Bitcoin and other types of digital currency were in the headlines for a couple of years as their value skyrocketed and made millionaires out of many early investors – or, virtual millionaires. Cryptocurrency is the name given to all digital or virtual money including Bitcoin, Ethereum, Ripple and Libra that are electronic, peer-to-peer and highly secure cash systems that are not regulated by the government. “Crypto” refers to very complicated cryptography that is used to create and process digital currencies and make transactions. There are thousands of different types of cryptocurrency, and they can only be accessed by using a computer or a smartphone.
Traditional estate planning legal documents such as wills and trusts are not designed to transfer cryptocurrency to your beneficiaries after your death. And estate planning attorney with experience in managing digital assets including cryptocurrency can help you make sure that the existence of your cryptocurrency accounts is documented in your estate plan and that access to those accounts is secure and protected.
1. Cryptocurrency is not traceable.
There is no crypto bank account or other physical accounts for your digital cash. You should only give access to your virtual cash accounts to someone you trust completely. Otherwise, your digital money can disappear without a trace.
2. Cryptocurrency exists only online and is very secure.
If you die without leaving your heirs your passwords, keycodes and other instructions needed to access your cryptocurrency accounts, they will not be able to inherit your digital cash.
3. Cryptocurrency is taxed as property, not as currency, by the IRS for tax purposes.
If you are leaving your assets to your heirs through a trust, it’s important that your trust has specific languages and instructions for your cryptocurrency beneficiaries. Any transactions involving cryptocurrency are subject to the capital gains tax regulations. Cryptocurrency increases and decreases in value in the same ways that real estate changes in value, and not like stocks.
An experienced estate planning attorney can assess your situation and advise you on the best way to pass your cryptocurrency assets to your heirs, and make sure that the information to access your digital cash accounts is safely passed to your estate executor and beneficiaries.
• Digital Asset Estate Planning Guidelines
Protect your cryptocurrency and other digital assets by consulting an experienced estate planning lawyer who can advise you on the best options for your situation. To talk to a qualified estate planning attorney in Chicago or Lombard, contact the Estate & Probate Legal Group at 630-687-9100.
We serve Cook, Dupage, Kane, Lake, and Will counties.