As the financial world evolves, cryptocurrency has become a vital asset class. As an estate planning lawyer, I have been receiving increasing questions about cryptocurrency and its implications on estate planning. Cryptocurrencies like Bitcoin, Ethereum, BNB, Solana and others are not just investment vehicles but are now integral parts of modern estate planning. This post from our wills and trusts lawyer is designed to provide you with actionable strategies for incorporating cryptocurrency into your estate plan.
Understanding Cryptocurrency in Estate Planning
Cryptocurrency's completely digital nature makes it unique compared to more traditional assets. It's stored electronically on the blockchain and accessed through complex cryptographic methods. For estate planning, this provides very unique and complex challenges.
Actions for Including Cryptocurrency in Your Estate Plan
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Inventory of Digital Assets: One of the most important things you can do if you own cryptocurrency is to take an accurate inventory of your cryptocurrency holdings. I hold cryptocurrency across multiple exchanges. It would be nearly impossible for my loved ones to administer this aspect of my estate plan without a clear inventory and roadmap for where these holdings are held. You should begin with a detailed list of your cryptocurrencies, including each currency type, the wallet or exchange where it's stored, and its approximate value. Your loved ones must have clear instructions on what cryptocurrencies are in your portfolio and where they are stored.
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Access Information: Cryptocurrencies are accessed via private keys. Ensure your estate plan includes secure yet accessible instructions for managing these keys. Ensuring these passwords and keys are available to your loved ones is critical. Without it, there is virtually no way to move these assets.
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Transfer Instructions: Due to the decentralized nature of cryptocurrencies, clear instructions on how to transfer these assets after your passing are crucial. Nearly every cryptocurrency and crypto exchange type has different requirements and may be on entirely different crypto networks and blockchains.
Cryptocurrency Challenges For Estate Planning
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Evolving Laws: The legal status of cryptocurrencies is still developing. This new area is an evolving asset class, and federal and state regulations are still catching up and continuing to develop. Our estate planning lawyer recommends that you pay close attention to these legislative changes as they can dramatically affect the valuation and viability of specific cryptocurrencies. For example, the first Bitcoin ETF was recently approved by the FTC. This new development shifts the future of cryptocurrency and its regulatory future and may make it a more standard part of estate plan portfolios nationwide.
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Valuation Fluctuations: Cryptocurrency is a notoriously volatile asset class. The value of cryptocurrencies can change rapidly and sometimes skyrocket dramatically or crash entirely overnight. Regularly updating your estate plan to reflect current values is vital to avoid disputes and ensure equitable distribution within your estate plan.
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Potential Estate Tax Implications of Cryptocurrency: Given their potentially high value and extreme volatility, cryptocurrencies can significantly impact tax calculations. Understanding and planning for these implications and volatility can be critical in an effective estate plan.
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Capital Gains Tax: Beneficiaries may also face capital gains tax upon selling inherited cryptocurrency, another important consideration in estate planning. If you have additional questions, please get in touch with an experienced estate planning lawyer near me to discuss the implications that cryptocurrency may have on your estate plan.
Digital Asset Management in Estate Planning
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Security Concerns: Cryptocurrency is ripe for fraud and theft abuse. For example, according to a recent analysis by consumer awareness firm Comparitech, approximately $16.93m of crypto has already been stolen in 2024 as of January 15. Safeguarding access to your digital assets is paramount. Consider encrypted storage solutions and utilizing hardware wallets for cryptocurrency access key storage.
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Successor Knowledge: Ensure that the executor of your estate or your beneficiaries are knowledgeable or have access to expert advice on managing cryptocurrency. A detailed inventory and roadmap for transfer is a critical aspect of any cryptocurrency estate plan.
How a Tallahassee Estate Planning Lawyer Can Assist
As an estate planning lawyer in Tallahassee with personal experience in trading cryptocurrency, we can help navigate the complexities that cryptocurrencies can cause for estate planning. Our office can offer up-to-date legal advice, assist in drafting clear, legally sound estate documents, and provide strategies for efficiently transferring digital assets and cryptocurrency.
Conclusion
Incorporating cryptocurrency into your estate plan is no longer a futuristic concept but a present-day necessity. With digital assets' unique characteristics and legal considerations, a comprehensive and up-to-date estate plan is essential. Contact our Tallahassee estate planning office today to expertly integrate your cryptocurrency holdings into your estate plan, ensuring your digital legacy is preserved and passed on according to your wishes.
