More and more people are investing in digital currency, such as Bitcoin or Ethereum. And according to a recent NY Times headline, Lost Passwords Lock Millionaires Out of Their Bitcoin Fortunes. If you secured your bitcoin password, congratulations: that’s the 1st step toward protecting your digital assets.
But what if you die today:
1. Is your cryptocurrency accessible to the executor of your will?
2. Will your executor know that you have digital assets?
3. Is your cryptocurrency included in your will and trusts?
Your digital assets, including cryptocurrency, need to be included in your estate plan and need to be accessible to the executor of your will. Traditional estate planning legal documents such as wills and trusts are not designed to transfer cryptocurrency to your beneficiaries after your death. An 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.
Your digital money can disappear without a trace, as the NY Times story indicates. 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.
“Of the existing 18.5 million Bitcoin, around 20 percent — currently worth around $140 billion — appear to be in lost or otherwise stranded wallets”
– NY Times
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.
Learn More:
• Digital Asset Estate Planning Guidelines
Protect your Bitcoin and other cryptocurrency and 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.
