In the evolving world of digital assets, cryptocurrency has become a valuable part of many financial portfolios. However, without proper planning, your digital wealth could become inaccessible to your loved ones. Here’s why it’s essential to include cryptocurrency in your estate plan and how to do it.
What Is Cryptocurrency?
Cryptocurrency is a type of digital currency that uses encryption to secure transactions and operates on blockchain technology. Unlike traditional money, it is decentralized, meaning no government or bank oversees it. Popular examples include Bitcoin, Ethereum, and Litecoin. To access cryptocurrency, you need a private key, a unique code that acts as a password for your digital wallet.
Why Cryptocurrency Needs Special Attention in Estate Planning
Inaccessibility Without Keys: Without private keys, beneficiaries cannot access your cryptocurrency.
Anonymity of Transactions: The decentralized nature makes it hard to locate holdings without clear instructions.
Regulatory and Tax Considerations: Cryptocurrency has specific tax rules that need to be addressed in your estate plan.
Steps to Include Cryptocurrency in Your Estate Plan
- Create a Comprehensive Record of Your Cryptocurrency
- List all digital assets: Document your cryptocurrency holdings, including wallet addresses, account names, and platforms (e.g., Coinbase, Binance, or cold storage devices like hardware wallets).
- Detail storage locations: Specify where each asset is stored, such as online exchanges, mobile wallets, or physical hardware wallets.
- Provide clear access instructions: Write step-by-step directions for accessing your wallets and private keys.
- Ensure secure storage of access details: Use a secure method, such as a password manager, encrypted digital file, or a physical document stored in a safe or safety deposit box.
- Choose a Knowledgeable Fiduciary
- Select the right person: Choose an executor, trustee, or power of attorney who understands cryptocurrency or is willing to learn about it.
- Equip them for success: Ensure they have the necessary tools, information, and support to manage your digital assets effectively.
- Include Cryptocurrency in Your Estate Plan
- Add your cryptocurrency to your estate documents: Specify your cryptocurrency holdings in your will or trust to ensure they are distributed as intended.
- Consider a living trust: This option can simplify asset management and help avoid probate, ensuring quicker access to your cryptocurrency.
- Stay Current on Legal and Tax Regulations
Plan for taxes: Be prepared for any tax obligations tied to the transfer or sale of cryptocurrency, and make a plan to minimize potential tax liabilities.
We can help you navigate the complexities of cryptocurrency in your estate plan. Call Roth Elder Law, PLLC today at 607-962-6162 or complete this intake form and we’ll be in touch to schedule a meeting.