What will happen to my assets held in cryptocurrency if I die?
Cryptocurrencies have soared in popularity and value in recent years. Millions of investors now hold a portion of their assets in cryptocurrencies. While touted as the currency of the future, cryptocurrencies can prove hazardous if not accounted for in your estate plan. This new asset class that holds widespread appeal due in part to its secrecy could literally disappear if you die without proper documentation of your holdings.
Cryptocurrency Hazards
Cryptocurrencies can only be accessed with an encrypted passcode. As such, cryptocurrency holders who misplace or forget their passcode have gone to amazing lengths in attempts to retrieve it, including hypnotism. If you die without including information concerning your cryptocurrency in your estate plan, your heirs may simply be unable to access it.
Unlike assets held in a bank, relatives cannot easily uncover your cryptocurrency holdings. While bank assets can be searched through your Social Security number or IRS filings, cryptocurrency is nearly entirely secret. Untraceable, as a protection from hackers, your heirs could never know your digital assets existed.
Even if your heirs are aware that you have assets in cryptocurrency, without knowing the encrypted passcode, it can be nearly impossible for your heirs to access the funds. Millions of dollars could be lost in valuable cryptocurrencies if crypto-asset holders do not take steps to pass their assets on to the next generation. For this reason, it is absolutely critical that your estate plan take into account your cryptocurrency holdings.
Protecting Your Crypto-Assets With an Estate Plan
Your estate plan should include a Last Will and Testament which discloses your final wishes for your assets and/or a trust that will take ownership of your assets, potentially including your crypto-assets, to seamlessly pass them on to your heirs. Your estate plan should include a net worth statement, which must specifically list any cryptocurrencies you hold.
Next, you will need a secure way to provide your heirs with the needed login information to access your cryptocurrency assets. You could upload the passcode to a smart thumb drive which securely stores information and prevents hackers from accessing it. You may further consider placing a paper copy of the passcode within a safety deposit box. Your estate planning attorney will further assist you in protecting your cryptocurrency and other valuable assets.