Many people are already familiar with the term “cryptocurrency.” But to others, it sounds like something from a sci-fi movie. Although the most well-known cryptocurrency, Bitcoin, came on the scene in 2009, digital currency has been a topic of discussion for decades. But as more and more people invest in this alternative currency, it’s becoming a hotter topic. Cryptocurrency owners and potential heirs should be aware of some important issues surrounding this digital asset and its impact on estate planning.
- Documenting ownership is mission critical.
As with any asset, having critical details in writing makes the estate management process go much smoother. With digital currency being a non-physical asset, records are all the more important. Without documentation, heirs likely have no clue that any cryptocurrency was owned by the deceased, and who knows where the funds will end up.
- Someone needs to know where to find the assets.
Cryptocurrency is privately issued and held in digital “wallets.” The information gets stored in various ways like on web exchanges, software, digital devices, or even flash drives. It’s imperative to document the location of any digital currency so whoever stands to inherit these assets will be able to find them.
- Share key access details.
Depending on how and where the currency is stored, there can be all kinds of usernames, passcodes, security questions, codes, private keys, and access phrases associated with the account. And without these critical pieces of access information, it’s nearly impossible to transfer or cash out. Often this type of valuable information is stored in a safe deposit box.
- Put your wishes in writing.
There are different options for bequeathing digital currency. Specific gifts can be made to an individual or trust, or the asset can simply become part of the overall estate. But it’s important that the owner’s wishes are spelled out in a legally-binding will.
- Know what happens after the bequest.
When someone inherits digital currency, the fair market value is set at the date of death. Since cryptocurrency isn’t backed by any governments, the values can be pretty volatile. And we’re not just talking about Bitcoin here. There are estimated to be thousands of different virtual currencies out there. Just like traditional assets, an heir can usually choose to maintain ownership of the currency or to liquidate, unless a will dictates otherwise.
Laws around the inheritance of digital assets continue to change as the cryptocurrency landscape fluxes. Consulting an estate planning attorney for guidance can help you soundly navigate these issues. Reach out to Cecelia Neihouser Harper at 765-637-9175 to learn more.
The content of this blog is intended to be general and informational in nature. It is advertising material and is not intended to be, nor is it, legal advice to or for any particular person, case, or circumstance. Each situation is different, and you should consult an attorney if you have any questions about your situation.