With the rise in popularity and use of cryptocurrency comes the need to include such investments in estate planning. However, cryptocurrencies such as Bitcoin are more secretive in nature than traditional investments, resulting in the need for awareness and creativity on the part of estate planning lawyers.
Currently, cryptocurrency exchanges do not require your personal information as a condition of sale, and they certainly do not ask buyers to name a beneficiary, as with most other investment accounts. This means that unless the holder informs family or friends of the existence of a cryptocurrency account, and all its access information, in the event of the holder’s unexpected passing the account ends with them.
Cryptocurrency is Property
Those who already have significant cryptocurrency holdings may know that the IRS has found that cryptocurrency is property, rather than currency, and subject to tax on capital gains.
When it comes to estate planning, unless the account is named in a will, it will go through the probate process, which can be lengthy and time consuming.
Whether it is a will, revocable living trust or power of attorney authorization, legal documents should be updated to allow those named as fiduciaries to act on your behalf with regards to access to computers, accounts and data, and storage devices. They should also specifically allow access to digital assets like cryptocurrencies. To do so they will also need your private key information. The holder should specify how cryptocurrency assets should be distributed.
Legal documents can become public, so it is advisable to keep a separate list of important digital property with information on where it is located, how to access it, and what your wishes are.
In addition to cryptocurrency accounts and private encrypted key information, this should include information about sentimental assets such as Facebook and Instagram photos. It is a good idea to put everything in writing and store it safely in a bank safe deposit box, home safe, or other secure means.
Recordkeeping is Important
To ensure that their cryptocurrency accounts are not lost, holders must at the very least maintain an active written record of what they own and the source it was acquired from. Additionally, they should spell-out what they paid for it, where it is located, and the selling price, if applicable. It is crucial to record the private digital key and store it safely.
Even better are technological options that transfer cryptocurrency assets automatically upon the execution of a will. Holders of cryptocurrencies are urged to update their estate plans and documents with the help of a knowledgeable and experienced estate planning lawyer.
Chester County Wills and Estates Lawyers at Eckell Sparks Provide Experienced Counsel for All Aspects of Estate and Asset Protection Planning
If you need advice on how to protect your cryptocurrency assets, speak to an experienced Chester County wills and estates lawyer at Eckell, Sparks, Levy, Auerbach, Monte, Sloane, Matthews & Auslander, P.C. who can advise you as to your estate options. Call 610-565-3701 today or contact us online to schedule a confidential consultation. With offices in Media and West Chester, Pennsylvania, we serve clients throughout the Philadelphia metropolitan area, including those in Delaware County, Chester County, and Montgomery County.