Cryptocurrencies, such as Bitcoin, are increasingly popular among investors; these digital currencies have value, and as such, they may be considered as estate assets. However, due to the nature of cryptocurrency, typical wills and trusts may prove ill-suited to efficiently deal with these assets. If you’ve invested in cryptocurrencies of any kind, it’s important to speak with your estate planning attorney about how your plan can accommodate digital assets.
A few particular items to discuss with your attorney include:
Whether you should hold or sell. Remember that your beneficiaries will be on the hook for your cryptocurrency’s tax rate, based on its free market value at the time of your death. If your cryptocurrency has depreciated significantly, it may make more sense to sell as opposed to holding.
Let your trustee and executor know. Those individuals who are tasked with administering your estate should be made aware of any cryptocurrency holdings you have, and also how those funds can be accessed.
Remember your power of attorney. It’s typically best if your power of attorney can access your cryptocurrency, which means ensuring that the power of attorney has your private key (name and password) handy.
Consider diversification. In some states, it’s mandatory that the executor of an estate diversify its holdings under certain conditions, which may mean selling your cryptocurrencies to invest in other asset classes. You can override this stipulation but will need to be explicit in doing so. Your attorney can assist with this.
These are just some of the ways in which holding cryptocurrencies can complicate estate planning. All of these issues can be addressed in a positive way, but only if you act sooner rather than later. Connect with Singh Law Firm today to talk to a lawyer about how cryptocurrencies fit into your estate plan.