In recent years there has been a tremendous buzz around cryptocurrencies and crypto assets. A major transformation has taken place in the crypto world as many cryptocurrencies have been legitimized by the likes of governments and multinational corporations adopting and using them. If you or a loved one has bought into crypto investments, here are some points to consider in regard to estate planning.
What are crypto assets?
Cryptocurrencies are any form of currency that only exists digitally. Cryptocurrencies, utility coins, and security tokens are terms used interchangeably.
There are thousands of types of crypto assets, such as crypto art. Therefore, the term crypto assets is often used when talking about these types of digital investments. Crypto means “hidden” or “secret” due to the cryptography techniques used to prevent counterfeiting, theft, and fraud. Because these digital assets are secretive by nature, they require a higher level of due diligence to prove ownership in the case of executing an estate plan.
It is more important to keep detailed records of crypto assets than is necessary with other property. Investments made with a bank or brokerage firm are documented and easily accessible. The intrinsic secretive nature of crypto assets can make it difficult or even impossible to access them when the owner dies. Documentation should be archived in digital and printed forms in a and secure location.
What should you consider when including crypto assets in your estate plan?
Here are some questions to ask as you develop your plan:
- Who made the original investment or purchase?
- When and where was the crypto asset purchased?
- Where is it stored? Is it in a digital “wallet,” an exchange service or on a specific app?
- What was the original purchasing price? This is vital to determining capital gains.
- Which type of crypto asset is owned? In the case of cryptocurrencies, there are numerous types on the market. Bitcoin is the most well-known.
How will loved ones access the crypto asset? Document access codes, tokens, and passwords necessary to access the crypto-investment.
Dealing with the death of a family member is difficult enough without discovering that crypto assets are lost or inaccessible. Estate planning is one of the last acts of love for your family. Experienced legal guidance can be extremely valuable as you develop your estate plan.