How does cryptocurrency fit into estate planning?
Purchases of cryptocurrency have increased in recent years — and that’s thrown a new curveball into the estate planning process for some families.
Estate planning attorneys have learned how to guide their clients in most effectively securing, transferring or gifting these funds to their heirs. There are a few different ways to accomplish these goals. Here’s where to start if you want to learn more:
What is cryptocurrency?
Cryptocurrency is an anonymous digital currency. One of the reasons crypto became popular when first introduced on the market a few years ago is because people appreciated the currency’s deregulation. This starkly compares to heavy government regulation of cash or publicly traded stocks. Government regulators and tax authorities have only recently begun trying to implement strategies aimed at regulating this industry.
How can you pass on your cryptocurrency to future generations?
If the thought of revealing that you have cryptocurrency and turning over your login credentials to the exchange where you buy and sell such assets rubs you the wrong way, you’re not alone. Even if you did want to do so, how would you go about it?
Many people who own cryptocurrency simply rely on typing in a string of numbers and letters (a private key) to access their accounts. If a loved one finds a paper with that key (without any additional information present), they may assume that the numbers have no value when that couldn’t be further from the case. Some individuals who invested as little as $1,000 in Bitcoin 10 years ago now have a cryptocurrency portfolio worth millions.
To pass your assets on, you must let your loved ones know that you have cryptocurrency and how to access your digital wallet. You don’t want to include your cryptocurrency in your will as it becomes publicly accessible when you die, which negates the whole idea of anonymity behind investing in this currency. You may want to place your cryptocurrency into a trust, instead. You can appoint a company or a trusted individual to administer this trust.
You may need someone with experience to guide you through this process of planning your estate, especially when complex assets like these are involved.