At this point in time, most people have digital assets. Our digital lives continue to grow and, with that, so do the digital assets we need to account for in our estate plans. Cryptocurrency, for instance, has not existed for very long, but continues to grow in popularity. More and more people are investing in cryptocurrency. Some are even making substantial investments in digital currency. Regardless of the size of your cryptocurrency portfolio, be sure to account for this digital asset in your estate plan.
Accounting for Cryptocurrency in Your Estate Plan
Cryptocurrency is held in digital wallets accessible by password or private key. It is not regulated by any central authority tasked with maintaining registration of ownership or title. The blockchain technology which supports cryptocurrency distributes any related crypto holding information across multiple locations. Without knowing about your cryptocurrency holdings, knowing where to access them, and knowing how to access them, they are likely to be lost in the digital void upon your passing.
To avoid your cryptocurrency from falling into the digital void and, instead, being effectively transferred to your heirs, there are a few things you are going to need to do. You are going to need to make a provision in your will for who is to inherit what digital assets, cryptocurrency included. You will also need to detail where your cryptocurrency is held and how to access the digital currency. It may be a good idea to have a written document, without a digital file that may be vulnerable to hackers, which sets forth this information. Make sure the person who will take on the role of executor knows where this document may be found.
Look into what your personal representative will need to do to access your cryptocurrency holdings. You may need to assign digital powers to your personal representative so that they can access and control your cryptocurrency. Depending on what cryptocurrency exchange you were using, whether it be Coinbase, Binance, or something else, the requirements for someone else to access your cryptocurrency after you pass away can vary. Some will require you to produce a death certificate along with a copy of the will and other documentation before accessing the cryptocurrency holdings of a deceased individual.
As part of the estate planning process, taking tax planning considerations into account can also be important. This is especially true considering the profound impact taxes can have on the wealth you are able to effectively transfer to your heirs. Bitcoin and other cryptocurrency holdings will be taxed just like any other asset. It will be valued at the time of your death and may be taxed at both the state and federal level. Cryptocurrency is also subject to capital gains for any increase in value.
Estate Planning Attorney
For assistance effectively including cryptocurrency and other digital assets into your estate plan, you can count on the team at Verras Law for assistance. Contact Verras Law today.