Cryptocurrency, a relatively recent investment, requires careful consideration within your estate planning. The increasing popularity of cryptocurrencies, including Bitcoin, Ethereum, Tether, Doge, and others, has led more individuals to invest and safeguard their wealth in digital coins. However, cryptocurrencies differ from traditional assets in the context of estate and tax planning. Unlike a standard bank account, cryptocurrencies lack a physical presence. It's imperative to acknowledge them in your estate planning documents and inform a trusted family member or attorney about their existence.
Being entirely digital, cryptocurrencies could remain undisclosed to your heirs after your passing unless you've shared this information within your estate plan. Moreover, your heirs may require your username, private key, and passcode to access your cryptocurrency holdings. If you've stored your cryptocurrencies on a hard drive, phone, or USB drive, including this essential information in your estate planning documents is advisable.
Why You Need to Include Crypto in Estate Planning
Given that cryptocurrencies operate in a decentralized manner, including them in your estate planning is of utmost importance. To illustrate this, consider the following scenario: Suppose you inadvertently omit one of your bank accounts from your will. In such cases, due to the centralized control of bank accounts, your family members can collaborate with the bank and the legal system to establish their identity and gain access to your account after your demise.
However, crypto assets lack this safety net due to their decentralized nature. As the cryptocurrency owner, the responsibility falls on you to devise a strategy for your assets and provide clear instructions on how your heirs can access them. You need to pay attention to this step so that a central authority can assist your loved ones in locating or obtaining access to your cryptocurrency. Without a well-structured plan, these digital assets may be permanently inaccessible.
The Best Ways to Include Crypto in Your Estate
In estate planning, wills and trusts share a common objective: both provide you with the means to determine the beneficiaries of your wealth and belongings upon your passing. They also allow you to designate a guardian for your underage children, identify a caregiver for your pets, and even make charitable contributions.
Trusts - Trusts can both secure and oversee cryptocurrency holdings. Nonetheless, you'll need to specify the authorized individuals with access, establish the timing of asset transfer to the trust, and define the permissible actions related to the cryptocurrency within the trust. Trusts serve several crucial purposes, such as safeguarding your cryptocurrency from potential loss following your passing, streamlining the probate process to save both time and money, bolstering security by storing assets in cold storage, and alleviating the responsibility on your beneficiaries by simplifying access to and management of your cryptocurrency holdings.
Wills - A last will and testament, often called a 'will,' is a legal document that outlines your posthumous property distribution preferences and designates guardians for your minor children. Upon your demise, your will gets submitted to a court, which then authorizes and supervises the allocation of your assets. When you draft your will, it's essential to specify the beneficiaries for your cryptocurrency holdings. It's advisable to designate a digitally proficient executor or trustee. Be explicit and comprehensive regarding your crypto assets and provide clear instructions to access them. Safeguard your crypto keys in a secure location that the appointed executor can access.
Use An Estate Planning Law Firm
Suppose you find the complexities of cryptocurrency unsettling, lack confidence in having an informed executor, or are seeking top-tier estate planning services in the Fairfax/Oakton area of Virginia (specifically Fairfax County) at an affordable, fixed cost. In that case, it's time to contact Northern Virginia Trusts & Estates. Cryptocurrency holdings can represent a substantial financial asset you wouldn't want to be overlooked, wasted, or mishandled. Contact the Northern Virginia Trusts & Estates experts to explore how we can assist you in preparing for the inevitable.