Cryptocurrency should be included in estate planning.
I know I have posted more than a few blog post on this subject of late.
However, cryptocurrency has been in the news quite a bit lately.
Generally speaking, the meaning of “currency” has changed throughout the years.
Early in human history, people bartered goods and services for what they needed.
Money was later included to represent wealth and aid in commercial transactions.
Even now traveling to different countries requires one to utilize an exchange to local currency when making cash transactions.
According to a recent Roll Call article titled “Estate planners want to keep the crypt out of cryptocurrency,” a relatively new currency to enter the scene is cryptocurrency.
Although “crypto” (a little insider lingo there) can be intimidating to include in estate planning, it is important for all parties to understand how it functions.
When all people are on the same page, then it can actually be an easy asset to transfer.
While traditional bank accounts require an original death certificate and other documents to begin the transfer of assets, the only thing required for the fiduciary or executor to access the cryptocurrency accounts are the passcodes.
It is vital to securely store and share a passcode because this 64-digit string of letters and numbers is used to open the digital wallet where the asset is stored.
This passcode is also known as the “key” and is impossible to replace if lost.
What does this mean?
If the key is misplaced, forgotten, or stolen, then the digital currency will no longer be accessible.
For this reason, the passcode should be stored in a safe and accessible location where the trusted individual, like your executor or trustee, will be able to find it when the proper time comes.
What happens if you change executors or trustees at some point?
If you gave such “former” fiduciary full access to the digital key, you may not be able to ensure they will not use it against you!
What are other ways you can protect your cryptocurrency?
One option is to use “cold storage.”
What is cold storage?
The passcode to the account is both concealed and stored on a USB or other device.
This means the user or executor will not need to learn the passcode to gain access to the cryptocurrency.
Rather than one person having the code itself, the drive can be handed from one fiduciary to another should a successor fiduciary be needed.
Will taxes be due on the cryptocurrency?
Congress is addressing blockchain and cryptocurrency policies.
The IRS has also issued notices on the taxation of digital currency.
Although regulations, polices, and litigation involving crypto are relatively new; the need for planning cannot be ignored.
Work with an experienced estate planning attorney to incorporate your cryptocurrency into your estate planning.
Reference: Roll Call (Feb. 22, 2022) “Estate planners want to keep the crypt out of cryptocurrency”