Cryptocurrency and Estate Planning
Cryptocurrency (commonly known by its most well-known brand, Bitcoin) has become a mythical concept to many, but has become an investment strategy to others. This has created questions in the legal field about how to treat cryptocurrency for tax reasons and for asset protection and estate planning.
It is important for Estate Plans to accurately reflect your assets and protect your assets in order to transfer wealth should something happen to you. Though cryptocurrency is still in its nascent stages, there are some strategies that attorneys can utilize to avoid these assets going through the probate court system.
Some of the draws to cryptocurrency are that it is not subject to any government regulation and is a more confidential way to transact. The issue with this, though, is that there is currently no way to identify holders of cryptocurrency. Cryptocurrency accounts are not associated with account numbers. For instance, if monetary assets are left within a traditional financial institution (e.g. a bank), each state's Controller office has "Unclaimed Property" units. Currently, cryptocurrency is treated as personal property, rather than money. It is unclear whether cryptocurrency assets will be accessible or traceable through Unclaimed Property searches. In fact, your loved ones would not even know that you have cryptocurrency. It is important that you let them know that you have these assets through your Estate Planning portfolio.
Not all Estate Plans are created equal and it is important that your Estate Plan address a few issues with regards to cryptocurrency.
First, your Estate Plan should accurately reflect that these assets exist so that these do not fall through the cracks. At the time of this writing, cryptocurrency companies only allow for single account holders, as opposed to allowing for co-owners or successor owners. These accounts also do not have beneficiary designations.
Second, your Estate Plan needs to give your successor trustee the appropriate access and powers to manage your cryptocurrency, in the event something happens to you. This power comes through a carefully drafted trust and Financial Power of Attorney.
Third, your successor trustee must know where you have kept the "key" to your cryptocurrency and any relevant login identification or passwords. Depending on your relationship with the successor trustee, you may not want to give them the "key" right now because that would give immediate access to transact.
If you have cryptocurrency, it is vital when Estate Planning that you both mention these assets to your attorney and find an attorney who is educated in how to make sure your cryptocurrency is protected as a part of your trust estate. In addition to the tips given in this post, there are other ways that an attorney should advise you with regards to your cryptocurrency.