New York Estate Planning & Elder Law Blog
The introduction of cryptocurrency has created a number of new issues, which includes how these digital assets should be addressed in a person’s estate plan. Because the Internal Revenue Service has classified cryptocurrency as property capable of being taxes, it is possible to dictate how ownership of cryptocurrency should be passed in a person’s estate plan. In many cases, however, it can prove difficult to transfer ownership of cryptocurrency without creating a potential security risk.
The Estate Planning Challenges Presented by Cryptocurrency
A person’s ownership of cryptocurrency is represented in that individual’s virtual “wallet”, which also stores the owners’ credentials and interacts with blockchains so users can both send and receive cryptocurrency. Consequently, the person who knows the access credentials to a virtual wallet has access to any cryptocurrency that is contained in the wallet.
Anyone with this information can also transfer the cryptocurrency. If no one knows the details about the cryptocurrency, its information is lost. This means that when it comes to estate planning, if a person shares any details about their virtual wallet, there is a risk that anyone who obtains this information will be able to transfer or steal funds.
Make Sure Your Cryptocurrency is Accessible
In contrast to a number of other more traditional assets, your loved ones after your death will not be able to directly contact and resolve issues with the cryptocurrency provider. Instead, your agent must have access information to digitally transfer the cryptocurrency in accordance with your estate plan.
The challenge then becomes how to make sure that these access details are both easily obtained but secure. Some people decide to store this information on a secure digital archive site or even to keep the details in a safety deposit box.
Suggestions for Successful Cryptocurrency Estate Planning
Some of the helpful steps that you can follow for effective cryptocurrency estate planning include:
- Add details to your revocable trust or will that lists both the type and amount of cryptocurrency that you own. It is also a wise idea to include details about how the cryptocurrency is stored as well as where details about how to access the cryptocurrency can be found.
- Do not include access credentials in your estate planning documents. Not only is there a possibility that access information might changed, this also weakens the security of your access information.
- Write a separate letter to your executor or trustee concerning what steps need to be taken to both access and distribute your cryptocurrency.
- Make sure that a copy of details about how to access your cryptocurrency is placed in a safe location.
- If you have additional questions about how to handle estate planning challenges presented by cryptocurrency, do not hesitate to speak with an experienced attorney.
Speak with an Experienced Estate Planning Lawyer
Cryptocurrency is just one of many areas of estate planning that can seem complex and overwhelming. If you need the assistance of an experienced estate planning attorney, do not hesitate to contact Ettinger Estate Planning today to schedule a free initial consultation.