Estate Planning in the Age of Cryptocurrency
Digital assets in the form of cryptocurrencies have been gaining increasingly more attention in 2017. You have probably heard of Bitcoin and Ethereum, but there are many others. As people begin to invest more of their dollars in cryptocurrencies and as the uses of digital currencies begin to grow, the following issue naturally arises: how to make plans for this new and largely unregulated form of wealth after death.
Include in Estate Planning Documents
An important step in making sure your cryptocurrency is passed to a person of your choosing upon the event of your death is to have an attorney prepare a testamentary instrument which disposes of your assets according to your wishes. This instrument can be in the form of a will or if it is your desire to avoid probate, a revocable living trust. Cryptocurrencies are a relatively new form of asset and as such the environment is ripe for confusion relating to their disposition upon death. Currently, there is not a long history of legal precedent for judges to follow. Further, there is a debate as to whether cryptos are more like a commodity such as gold or should be classified as a security, such as stocks and bonds. For the foregoing reasons, among others, it may be important that digital assets be specifically mentioned in wills and trusts to avoid any ambiguity as to whether they should be included or excluded in articles regarding the disposition of certain assets.
Giving Access to a Devisee
Another practical consideration is determining how the beneficiary designated to inherit your cryptocurrency will ultimately gain access to these digital assets upon your death. The reason gaining access to digital assets may become a problem for a beneficiary is due to the nature of how cryptocurrencies are stored. Obtaining cryptocurrency of a person who has died may not be as easy as the process for claiming more traditional assets. The process for obtaining traditional assets of the decedent generally includes presenting certain probate documentation to the institution holding the assets. On the other hand, cryptocurrencies exist only in cyberspace, thus they are all stored digitally. Usually, this means cryptocurrency is either stored online in an exchange or offline in a digital wallet. Both storage options include security protocols to protect cryptocurrency from theft through hacking. Therefore, instructions to gain access must be shared with a trusted individual during your lifetime or a mechanism must be put in place to deliver the necessary instructions, passwords, and access keys upon death.
If you have any questions about transferring this new form of currency or wish to consult with us about any of your estate planning needs or probate issues, please give us a call.