Cryptocurrency is a digital asset that has gained significant popularity in recent years. Some investors have made a considerable amount of money through cryptocurrency trading, but what happens to that wealth after death?
Estate planning is important in ensuring the smooth transfer of assets—including digital assets—but the rules surrounding cryptocurrencies can be complex. In this blog post, we’ll discuss what happens to cryptocurrency in probate and the steps you can take to ensure that your digital assets are properly accounted for in your estate plan.
Understanding Cryptocurrency
Before we get into how cryptocurrency fits into estate planning, it's important to understand what these digital assets are. Cryptocurrency is a decentralized digital currency that uses cryptography for security. Transactions are verified through a blockchain, which is a digital ledger of all cryptocurrency transactions. Some popular cryptocurrencies include Bitcoin, Ethereum, and Litecoin.
Because cryptocurrencies are decentralized, they aren’t controlled by any government or financial institution. This means that they are subject to less regulation than traditional assets like cash or stocks. That said, they are not free from regulation, so it’s important to ensure you follow all relevant legal processes when you want to ensure an uncomplicated transfer after your death.
Cryptocurrency in Probate
So, what happens to cryptocurrency after death? The answer lies in the probate process, which is the legal process of distributing a deceased person's assets. Cryptocurrency is treated like any other asset in probate, but there are some unique challenges that come with it.
For one, cryptocurrencies are intangible assets that can be stored on digital wallets or exchanges. If you don't have access to the private keys or login information for these wallets or accounts, your cryptocurrency could be lost forever. This means that anyone who intends to put cryptocurrency in their estate plan should take care to ensure to include all information their executor will need to access these funds. Additionally, cryptocurrencies are subject to market fluctuations, which can affect their value. Executors must stay up to date with the market value of any cryptocurrency in the estate.
How to Include Cryptocurrency in Your Estate Plan
You must include your crypto assets in your estate plan to protect and transfer them to your beneficiaries. Start by taking an inventory of all your cryptocurrency accounts and digital wallets. Keep a record of your private keys, login information, and any other relevant information for each account. You may want to consider storing this information in a secure location, like a safe deposit box or encrypted digital storage. Be sure to update this inventory regularly.
All of this is necessary whether you have a trust or only a will; in either case, your estate’s executor will need access to your cryptocurrency to create an accurate accounting and perform the transfer to your beneficiaries.
Working with an Estate Planning Attorney
As with any estate planning, it's highly recommended to work with an estate planning attorney to ensure that your documents are legally sound and reflect your wishes. Your attorney can help you create a plan that covers all your assets, including cryptocurrencies. They can also advise you on the best way to structure your plan to minimize taxes and ensure a smooth transfer of assets. Remember to update your estate plan regularly to reflect any changes in your assets or beneficiaries.
The Law Office of Mitchell A. Port can provide the legal support you need. Contact us today to learn more.