Estate planning is always changing. In recent years, one of the most seismic changes has been the introduction of digital assets such as Bitcoin. As more people accumulate wealth in this format, it has become increasingly vital to consider how to protect digital assets within the scope of an estate plan.
Indeed, one of the ironies of cryptocurrency is that, while it can make business transactions much more fluid and seamless, it makes estate planning bumpier. The days of simply writing out a will, then trusting the executor of the estate to track down all your assets, are over. It’s now necessary to provide much greater clarity about what assets you have, and how those assets may be accessed.
How to Think About Digital Estate Planning
As you consider estate planning with cryptocurrencies in view, here are a few key considerations.
Digital Assets Have Value
This may seem like an obvious statement, but here’s what we mean: A cryptocurrency has legal value, which means you must include it when assessing the true value of your estate. It’s not legally valid to conduct a valuation of your estate that doesn’t account for cryptocurrencies. In fact, in larger estates, cryptocurrencies may be subject to federal estate taxes.
Keep Up with Your Personal Keys
One of the big problems that cryptocurrencies bring is the struggle for access. It’s not sufficient to bequeath your Bitcoin to an heir; you also need to make sure your heir can actually access the pertinent assets. That means keeping up with your personal logins and keys and providing an exhaustive list of them within your estate plan. Verify that your heirs will have all the information and credentialing they need to claim these digital assets.
Consider a Hard Wallet
There is an alternative to the above: Instead of keeping your cryptocurrencies in an online exchange, you can get “hard copies” in the form of a USB wallet in which all your assets are kept. This can be a smart approach, but there is a major caveat: If you somehow lose the wallet, all the assets will be lost, as well. There won’t be “backup copies” floating around on the Web.
It’s Not Just About Cryptocurrency
We’ve been focusing exclusively on digital finances here, but it’s worth noting that there are many other online assets that you might include in your estate plan. These include account logins and passwords for digital banking platforms, as well as your login information for Facebook, Twitter, etc. Be sure your estate plans leave detailed instructions for who you’d like to be in charge of these accounts, how the accounts can be accessed, what you’d like done with them, etc.
Keep Up with Your Estate Valuation
Remember, too, that the value of digital currencies can fluctuate over time, which means the overall value of your estate may go up or down. This can in turn impact the estate tax burden you face, how much you have to leave to heirs, etc. As such, it’s worth keeping tabs on the changing value of your cryptocurrencies and keeping your estate planning attorney in the loop.
Find Out More About Digital Estate Planning
It’s increasingly common for individuals to possess numerous digital assets… and the more of these assets you accumulate, the more important it becomes to include them in your estate planning efforts.
If you have any questions or need to update your estate plan to account for digital assets, we welcome you to give us a call. Set up a consultation with the estate planning professionals at Singh Law Firm today.