Handling Cryptocurrency In Your Estate Plan
As time goes on, cryptocurrency like Bitcoin and others is becoming a larger part of our wealth and assets. That means that they should be accounted for in any estate plan. But there are legal and technological issues in estate planning for cryptocurrency that you should be aware of, and prepared to deal with, when you make your estate plan.
One of the benefits of cryptocurrency is anonymity.
But when you leave cryptocurrency to others in an estate plan, you lose that anonymity—you obviously will have to disclose that you own, for example, $10,000 of Dogecoin or Bitcoin, when you put those assets in trust, or in a will, or in some other estate planning device. That may not be a huge concern, but it is something to be aware of.
The good news is that like any other asset, property left in trust avoids probate. That means that at least your cryptocurrency holdings will not be public record, or accessible to the entire public, as it will not be part of the public records.
Accessibility and Password Keys
Accessing cryptocurrency requires a private key, accessible only to you. The key is put inside of a crypto wallet, and with that, you can do whatever you would do with “normal” money, like cash out or sell your currency.
Even if you own cryptocurrency, you may not have access to your own private key, because many keys are “hosted,” meaning the cryptocurrency services you use, host the key for you. By doing this, users can buy, sell or trade their crypto very easily. And, if you lose your passwords or other information, you can still retrieve your cryptocurrency.
The problem is you don’t have your own private key. But the good news to that when it comes to estate planning, is that you can just leave your password information or other information to a trustee, or beneficiary, and your cryptocurrency can be accessed.
Problems come when your password key is not hosted. You, individually and personally, have access to your key and the password information that allows you to access, and thus transfer, trade, or sell, your cryptocurrency. If you lose your access information, you could lose all of your cryptocurrency. Even if you were to go through probate, and a judge were to order the cryptocurrency be transferred, that may not be possible if your personally kept password key is lost.
Whomever you designate as a trustee, or your estate planning attorney, should have access to this private key, to allow your cryptocurrency to be transferred upon your passing. You can literally write the information down on a physical sheet of paper, and store it somewhere safe, like a safety deposit box.
Large cryptocurrency accounts may need a corporate trustee or custodian, to keep watch over the key.
Many of these problems can be avoided by estate planning now, when you are around, and can assist in getting keys, or passwords, to make sure that the cryptocurrency can be accessed later on.
Call the Torrance will and estate attorneys at Samuel Ford Law today for questions about estate planning and your cryptocurrency or Bitcoin assets, and how to handle them in your will or trust.