, illiquid markets, and the absence of standardized appraisal frameworks, creating estate tax uncertainty.
Question 4: Which provision in a durable power of attorney is most important for managing digital assets during incapacity?
- A general banking authorization clause
- An explicit digital asset authorization clause referencing RUFADAA (Correct answer)
- A real property management clause
- A healthcare surrogate designation
Correct answer: An explicit digital asset authorization clause referencing RUFADAA
Many states require an explicit digital asset clause in a POA to grant the agent authority over digital property under RUFADAA; a general banking clause is insufficient.
Question 5: A client's Kindle library contains hundreds of purchased e-books worth approximately $5,000. How does this affect the estate?
- The e-books are owned property and pass to heirs as digital assets
- Amazon's terms of service grant a non-transferable license, so they cannot be inherited (Correct answer)
- The e-books must be reported as income in the final return
- The estate can sell the e-books on the secondary market
Correct answer: Amazon's terms of service grant a non-transferable license, so they cannot be inherited
Amazon's Kindle terms grant a personal, non-transferable license — the decedent never owned the e-books as property, so they cannot be inherited or sold.
Question 6: Which best practice should a CEA recommend for a client who mines cryptocurrency as a business?
- Report mining income only when coins are sold
- Document the business structure, mining income, and wallet addresses in the estate plan (Correct answer)
- Transfer all mining equipment to a revocable trust immediately
- Exclude mining income from gross estate as self-employment income
Correct answer: Document the business structure, mining income, and wallet addresses in the estate plan
Crypto mining operations involve ongoing income, equipment, and wallet assets that must be documented in the estate plan so the executor can continue or wind down operations.
Question 7: A married client in a community property state purchased Bitcoin during the marriage using joint funds. At the client's death, what portion of the Bitcoin is included in the gross estate?
- 100%, as the account holder owns the full balance
- 50%, as the spouse owns the other half as community property (Correct answer)
- 0%, as community property is excluded from the gross estate
- 25%, after applying the marital deduction
Correct answer: 50%, as the spouse owns the other half as community property
In community property states, assets acquired during marriage with joint funds are owned 50/50, so only the decedent's half is included in their gross estate.
CEA Digital Asset Management 4
A client has a Shopify e-commerce store generating $80,000/year.
For estate planning, this business is best characterized as: