Why is It Important to Plan for My Crypto Assets When Creating an Estate Plan?
The popularity of cryptocurrency has exploded within the last few years, and estate planning laws are still evolving to give it the protections it deserves. If you have explored the world of crypto or accumulated some assets, it’s crucial to put measures in place to protect them, like tangible assets or cash.
Lawyers from a reputable law firm in California explain that crypto assets aren’t managed by a centralized authority. Transactions occur on an unchangeable and publicly accessible ledger known as a blockchain. Tracing the assets after your demise can be difficult for your loved ones because the transactions are not affiliated with traditional banks.
That indicates the need to include your crypto assets in your estate plan. Skilled estate planning attorneys in California can provide legal insights to help you draft a comprehensive document to protect these hard-earned assets.
How Can I Include Crypto Assets in My Estate Plan?
When creating an estate plan for your crypto assets, it’s vital to remember that passing them to your beneficiaries can be different than that of traditional assets. Cryptocurrency doesn’t require a death certificate or letters of testamentary for someone to take control of the accounts.
However, choosing an executor who will make the necessary transfer without compromising your assets is imperative. Ensure you give them proper authorization to legally access and manage the accounts, without which they would be violating state and federal data protection and privacy laws if they do.
California estate planning lawyers advise that you can do the following when creating an estate plan to protect your crypto assets:
Create a Will or Trust
Wills and Trusts let you decide who should inherit your assets after your demise. Beneficiaries can be your spouse, children, or parents. However, a Will can sometimes be subjected to probate, a lengthy and often complex system if disputed. Work with experienced estate planning lawyers in California to avoid mistakes that could invalidate your Will.
Once you open a trust, you must fund it by transferring your crypto assets. Funding a trust entails re-titling or re-deeding the property to the trust’s name. While crypto assets lack a title or deed, they are valuable assets you want to transfer into your trust.
You can do this by writing an assignment document stating that you want the assets transferred to your trustee. Legal experts can advise on how to provide instructions for the transfer to ensure compliance with California’s trust funding laws.
Name a Beneficiary for the Crypto Assets
Choosing a beneficiary who will inherit your crypto assets after your death is necessary. You may leave them to your favorite charity, just as you would other assets like your bank account. However, some charities may not be able to receive cryptocurrency assets as they are still a relatively new asset class.
Confirm if your preferred charity would be able to receive the assets before appointing it the beneficiary. Your legal team can guide you in donating to charity through your Will.
Create a List of Your Crypto Assets
Listing your crypto assets and naming the beneficiaries in your estate plan is not enough. California estate planning lawyers recommend indicating where the assets are stored to enable your trustee to find them quickly when you’re gone. Some ways in which you could store your crypto assets are:
Hardware Wallet
Crypto in a hardware wallet is comparable to cash or gold in a safe; only the person with access codes can access it. The assets are not titled in your name, but the ability to access them depends on whether someone knows the private key. Your estate plan should provide detailed instructions on how the trustee can access hardware wallets.
Centralized Exchange
Centralized exchanges don’t allow you to hold joint accounts, title your accounts, or name beneficiaries. So, an exchange won’t surrender your account to anyone claiming it without a court order.
You can help your trustee escape the probate process by drawing your exchange-based crypto into your trust through a Heggstad petition. California estate planning lawyers can provide in-depth insights into how the process works to save your trustee the struggle of obtaining a court order to transfer the assets.
DeFi or Liquidity Pool
DeFi and liquidity pools vary, so it would help to maintain a general log of your activities related to crypto assets and secure all access information. You could write a journal and keep it in a safe or password-protected hard drive. The bottom line is to let your trustee know where to find your accounts and how to access them.
Update Your Plan Regularly
Your crypto assets may change, increase, or decrease with time, and these changes should be updated on your estate plan. Skilled estate planning lawyers can evaluate your documents periodically to ensure they reflect the current circumstances and minimize potential transfer delays after your unfortunate demise.
An Experienced Estate Planning Lawyer Helping You Protect Your Crypto Assets
While your beneficiaries can be granted access to your bank or investment accounts after your demise, the same is not true for crypto assets. These assets are decentralized, so you are responsible for planning how to transfer them to your beneficiaries once you’re gone. Without a well-crafted estate plan, you could lose your crypto assets forever.
Skilled California estate planning lawyers at the Singh Law Firm can work with you to protect these assets. Estate planning for crypto may be more complex than for other assets, but a legal framework exists to help you take the necessary precautions. Call us at 510-901-5375 to schedule a FREE case assessment.
